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Does Private Label Size Matter?

I often get asked by retailers, “Are we big enough to have a private label program?”

The answer is always the same: A resounding “Yes!”

Recently, I attended a function with dozens of retailers in attendance. At my table there were several small scale operators (less than twenty stores each) who were anxious to start private label programs, but didn’t know how to go about it and were afraid that their volumes would not be significant enough to offer a full fledged, appropriately valued program to their customers.

After some cajoling, deep-breathing exercises and hand holding, I was able to persuade them that, in this case, size was fairly insignificant. We have created a customer who understands that modern day in-house brands are generally the same as, if not better than, national brands. This customer has come to trust what our store’s banner offers. If they trust us, then they’ll tend to trust our private label.

Once we have our own brand to put on the shelf, customers will trade down to save money and walk away satisfied that they aren’t trading down in terms of quality.

Manufacturers understand how private label works. It’s the basic (quoting from the movie Field of Dreams) “If you build it, they will come” theory. They’re usually willing to take a leap of faith with a retailer starting off with relatively small volumes and building the business year over year. They appreciate the additional production volume and take into consideration the life of the business, not just the annual forecasts.

My advice to those of you thinking about a private label program: Start off with a few basic commodity items, items customers purchase each time they visit your store. This will give your brand instant recognition and permit you to branch out into other categories as your program builds momentum.