Private Brands Drive Profit For Natural & Organic Retailers

Christopher Durham Nov 23, 2011 0

This week the natural food, dietary supplement and health and beauty sector trade publication Whole Foods Magazine printed its 34th Annual Retailers Survey. The survey takes a look at natural and organic retailers and their business in the past year. According to the survey many stores are reporting strong sales numbers, and are clearly thriving businesses in their communities as evidenced by heavy foot traffic and good spending per transaction. Other establishments may just be making ends meet, and are feeling the sting of lost jobs in their areas (thereby fewer shoppers and less spending). Overall sales are down slightly, which is not surprising given the shape of our economy. Not surprisingly Private Brands played an interesting and significant role in this years survey the following is an excerpt from the article:

Private Eye
We know that offering private label products is an important way to distinguish your store from the others and to encourage repeat sales. Are private label offerings helping the bottom lines of this year’s survey participants?

We can start off by noting that 39% of participants sold at least one private label item. That’s slightly more than last year, which recorded 37% of participants selling private label.

This year, we can note a linear correlation between profits and private label offerings. The main trend is that stores that sell private label generally have more sales and net profits than those that don’t.

The net profit percentages for stores also had a fairly linear correlation, though there was a dip in the 25–50 private label supplements group.

As for foot traffic, stores with no private label offerings at all also had the fewest customers per day (87 people). Stores with just 1–24 private label supplements had more than double this amount, with 188 shoppers daily. Carrying just 1–24 private label supplements also made for larger transactions than the non-private label group ($40.63 versus $30.83). It should be noted, however, that while foot traffic and average transaction were greater for the 1–24 private label supplements group, their profits were about the same as the group that sold no private label at all. Again, perhaps we can attribute this to higher expenditures such as payroll ($322,028 annually or 28% of their annual sales versus $119,816 annually or 12% of their annual sales).

The group that seemed to fare the best in terms of profit were the stores that had 51+ private label offerings. Their net profit was significantly higher than the others ($122,500, a net profit percentage of 12%), though they had smaller overall sales ($1,010,009) than other stores. These 51+ private label supplements stores must be owned by savvy managers that probably bargain for the best prices from their distributors and sell at just the right price points to maximize profits. It’s likely that private labeling plays a major part in this equation.

Read the entire article.

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Christopher Durham

Vice President of Retail Brands at Theory House

Christopher Durham is the founder of My Private Brand and the VP of retail brands at Theory House, the branding and retail marketing agency. He is a consultant, strategist and retailer with close to 20 years of real-world retail and corporate experience creating, launching and building billion dollar Private Brands.

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