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Private label

A private label, also called a private brand or private-label brand, is a brand owned by a company that directly sells the product,[1][2] but outsources the manufacturing to a third-party. That is, company A makes a product for company B, which company B then offers under their brand name.[3][4][5] Among the best-known private-label brands are store brands, brands owned by and sold exclusively at a particular retailer, such as a supermarket or grocery store chain. Examples are Simple Truth by Kroger and Great Value by Wal-Mart. Store brands compete with national brands. Private-label producers are usually anonymous, sometimes by contract. In other cases, they are allowed to mention their role publicly.

A private-label is similar to but distinct from a white-label product. A private-label product is made by the manufacturer under contract exclusively for the client, who sets the product specifications, while a white-label product is specified by the manufacturer, who may make the same product tor multiple clients, and each retail client merely applies their brand.[6][7][8][9]

Store brands

In the supermarket and grocery store industry, a store brand is also called a house brand[11] or own brand,[12] is almost always offered exclusively at the chain store that owns it; in rare instances, however, the brand is licensed to another company.[13]

Examples of store brands are Simple Truth by Kroger, Great Value by Walmart, Clover Valley by Dollar General, Market Pantry by Target, and Specially Selected by Aldi.[14][15] Store brands can also be eponymous.

Store brands compete with national brands, also called premium brands or name brands.[16][17][18][19] The general appeal of store-brand products is that they are usually offered at a lower price than their name-brand counterparts.[1]

Most private-label store brand products are manufactured by third parties, but companies owned by the retailer make some.[20] For instance, a vice president of The Kroger Company stated in 2018 that approximately 60% of their private-label products are outsourced. The remaining 40% is manufactured internally: in 2018, Kroger owned 38 plants, including 19 dairy farms, 10 bakeries, and 2 butcheries, strategically spread across the US.[21] Similarly, Safeway Inc. owned 32 plants as of 2012.[22] Most retailers prefer to keep the identity of their suppliers private, and accordingly have non-disclosure clauses in their contracts, making it difficult to determine the producer of a private-label product.[23][24] In a few cases though, the manufacturer is allowed to mention it publicly,[25] is revealed through a product recall, or in rare instances, is stated on the product itself. For example, the bags of Kirkland Signature coffee by Costco feature the text "Custom roasted by Starbucks".[26][27]

A private-label brand is often produced by the same company that manufactures the national brand of that product.[28] Different brands target different consumers. For instance, Kimberly-Clark makes Huggies diapers, but also produces a Walmart budget version.[29] Allegedly, some store-brand items are identical to their name-brand counterparts: they are said to be literally the same product, except for the packaging and price. In other cases, a manufacturer can have multiple formulas for one product, creating a private-label version using one method and the national-label version using another.[30] In 2007, a mass-recall of contaminated pet food products brought to light that more than 100 different brands of pet food, both premium- and private-label, were in fact produced by a single company: Menu Foods Inc. in Ontario, Canada. The ingredients and recipes they used differed substantially among brands, depending on what their clients specified.[29]

History

Private-label brands emerged in the 19th century.[31] Until the early 20th century, their general focus was on delivering quality at a price below that of the national brands. In the first half of the 20th century, the quality of private brands diluted and their standards dropped. In their competitive struggle against national brands, low prices were considered more important than quality. In the second half of the century, this trend gradually reversed.[32] As quality and visual appearance improved, private labels rose to prominence in the 1970s and '80s.[33] By the 1990s, they were increasingly seen as a threat to the established brands.[34] Also, from the 1990s onwards, a premiumization of store brands began to occur,[35] giving rise to more expensive premium private labels.[36][37] A survey conducted by the UK's Groceries Code Adjudicator in 2024 noted that retailers were introducing more own-label products and the adjudicator commented that this trend added to management complexities for suppliers.[38]

Generic brands are often associated with store brands. Generic products were first introduced in the United States in 1977,[39][40][41] quickly winning market share from national and private-label brands.[42] A 1981 academic article described them as products "without brand names, in very plain packages with simple labels and usually sold at prices below both the national and private brands with which they compete".[39] Packages of generic products often feature only the name of the type of product it contains, e.g. "Cola" or "Batteries".[40] Nowadays, the terms generic brand and store brand are sometimes used interchangeably.[16][43][44] The term generic can be used as a pejorative toward store brand items that are perceived as bland or cheap.[45][46]

In finance

A private-label credit card (PLCC) is a type of credit card that can only be used at a specific company or chain of companies. Since this is virtually always a retail business, they are also called store cards.[47][48] The retailer partners with a bank that issues the cards, funds the credit, and collects payments from customers. The cards themselves are branded with the logo of the store, but not the bank.[49] Examples are the Target Circle Card (formerly Target RedCard) (issued by TD Bank, N.A.),[50] the Walmart Reward Card (issued by Capital One),[51] and the Amazon Store Card (issued by Synchrony Bank).[52] PLCCs also do not carry the logo of the payment network (e.g. Visa or Mastercard), but they do use that network for transactions.[47]

Private-label store credit cards are sometimes compared to but not the same as co-branded credit cards. These cards usually feature the payment network logo, and sometimes the bank's logo.[53] Unlike PLCCs, co-branded cards work like 'normal' credit cards, usable at any place where that type of card is accepted.[54] For instance, warehouse chain Nordstrom offers a Nordstrom Store Card (private label) and a Nordstrom Credit Card (co-branded), both issued by TD Bank, N.A. and using Visa's network.[47]

