Executive Briefings

The Growth of Exclusive Brand Labels

Increasingly, the old, functional ways of operating across the supply chain are working less effectively. New ways of working have emerged, which put collaboration at the heart of establishing a powerful rapport with the consumer. Successful retailers understand this. The new creed is to work more effectively and efficiently, both internally and externally, to derive more value from the supply chain and, crucially, to get closer to the customer. -Nancy Marino, Senior Vice President, Tompkins International, and Chief Development Officer, MonarchFx

Collaboration requires a different way of thinking and working. Sharing insight and, more importantly, acting on it quickly is at the heart of truly successful retail businesses today. The information and insight through purchase data that retailers now have into each customer’s behaviour and shopping have driven a revolution in thinking and organizing around vendor relationships, buying and merchandising activities.

However, some retailers might see all of this customer insight as a burden. More successful retailers have embraced it willingly; recognising that in change there is opportunity. For many retail businesses, buying was traditionally stage one of a three-stage process: buy things, move them and sell them. Retailers relied on the brand companies they bought from to know and understand what customers wanted, when and why. In reality, it’s the retailer who is closest to the customer and the one who should best understand their psychology, ergo, what is of lasting value to them. Retailers should understand consumer choices, preferences and budgets, with the result that they are redrawing the structure and composition of their merchandise ranges. Retailers should be the ones drawing on a combination of brands and their own exclusive brand label products to deliver a more attractive balance of products that will meet each customer’s needs while growing business profitability.

The march of exclusive and private label brands

Exclusive and private brand label products are nothing new of course. In the 1970s, private labels emerged in the grocery sector as generic products selling solely on price. By the ‘80s they had become “me too” products, mimicking and imitating established brands.  By the ‘90s, they were scaling the premium sector of the market, considered every bit as good, often better and more innovatory than the brands.

Today, many sophisticated grocery retailers find themselves as managers of exclusive and private label ranges which are every bit as large, if not larger than the branded products with which they compete.  Some notable businesses have built their brand reputations on the value and performance of their exclusive and own products (Marks & Spencer in Britain, for example). What has changed is the number of retail businesses that have embraced the development of exclusive and private branded products and not just in grocery, but in categories such as apparel. The globalisation of trade and the opening up of Asia in particular have offered huge buying and sourcing opportunities, which can deliver a compelling blend of quality and price. More than anything else, this has stimulated the tremendous growth in private brand labeling.

The Outlook

Over the last decade, exclusive and private label brand apparel sales have carved out a sizeable share of the U.S. apparel market. This trend is being followed in Europe. Many retailers now recognize exclusive brand labels as a key part of the customer offering. These are distinct from exclusive brands and internal private label brands, which are normally limited to one category, such as menswear. Each subcategory brings with it different challenges for the retailer.

Collaboration requires a different way of thinking and working. Sharing insight and, more importantly, acting on it quickly is at the heart of truly successful retail businesses today. The information and insight through purchase data that retailers now have into each customer’s behaviour and shopping have driven a revolution in thinking and organizing around vendor relationships, buying and merchandising activities.

However, some retailers might see all of this customer insight as a burden. More successful retailers have embraced it willingly; recognising that in change there is opportunity. For many retail businesses, buying was traditionally stage one of a three-stage process: buy things, move them and sell them. Retailers relied on the brand companies they bought from to know and understand what customers wanted, when and why. In reality, it’s the retailer who is closest to the customer and the one who should best understand their psychology, ergo, what is of lasting value to them. Retailers should understand consumer choices, preferences and budgets, with the result that they are redrawing the structure and composition of their merchandise ranges. Retailers should be the ones drawing on a combination of brands and their own exclusive brand label products to deliver a more attractive balance of products that will meet each customer’s needs while growing business profitability.

The march of exclusive and private label brands

Exclusive and private brand label products are nothing new of course. In the 1970s, private labels emerged in the grocery sector as generic products selling solely on price. By the ‘80s they had become “me too” products, mimicking and imitating established brands.  By the ‘90s, they were scaling the premium sector of the market, considered every bit as good, often better and more innovatory than the brands.

Today, many sophisticated grocery retailers find themselves as managers of exclusive and private label ranges which are every bit as large, if not larger than the branded products with which they compete.  Some notable businesses have built their brand reputations on the value and performance of their exclusive and own products (Marks & Spencer in Britain, for example). What has changed is the number of retail businesses that have embraced the development of exclusive and private branded products and not just in grocery, but in categories such as apparel. The globalisation of trade and the opening up of Asia in particular have offered huge buying and sourcing opportunities, which can deliver a compelling blend of quality and price. More than anything else, this has stimulated the tremendous growth in private brand labeling.

The Outlook

Over the last decade, exclusive and private label brand apparel sales have carved out a sizeable share of the U.S. apparel market. This trend is being followed in Europe. Many retailers now recognize exclusive brand labels as a key part of the customer offering. These are distinct from exclusive brands and internal private label brands, which are normally limited to one category, such as menswear. Each subcategory brings with it different challenges for the retailer.