TOTAL LICENSING
Countering the Impact
of Private Label
on Brand Value
By David Drews,
Private label is here to stay. Any directly with national brand products The private label products are easily
Consor Intellectual
brand manager who has paid in HABA and over-the-counter incorporated into their regular
Asset Management
attention has surely noticed medications. Comparable imitations advertising activities, such as inserts in
the incredible growth of private may be found in any grocery store the Sunday newspaper, and allow the
label products, both in terms or drugstore’s pain reliever or cold retailers to enjoy a higher margin per
of sales and variety of available remedy aisle. This similar appearance unit sold.
products. Recent statistics is used by retailers to demonstrate the However, many retailers are going
indicate that more than 20% functional equivalence between the beyond price in their competitive
of all supermarket, drugstore two products. Courts have ruled that efforts. They recognize that relying
and mass merchandiser sales, this is acceptable, as long as the intent solely on price and subordinating
more than $50 billion each year, is not to confuse or deceive. The the advertising of their private label
consist of private label products. distinction between the two offerings programs to the promotions of the
Indeed, 90% of consumers polled is accomplished via the inclusion national brands prevents them from
were familiar with store brands, of the retailer’s private-label or establishing a high-quality private label
with 83% of the respondents umbrella brand, as well as prominent program. Retailers that implement
purchasing private label products “compare and contrast” point-of-sale these comprehensive private label
on a regular basis. advertising. programs enjoy a private label dollar-
The second category of private label share of sales of 22% versus 16% for
There are two main categories of goods includes in-store brands that other retailers. Their sales growth
private label products being offered by feature a more comprehensive and over the last three years has also been
retailers. The first category consists of specific marketing effort. These in- significantly higher: 5.3% versus 3.4%
products that offer a similar look and store brands may be limited to a for other retailers. Clearly, the use of
feel to the competing national brand narrow line of products (Safeway’s private label by retailers is becoming
in terms of the packaging and other “O” Organics brand) or may cover more sophisticated, and will continue
trade dress aspects. For example, dozens of product categories to have a large and growing impact on
Albertson’s offers many products (Costco’s “Kirkland Signature” brand). the success or difficulties of national
under the “Savon” brand that compete This second category of private label brands.
products typically
features its own Various Impacts
product or storewide All of these developments have had
brand (separate from numerous and considerable impacts
the brand of the on national brands. Pricing pressure is
retailer), complete one of the most obvious. Especially in
with its own trade an environment where prices for basic
dress, logos and brand necessities are rising and consumers
image, and often has are concerned with the direction of
the look and feel of a the economy, the lure of a lower price
national brand. may be enough to get the consumer to
In most cases, retailers try a comparable private label product.
view private label as If the private label experience is not
an opportunity to unpleasant for that consumer, the
effectively compete corresponding national brand may
against national have lost a customer for good. Many
brands on price. brands are fighting back with special
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