Abstract
This paper will discuss the reason why national brands sell their products to private labels and the importance of national brands in comparison to private labels in international markets.
Earlier, Private labels used to be the moniker of lower quality and cheaper products. Most of the retailers used to promote them as they were considered the engine of growth as all private labels had greater profitability and higher margins despite the low scale investments. The technology used for manufacturing private labels has dramatically increased overtime and most private label retailers have upgraded with relegation of low-quality products and moving on to white-labels or second-tier private labels (examples: Saving plus of A&P). With time national brands have started to thinks private labels as just as another national label and treat them as their competitors. The national brands need to sell to these private labels as they give them an alternate market to sell at with popular stores like target and Wal-Mart. The national brands can introduce value flankers and sell to the private labels and compete in a market where their traditional products are deemed expensive (example: Gain of P&G and All of Lever Brothers).
Rise of Private Labels in International Market
Private labels are on a prowl even in international markets as “Private label brands now have the power to become destination brands in their own right. Tesco, Harvey Nichols, and Waitrose are great examples of this principle” (Richard). Some examples of international markets are:
Argentina started to witness the emergence of private labels before the notion invaded the market. Earlier, choosing from outlet brands meant lower-quality and defective products, private labels brought an advantage to the customers with their better quality similar to national brands.
Japan saw the growth of PB products which are planned and sold by the distributor but they are produced by the manufacturer. Example of PB brand is Top Value which is sold at major distributors Jusco, Daiei and Aeon.
Conclusion
In these tough economic times, the bases are loaded for private label brands. Retailers can choose to rely on price and continue to walk in the run or they can swing for the fences with package design. Although National brands have their place and will surly keep it in long run, private labels have made their mark with advancement in product quality and lower prices.
References
Bachman, L. “Private brands: A global guide to the rise of private label brands”. Retrieved from. http://www.interbrand.com/Libraries/Articles/-1_Private_Brands_pdf.sflb.ashx
Hoch, S.J. (1/15/1996). “How Should National Brands Think about Private Labels?”. Retrieved from. http://sloanreview.mit.edu/article/how-should-national-brands-think-about-private-labels/
