Keen to expand your company’s product base without taking on additional headaches? Private label branding allows you to outsource the entire supply chain to a third party.
Under this arrangement, another entity handles product sourcing, manufacturing, shipping, importing, and related supply chain aspects. You only apply your brand name to the packaging at the time of sale.
Across industries, private labeling is trending as it grants manufacturers the opportunity to increase their profits. Private label products are sold cheaper than competing brands due to reduced advertising costs.
Widespread Business Practice
Today, drugstore, supermarket, and mass retailer chains sell many items under their brand name. In a competitive marketplace, small and midsize manufacturers are establishing their presence by creating private-label goods. Products with large sales potential are worth considering for private-label branding.
A renowned retailer private labels your product when its quality is at par with leading brands as the former has a reputation to uphold. Private label manufacturers should ramp up production when the need arises and meet tight deadlines while maintaining the highest quality industry standards.
As a manufacturer selling to private labels, you eliminate the entire branding exercise and thus conserve your precious resources. Here are some essential aspects worth knowing about this popular trend in merchandising:
Private Label Builds Brand Loyalty
Unlike earlier, when branded goods were considered superior, private label products now enjoy better brand loyalty thanks to consistent quality. Improvements in manufacturing processes and product innovations have led to this welcome transformation. Today consumers stay loyal to a store they associate with premium offerings.
Infographic created by Chicago Tag & Label, a custom labels manufacturer
Assures Higher Profit Margins
Your expense is limited to manufacturing the said product as private labeling eliminates additional packaging and marketing expenses. The retailer who labels the product takes on its designing and marketing campaign costs. Without the expensive branding exercise, your profit margins are certain to soar.
Maintains Market Stability
In times of economic slowdown, private-label goods continue to enjoy steady sales mainly because of lower pricing. These products are associated with consistency, quality, and affordability which make them attractive to consumers. During tough times, retailers are more likely to increase order quantities than put a freeze on them.
Lowers Operating Costs
Items that fly off shelves without necessitating advertising campaigns are diverted for private labeling. Producing such products in high volume because of popular demand makes them cheaper to manufacture.
Major retailers generally place large orders, which reduces your operating costs. Moreover, shipping your entire stock to a single customer also benefits the manufacturer, saving on distribution expenses.
Exclusive Selling Rights
When you earn exclusive rights to sell a popular private label product, your retail brand has the edge over your competitors. Through effective marketing strategies, you can create demand for these products among your clientele. Your outlet chain being the only source of relevant private label items assures you of viable returns.
E-commerce platforms are also rapidly embracing private label merchandise. The opportunity to offer unique product offerings that beat the competition at higher margins is driving this trend.
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