It seems that many retailers are jumping into the private label game, and Amazon recently announced it would be adding new items to its list of homegrown products. Matt Sargent, senior VP of Magid, says it is becoming crucial for retailers to not only develop private-label brands but to create brand identities that emotionally connect with shoppers.
So what are the four standout benefits to starting a private label?
Sargent says No. 1 is differentiation: A private label is the best way to stand out from other retailers.
Second is traffic drivers: Having something that no one else does allows a retailer to drive traffic.
The third benefit to private label is category expertise: Having a private label and doing it well allows a retailer to develop a sense of category expertise. Sargent cites REI as an example.
"If your questions are about camping, you to to REI," he said.
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And the final greatest benefit is increased assortment without the cost: Customers want a choice, but having a wide assortment of brands is costly to the retailer. But if the brands belong to the merchant, the costs are easier to control.
Still, there are additional benefits to store-branded products, such as better control over a brand's identity a faster process for getting products from the design phase into the market and the ability to better control the product's emotional connection with consumers.
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Beyond REI, Sargent notes that Target has done a great job creating private-label apparel. It's no surprise, as he believes that grocery, apparel and furniture are more prone to the private label trend than other retail divisions.
Still, retailers need to open their eyes, as private labels are the wave of the future.
"This is not a passing phase," Sargent says. "Private label will be a growing determiner of success for all retailers."