Private label products are often called “house brands.” Both terms mean the same thing, the company that owns the brand, commonly the retailer, owns the product, not the company that produced it. Private labeling of products is not a new concept by far; it has been used for years and applies to many different industries. It is no surprise to consumers when they see house brands sitting side by side with national brands at the point of sale.
Private branding of products has been around for well over 100 years. There is plenty of evidence available that department stores at the time contracted with manufacturers of various apparatus and other goods which in turn were sold through the stores. This trend has grown and there is little reason to believe that it will not continue to grow exponentially. Many of the best known retailers attract customers based on the quality and value of their private label products as well as their extensive showing of nationally known competitive products.
Retailers that use private labeling are subject to a number of benefits. The company does not have to establish any kind of manufacturing facility to produce whatever the product may be, anything from lawn mowers to nutraceuticals. There is no need for the retailer to have an inflated payroll as all the employees involved in manufacturing are the responsibility of another contractor. As others are dealing with all these details, including distribution and the purchase of raw materials, the retailer has smaller overheads and they can focus all their energy and talent on sales and marketing.
Private label products already are fully developed, the retailer does not have to go through any development stages for new product lines. The manufacturer of private label products take full responsibility for product development. Once fully developed and ready for market, the manufacturer can approach the retailer or the other way around.
From the manufacturer’s point of view, private labeling allows for a significant increase in the volume of product. By producing the same product for a number of different retailers, albeit branded and packaged differently, the manufacturer can take advantage of the reduction in unit cost that is the result of increased volume. This simply translates into higher profit for the manufacturer.
