Private labels are what consumers consider to be ‘home’ brands, or brands that are owned by the retailer or distributer. These are the brands that are only found in that particular store or catalog. Private labels are used as a way to provide customers with generic versions of essential purchases like food or skin products, create supplemental income for doctors or a salon, or even raise a customer’s brand awareness.
There are four major types of private label lines: generics, copycats, premium store brands, and value innovators.
Many private label products are used to create cheap, inferior products known as ‘generics.’ Companies often avoid putting their name on these products, opting instead to simply put the name of the product on the packaging. For example, hair and skin products would be packaged as ‘Shampoo’ or ‘Face Lotion.’ This allows customers to get a cheaper price, and lets the company keep more of the profits.
These private label products are designed to copy the design of a more popular brand in the same product line. Retailers create a product with similar ingredients, packaging, and pricing to a major competitor. They then price their private label at a slightly cheaper price, promising customers the same quality as the more popular brand at a lower cost.
Premium Store Brands
Some retailers use private labels as a way to create a premium product that customers can connect back to their business. By creating a quality product with a distinct, unique packaging design, a company can compete with the top brands of the industry. For example, private label lotion manufacturers can create spa-specific skin care brands that a spa can use. They can then position themselves as providing the best skin care line, which can create supplemental income and brand loyalty.
This type of private labeling is done by retail or service providers who want their customers to associate their business with the highest value of product. They do this by cutting down costs and simplifying the production and marketing, providing their customers with quality products at lower prices. To be a value innovator, a company must sell a limited number of products, have low production and marketing costs, and sell their quality products at lower prices.