Retailers’ Best Hope: Private Label Products

Private label brands had greatly become popular among consumers during the pandemic when usual brands were unavailable due to the issue of supply chains. According to one recent survey, 40% of consumers have tried new private-label brands during the crisis of COVID-19, and those 40% continue buying those new private-label brands. Further analysis shows that assets under management (AuM) in private label markets are expected to expand by between $4.2 trillion and $5.5 trillion by 2025. Private label markets will earn more than 10% of global AuM by 2025.

This report highlighted the continued growth of private label brands as the fast-growing and highly significant portion of global capital markets. Investors continue looking for a sector that can deliver yields with lower risks and more liquid asset classes to struggle to meet both ends. This is the highest time for private label brands to take the lead on the global market.

No doubt, opportunities for the growth of private label brands are high; it is equally important to highlight that returns will be harder to find after the recession period and will be more aggressively fought. Managers of private label brands need to be contemporary in their approach to value creation and respond accordingly to changing investors as the government recovers from the crisis.

What are Private Labels?

When a company outsources production yet retains control of the final product, it is said to be selling “private label” products. The vendor researches every facet of the item being sold. Everything is described in detail, from the product’s features to how it’s packed. The private-label items are sent to the store where they will be sold. The “own brand” items are the ones the corporation sells under its name. A company specializing in collaboration software could sell conference call equipment under its brand. A different firm would produce these goods. The products would still be offered under the original company’s brand.

Industries Where Private Label Brands Are Prevalent:

Following are some examples of industries or sectors in which private labeling is most prevalent:

• Personal care – nail salons, hair salons, spas, and other establishments may sell nail polishes, shampoos, etc.
• Clothing – High-street clothing shops often sell their ranges alongside branded alternatives.
• Pet Food and Accessories – Pet stores sell pet food, pet toys, and other products with their brand.

Rise of Private Labels during Economic Uncertainty:

During the pandemic, when the world’s economic conditions were uncertain, national brand supply chains became unpredictable, and high prices created a headache for consumers; then, people started shifting their minds toward private-label brands. And these factors became the real opportunity for private label brands. Wall street journal, in one of their editorial, writes that shoppers are becoming increasingly changeable due to availability and pricing that goes into their shopping cart. These reports show that grocery stores started reserving their shelves for private-label brands during inflation. This thing removed consumers’ hesitation towards private-label brands, and they started trusting them.    

Price plays an important role in the gravitation of consumers toward private-label brands. One recent study shows that in the United States adults, 89% of adults have shifted from national labels to private label brands for better low prices and better value. In addition, McKinney found that more than 45% of consumers said that low prices are the main reason consumers shift from national brands to private label brands. Private-label brands need to keep in mind the practice of low pricing.

 In addition, private label brands should define the reason for introducing their brand. Consumers’ trend towards private labels increased greatly during the economic recession as private labels are typically more profitable. In addition, high-quality private labels can gain a loyal following and become a powerful driver of customer loyalty to the retailer.   

 Thus, it is high time for people to start private label brands. Outcome for those retailers who set bold ambitions and move quickly to fill any gap of capability, they can make their private labels soon as powerhouse brands.