Private label product is created in partnership between a retailer and a producer. This partnership allows both retailers and producers to get what they want. A retailer gets a product made to their specification, with their brand, and the producer can create something knowing it has a market. The new brand is sold as an alternative to one of the major brands.
Big retailers such as Walmart, Target and others have long used this model as a way to sell similar, private label merchandise as an alternative to some of the biggest brands they sell in their stores. The focus was on higher margins and smaller retail prices.
While private label started as a way to provide cheaper alternatives to national brands, it is now a strategy for differentiation. The modern private label partnership comes in two flavors. One has the retailers brand on the label, while the other is a form of co-branding, where the label says “Producer Brand, exclusively for Retailer.” The newer form of private label partnerships results in an exclusive line of products co-created by retailers and producers.
Target has been experimenting with this by partnering with established designers (Missoni for Target!). Indie retailers can do it with small batch artisans or producers and highlight their unique story.
The partnership of retailer and producer is necessary because each party needs something from the other in order to succeed.
The retailer needs products that offer value and are unique in order to satisfy their customer base. The producer needs access to the customer base of the retailers in order to actually sell their products.
When both parties understand the relationship, they are able to work together to grow each other’s businesses and profit. The future is a model where retailers focus on selling products from small, independent producers and manufacturers. Buying widely-distributed branded goods and competing on price is not a sustainable long term strategy for most indie retailers.
You can use this same model in your tiny retail business, by partnering with your vendors to create an exclusive line just for your shop. There are a few Vianza users who are using the platform to do just that. They search through the catalogs, find products they like and then talk to the producer to create a product line just for them.
Examples of Private Label Deals in Retail
A variety of industries are experiencing a trend toward smaller producers as consumers focus on value and quality instead of just price.
Sperry Top-Sider Brand Expansion
Popular footwear retailer and producer Sperry Top-Sider announced an expansion into other areas. The brand has partnered with independent manufacturers and brands to produce watches, luggage, eyewear and other accessory items.
The move highlights the trend of popular retailers focusing on independent producers. For Sperry, the move means a more diverse offering for their current customer base.
There can be a limit to the top line sales with any business that is focused on one product. Sperry looks to expand their sales by offering complementary products that their current customers will use with their boat shoes.
Sperry understands that the other products are outside of their core knowledge. As a result, they are partnering with producers that need the power of a bigger brand in order to achieve sales growth. While Sperry is looking to established brands there is also room in many industries for retailers to partner with newer, less established producers. These small and independent producers often need the power of a relationship to successfully launch their product while a brand like Sperry can benefit from the innovation and freshness of the new producer.
Surf Shops Get Back to Basics
Surf brand Billabong recently announced the closing of 150 stores. This came as a shock for some while surf enthusiasts may have seen it coming.
It appears that Billabong lost focus on what their core customer base - dedicated surfers - needed and instead focused on the more general population. The loss of focus alienated the core base and resulted in an expansion that did not pay off.
Today, the desire is for niche producers of surf equipment. The core target customer wants the independent style of small producers of boards, wax, and other equipment and accessories. Surfers want value and believe that independent producers traditionally provide the best equipment. This is where the opportunity for independent producers and retailers is.
By offering some of the smaller, newer, independent brands in their stores, retailers can still serve their core customer while offering the most popular brands.
Balancing popular, well-known brands with independent brands is the biggest struggle for retailers in the retail world today. There is a need for both forms of merchandise. Even as the smaller brands gain acceptance with consumers, the larger brands are still needed. It’s hard to replace decades of branding effort established brands have created. There are still a lot of consumers that want well-known brands.
But in order to succeed today, retailers can also focus on smaller independent brands where there is more profit to be made while also serving a growing portion of the consumer population.
Next Steps for Indie Retailers
The next step is finding independent producers of products. The Internet has allowed many independent producers - artists, designers, etc. - to create websites for their brands. Social sharing websites like Pinterest and other niche sites allow these small producers to gain an audience for their products.
The first thing a retailer needs to do when meeting with independent producers is to make sure the value proposition is profit and growth for the producer as well. A true partnership with the producer will help retailers turn their dreams of owning their own product line a reality.
Independent producers often have the products customers are demanding, but the retailers have access to these consumers. The partnership is beneficial for both parties, but each has to give up something in order for everyone to succeed.
Now indie retailers can build these relationships via Vianza.
Request an invitation and start browsing our catalogs for small-batch producers that you could work with, to create co-branded products. Its a win win all around!