Private Label in Retail Marketing - Essay Example

Private Label in Retail Marketing Merchandizing strategy within stores usually revolves around giving the largest share to the brands which give out the most fees to the retailers so that their brands remain prominent as far as the space myth within shelves is concerned. They give slotting fees so that retailers keep their brands in visible proportions and also allot due favors from time to time. The organizations which produce these brands know that their brands are being taken care of by the retailers and hence it is their duty to make the retailers feel happy and satisfied about keeping the brands on their shelves. Thus the famous maxim within retailing goes like this “eye level is the buy level” suggesting that if a brand is visible enough to come in close eye contact with the potential customer, then there is a huge chance that it could be sold. If however the customer does not see a brand and is entirely invisible, then there are more chances that it will remain hidden on the shelves as well and will remain unsold eventually. In such a scenario, a retailer would possibly take the best advantage that he could have by bringing his own line of labels or brands within the stores. The point of advantage is that he does not have to compete with the well known brands within the business since his target audience is limited and the cost of producing his own label within the retail store is minimal as compared to the giant brands which are already established and doing a roaring business. Thus what the retailer achieves from these labels is a small amount of money, deriving a great deal from the customers which have come in the store to buy the already established and well known labels. This indeed is the private label that the retailer introduces for his own benefit as well as the customers to give a cheap yet similar quality alternative. Private labels are also known as store brands since they are a manifestation of the store (retail outlet) itself. The reason as to why private labels pose as a threat to the high end business houses producing top quality brands is because these private labels offer an inexpensive alternative and attain a great deal of mileage as far as placement and visibility aspects are concerned, all coming under the domains of the retailer who is producing the same in the first place. This is a very significant aspect to understand since retailers can literally manipulate the well known brands so that their own labels, the private labels have stronger chances of being sold and sometimes the customers even prefer the private labels over the top brands doing the business within the particular market segments. The private labels crop up in the form of mushroom competitors for business entities since their brands are competing with these private labels at different fronts all the time and that too in different market segments and types. The retailers bring with them these private labels just to satisfy their quest of achieving profits whilst focusing more on the already established and well known brands. They look at the short term gains rather than long term private label relationship with the customers. They look to provide an inexpensive alternative to the public so that they throng the retail chain more and more. They understand that return customers for their private labels would mean more investments in the related retail category and eventually they might take the decision to launch the pertinent private label as a local brand. Upon achieving more success within the related local domains, this private label could attain the role of a national brand and thus compete with the major brands doing the same business and lying in the related industrial settings. Of course, once this private label becomes a national brand, there is only one way where it could go and that is on a global level. This last level is indeed the international level on which the brand matures completely and has a huge customer base, however pretty different to what was envisaged by the retailer when he introduced his private label within his retail outlet in the past. Before delving further into as to why private labels have made it big within the world of retail outlets, one must comprehend how merchandizing plays a significant role within these contexts. The usage of sales management studies and retail comprehension has benefited to the whole dogma of discount stores, merchandizing and affluent supermarkets. Now is the time to make people realize that retail management can bring in the much needed customized options which seemed to be missing in the yesteryears. Essentials such as market skimming, market penetration and the like have helped the cause of retail tactics and strategies for the last two decades now. These would be further strengthened by the help and facilitation from the newly forming retail theories, marketing strategies and tactics in the days to come. Merchandizing has brought into action products which can be made available courtesy the retail chains themselves with little or no litigation at their end. The already established brands do not usually pose questions upon their presence within the chain since they know beforehand that the merchandizing done by the retailer is his own and thus the organization needs to counter this threat by either doubling the slotting fees/payments or upping the quality of their brands in essence. This brings to light the notion of healthy competition which is always welcomes by the end users or the customers in this case. Thus merchandizing has benefited a great deal towards the eventual business regimes of the retail chains for a long period of time and they will continue to call the shots since they are the leaders within their retail outlets and no one can stop the freedom that they have. The competitive benefits that these private labels bring to the table are immense. The retailers earn quick money without investing too much. They bring in their retail brands (private labels) on the cost of the fees that they receive from the already established and well known brands doing the business. These retailers already have the space to present the brands to the customers so it would only be appropriate if they place their private labels within close proximity of the well known ones and hence provide a chance to get the sale done as far as their private labels are concerned. The cost factor however comes about in the wake of manufacture or production that has to take place all this while. They need to incur costs for the sake of producing these private labels and thus the retailers must be ready to have budgets within their folds so that losses are minimal in the event that the sale for the private labels is not in line with the ones that were envisaged at the time of launching them. These costs have to be understood in proper perspectives before a retailer makes the decision of launching a private label or abstaining from the very same and focusing entirely on acting as a retail chain between the already established brands and the customers themselves. Private labels are produced in a very small quantity and once they are sold off, the retailer makes the decision to bring them back on the shelves. He constantly keeps a check on the demand and supply cycle which is a very significant aspect in the related discussion of private labels. The benefits that these private labels have in essence also suggest that a dedicated customer base is developed within the domains of the relevant retail outlet who do not buy the competing and already established brands. They would rather opt for the private labels which are inexpensive, more geared towards meeting their needs, pretty much in line with the demand and supply issues and above all a feel of individuality and ‘the brand is talking to me’ feel which