See also

External links

References

  1. Marshall Hargrave. How Private Brands Matter Investopedia^
  2. {{Harvp|Fitzell|1982|p=9}}: "Any time a product is packaged under a label owned by a retailer, it can be called private label."^
  3. Stella Morrison. How Private Labeling Works business.com^
  4. MBA Skool Team. Private Label Meaning & Definition MBA Skool^
  5. Rasha Mahmoud. Private Label: Definition, Example, Pros & Cons Retail Dogma, 31 May 2020^
  6. Brittany Henneberry. What is Private Label Branding? Private Label Definition and How it Works Thomasnet.com, Thomas Publishing Company^
  7. Matt Ellis. Beginner's Guide to Private Labeling and White Labeling Ecomdash, 11 March 2021^
  8. Rob Starr. White Label vs. Private Label Products: What's the Difference? Small Business Trends, 7 April 2022^
  9. White Label vs Private Label – What's the Difference? That Company, 11 April 2020^
  10. Mark Hamstra. Lidl rolls out private label produce Supermarket News, 6 January 2023^
  11. {{Dictionary.com|house brand}}^
  12. —^
  13. Philip B. Fitzell. Private Labels: Store Brands & Generic Products AVI Publishing Company, 1982^
  14. Louis Biscotti. Private Label Brands Roar At Retail Forbes, 2 May 2019^
  15. One more way Aldi maintains its low-price reputation: Specially Selected products brick meets click, 29 March 2021^
  16. ((Chron Contributor)). Store Brand Vs. National Brand Chron^
  17. Trent Hamm. The Only Difference Between Brand Names And Generic Groceries Is The Mental Block Business Insider, 28 July 2012^
  18. Laurin. Generic vs Name Brand Foods – Is there really a difference? The Dinner Daily, 23 April 2015^
  19. Hitesh Bhasin. Generic Brand Definition – Difference from Brand Name Marketing91, 8 May 2020^
  20. {{Harvp|Fitzell|1982|p=10}}: "The label owner may manufacture his own private label products or have them manufactured and packaged to certain specifications by outside sources, including imports."^
  21. Lawrence Aylward. Crowning Kroger Store Brands, 23 February 2018^
  22. Kathie Canning. Is Self-Manufacturing Right For You? Store Brands, 4 January 2012^
  23. Sophie Hirsh. How Trader Joe's, Whole Foods, and Kroger Make Their Store-Brand Products Green Matters, 4 January 2022^
  24. Vince Dixon. What Brands Are Actually Behind Trader Joe's Snacks? Eater, 9 August 2017^
  25. Stefanie Tuder. How La Boulangerie Bounced Back and Into Trader Joe's and Costco Eater, 28 October 2016^
  26. Serah Louis. These are the big brands hidden behind Costco's Kirkland label MoneyWise, 23 December 2021^
  27. Laura Willcox. The Untold Truth Of Costco's Kirkland Brand Mashed, Static Media, 22 February 2022^
  28. Laurin. Generic vs Name Brand Foods - Is there really a difference? The Dinner Daily, 23 April 2015^
  29. Ellen Byron. 101 Brand Names, 1 Manufacturer The Wall Street Journal, 9 May 2007^
  30. {{Harvp|Dixon|2017}}: Sometimes suppliers have multiple formulas for one product; they might produce a private-label version using one formula and the brand label with another.^
  31. .^
  32. .^
  33. .^
  34. John Quelch, David Harding. Brands Versus Private Labels: Fighting to Win Harvard Business Review, January–February 1996^
  35. David Dunne, Chakravarthi Narasimhan. The New Appeal of Private Labels Harvard Business Review, May–June 1999^
  36. Mary Ellen Shoup. Deloitte report: What does the future hold for the food retail sector? FoodNavigator-USA, William Reed Ltd, 19 June 2020^
  37. The rise of premium private label and its impact on discount retailers nielseniq.com, Nielsen Corporation, 2 August 2019^
  38. Belser, T., Groceries Code Adjudicator Conference 2024: Suppliers Should Find Their Voice (and Do GSCOP Training), Haddleton & Co Ltd., published on 29 October 2024, accessed on 31 October 2024^
  39. John J. Wheatley. The Effect of Generic Products on Consumer Perceptions and Brand Choice Advances in Consumer Research, Association for Consumer Research, 1981^
  40. Martha R. McEnally, Jon M. Hawes. The Market for Generic Brand Grocery Products: A Review and Extension Journal of Marketing, January 1984^
  41. .^
  42. Margaret Yao. Clorox vs. Chlorine Bleach: Generic Products Are Winning Noticeable Shares Of Market From National Brands, Private Labels The Wall Street Journal, 10 August 1979^
  43. Brad Tuttle. Brand Names Just Don't Mean as Much Anymore Time, 1 November 2012^
  44. Laura Heller. 10 Secrets About Store Brands Forbes, 29 June 2011^
  45. {{Harvp|Dixon|2017}}: "Similar stores like Aldi ... have a private-label concept but have not transcended the stigma of "generic" as Trader Joe's has, nor have they mastered the art of brand deception (or perception)."^
  46. Carolyn Heneghan. Generic no more: How private label products compete with national brands Grocery Dive, Industry Dive, 7 November 2016^
  47. Julia Kagan. Guide to Store Credit Cards Investopedia^
  48. Lee Huffman, Dia Adams. What's The Difference Between A Store Card And A Credit Card? Forbes, 3 January 2021^
  49. Latoya Irby. What Is a Private Label Credit Card? The Balance, 9 June 2021^
  50. Target REDcard U.S. News & World Report^
  51. Holly D. Johnson. Walmart Rewards Card Review The Balance^
  52. Brendan Harkness. Review of the Amazon.com Store Card Credit Card Insider, 6 January 2020^
  53. kyle. Private Label vs Co Branded Credit Cards: What Is The Difference? Via Travelers, 25 February 2022^
  54. Elizabeth Gravier. How co-branded credit cards work and the 5 most unique ones we found CNBC, 2 June 2020^