is portrayed by these private labels. The single most advantageous benefit to date has remained the cost factor which is drastically lesser than the brands doing business on the national and global fronts and which do not have a segment by segment proportion to meet the selected and customized needs of the customers which the private labels meet ever so efficiently. The discussion now focuses on the private label strategy that is adopted by the retailer himself. This strategy comes about due to a weakness in the demand and supply cycle or when the retailer feels that he can find a loophole where he could exploit the shortcomings within the system. He devises his own methods and brings to fore the private labels which produce similar quality to the ones that are already on his shelves but keeps a low price for the same since in this case he has avoided the horizontal and vertical integration debates of channel members. He is himself the producer/manufacturer for the private label as well as its retailer. Thus there is no concept of wholesaler/distributor, intermediaries and any other channel member that might come about in the wake of an already established brand which is reaching to the customers. What the retailer gains from the absence of these pertinent channel members is the cost factor since he achieves a great deal of saving on his own part and thus produces and eventually brings to the shelves the private labels. Now when he feels that his private label is being sold in a very effective and efficient way, he starts putting up the private label’s advertisements, messages and so on and so forth within the domains of the retail outlet. He personally asks the customers to try the private label which is an area of concern for the brands which have been investing heavily on getting their message across to the right target audiences with as little wastage as possible. In this case, the retailer asks the customers themselves to try it and if they get hooked on to the particular private label, there is more chance that these customers who are now the clientele for the retail outlet end up buying the same private label and thus benefit the retailer immensely. To quote as an example, Carlsberg has made an unmatchable name and equity for itself in the world’s brewery markets. Because of this its advertising is made with utmost care and finer details are looked into with precision and accuracy. Add to that huge spending within the advertising of Carlsberg makes more reason that it will continue to survive in a cut throat competition that is marred by competitors of world class stature as well as private labels and mushrooms thronging the market every now and then. With that there are counterfeits which could mar the whole basis of equity that Carlsberg has built over a period of time and look to dismantle the reputation it has built with the beer drinking people. Thus one could see from this example that private labels have also counterfeited well known brands and presented their pertinent identities in line with those of the well known ones. The customers who are usually non-receptive to names and symbols and more receptive to price tangents pick these counterfeits and thus build a long lasting relation with the private label settings that are there for one and all to see within the retail outlets. This indeed is an unethical norm – one that is given air by the retailers more and more in the present times. The consumer protection agencies and the like need to play their vital role so that shortcomings within the related scenario could be avoided and also opportunities could be explored to bring benefits to the table as far as reaching to diversified customers is concerned – when the talk goes out loud regarding the availability of private labels, meeting each and every customer’s needs, wants and desires in any and every way there could be within the market. Consumer trends have changed in the last two decades or so. People are more conscious of their spending patterns now as compared to yesteryears. This is because money is difficult to earn yet it is with everyone. The purchasing ratio has also increased as times have changed. More and more people throng superstores and markets of similar nature which brings one to an understanding that there is an upsurge within the relevant consumer buying levels. However it also means that within the retailing context, people now have more purchasing power than ever before and they want to choose between prices that are offered to them along a line of diverse retail chains and outlets. Thus the aspect of changing consumer trends has brought in changes within the way markets have been shaped up in the current times as well. This is a healthy challenge for the expensive supermarkets like Sainsbury and Tesco situated within Britain and has opened a door for the low-priced discount stores – a sure haven for the not-so-privileged and the generally well-known working class of United Kingdom. Thus private labels have thronged the discount stores and retail chains within United Kingdom is a very aggressive fashion and this is a sure sign of things to get even better in the times to come. In the end, it is quintessential to understand that retailing has changed the face of the British supermarkets and chain outlets. This change might not be for the betterment of these chains and affluent supermarkets but has surely helped the discount outlets into developing their own niche in due course of time. Without a shadow of a doubt, these discount retailers will continue to blossom increasingly well in the times to come as well as make wholesale changes within their business game plans and offer more than just discounts to the discount-seekers at the end of the day. Marketing and more specifically retailing avenues will continue getting changed in the coming years since this is a developing field and much progress will be expected to happen sooner rather than later. The need now is to understand and foresee the potential the world of retailing and meticulously discount stores bring to the table considering in essence the British retail landscape. Also it is significant to understand that private labels will continue to play their due role within the retail domains of any area, segment of market. They will bring in competing brands and labels which will thwart the manner in which strong brands have been advertising and promoting their messages. What these brands need to do is to up their quality drastically so that private labels find it hard to catch by as well as lower the prices so that the customers choose the already well known and established brand over the less known private labels. However what is quintessential here is the fact that private labels will achieve success since they are being headed by the retailers themselves and they will never utter a negative word about their own labels all said and done. Bibliography Davidson, William R. (1967). Marketing. Ronald Press Co. Finucan, Karen. (2002). What Brand Are You? In an Age of Hype, Cities Have to Scramble to Get Name Recognition. The Big Apple, the Big Easy, City of Angels, Motor City. Planning, Vol. 68 Gilbert, David. (2002). Retail Marketing Management. Financial Times/Prentice Hall Hunt, Robin. (2003). Retailisation: The Here, There and Everywhere of Retail. Europa Kotcher, Lauri K. (1999). May the Sales Force Be with You. The McKinsey Quarterly McGoldrick, Peter. (1990). Retail Marketing. McGraw-Hill Publishing Michman, Ronald D. (1995). Retailing Triumphs and Blunders: Victims of Competition in the New Age of Marketing Management. Quorum Books Mira, Rafael. (1993). Solving the Brand Leaders Dilemma. The McKinsey Quarterly Thomas, Colin J. (1993). Retail Change: Contemporary Issues. UCL Press Wedd, George. (1998). The Supermarket Revolution. Contemporary Review, Vol. 272 Word Count: 2,519 Read More