Table of Contents
What is Private Label？
The private label refers to products produced by third-party suppliers but sold under the retailer’s brand name. This strategic retailer creates its own identity and image through unique branding and packaging to differentiate its products from those of its competitors.
Private label products are specifically designed to meet the needs of retailers and their target customers. Compared with selling branded products, private label products provide retailers with numerous advantages, including increased control over the supply chain, increased profit margins, faster time to market, and lower costs. It is also conducive to improving customer loyalty and increasing the innovation of product categories. Customers tend to trust a retailer’s brand more than a manufacturer’s because of product consistency and quality. Building a private label product line is an excellent strategy for retailers looking to increase revenue and build customer loyalty.
What are the national brands？
National Brands (NBs) are products or services that are manufactured, marketed, and sold by well-known companies with a strong national presence and recognition. These brands have captured a significant share of the market and are often strongly associated with quality, reliability, and consumer trust. National brands are usually developed and owned by large companies that have invested heavily in research and development, marketing, and distribution. These brands often have a long history and are well known due to extensive advertising campaigns and the prevalence of online and offline retail channels.
One of the key characteristics of national brands is their broad geographic reach. They are designed and positioned to appeal to a wide range of consumers in different regions or even globally. National brand typically have a diverse portfolio of products across a variety of categories that cater to different customer segments.
National brands benefit from economies of scale, allowing them to leverage their production capacity, distribution networks, and marketing budgets to achieve cost efficiencies and maintain competitive pricing. They often have strong relationships with suppliers and retailers, resulting in shelf space and better visibility in stores. Consumers often perceive national brands as reliable and trustworthy due to their established reputation and consistent quality standards. These brands build consumer loyalty and brand value by meeting consumer needs, product innovation, and brand association.
To summarize, national brands are products or services offered by well-known companies that have widespread recognition and presence in the marketplace. They play an important role in the marketplace, characterized by their strong brand reputation, extensive distribution network, and broad appeal.
The difference between private label and national brands
There are some key differences when it comes to Private Label and National Brands. The following is an objective analysis of the differences between them:
1. Brand ownership and manufacturer relationship
Private Label: Private Labels are created and owned by retailers or sellers themselves. They source unbranded products from manufacturers or suppliers and put their brand labels on their products.
National brands: National brands are developed and owned by large, well-known companies. These companies have their own manufacturing capabilities or long-term relationships with manufacturers.
2. Brand awareness and trust
Private label: Private labels are usually lower in terms of awareness and market recognition because they are not advertised and marketed on a large scale like national brands. Consumers’ trust in private brands needs to be built gradually over purchase and use.
National brands: National brands usually have widespread awareness and market recognition. Consumers generally have trust in national brands and associate them with high quality, reliability, and reputation.
3. Product positioning and market coverage
Private label: Private labels are usually positioned at more competitive prices and sold in specific retail channels, such as the private labels of supermarket chains. Their market coverage may be narrower and confined to specific sales channels.
National brands: National brands are usually positioned in the mid-to-high-end or premium segment and are sold in multiple distribution channels, including large retailers, specialty shops, and online platforms. They have a wider market reach and can cover both domestic and international markets.
4. Market competition and pricing strategies
Private label: Private labels usually compete directly with other private labels, especially in specific retail channels with similar product categories. They usually attract consumers through more competitive pricing strategies.
National brands: National brands face competition from a wider range of markets, including other national brands and private labels. Their pricing strategies may be more diversified and can be based on brand value, quality, and market positioning.
5. Brand control and innovation
Private label: Private labels have a high degree of brand control and can determine product specifications, packaging design, and pricing strategies on their own. However, they often rely on existing products from manufacturers or suppliers, and innovation and uniqueness may be limited.
National brands: National brands have greater flexibility and resources for product development, innovation, and control. They can invest in R&D, launch new products and special features, and use brand influence and resources to innovate.
Overall, private label and national brands differ in terms of brand ownership, awareness, positioning, market reach, competition, and innovation. Private labels typically have an advantage in price competition and specific retail channels, while national brands gain an advantage through awareness, trust, and broad market reach. Consumers expect more from national brands, while private brands are more price-competitive and customized.
Advantages of private label and national brands
National brands have the following advantages over private labels
1. Brand awareness and recognition
National brands typically enjoy widespread awareness and recognition in the marketplace. Consumers have a higher level of trust in national brand and see them as reliable, high-quality and trustworthy options. This brand awareness and recognition can boost sales and attract more consumer attention and purchases.
2. Market coverage and distribution network
National brands usually have extensive market coverage and well-established distribution networks. They can promote their products to a wider range of geographic areas and market segments through partnerships with a variety of retailers, supermarkets, specialty shops, and online platforms. This extensive market coverage and distribution network enables country brands to reach a wider range of consumers and provide convenient access to purchasing channels.
3. Economies of scale
National brands are usually able to reap economies of scale due to their size. They can reduce costs through mass production and negotiate more favorable purchasing terms with suppliers and manufacturers. This allows the national brand to price their products more competitively and achieve higher profit margins.
4. Marketing and advertising resources
National brands usually have more marketing and advertising resources. They can invest heavily in advertising, marketing, and branding. These brands can use a variety of channels such as advertising media, television, print, digital marketing, and social media to increase brand awareness, build brand image, and capture consumer attention.
5. Innovation and R&D capabilities
National brands usually invest higher resources in innovation and R&D. They have dedicated R&D teams and laboratories working on product innovation, technology improvement and new product development. This enables national brand to continually introduce new products, offer improved features, and meet the changing needs of consumers.
6. Brand reputation and quality assurance
National brands are usually known for their brand reputation and quality assurance. They have built a long-standing reputation in the marketplace, earning consumer trust by delivering consistent, high-quality products. This brand reputation and quality assurance allow the national brand to attract a loyal consumer base and sustain a competitive advantage.
Overall, nation brands have higher brand awareness, broad market coverage, economies of scale, marketing and advertising resources, innovation capabilities, and brand reputation and quality assurance relative to private brands. These advantages put national brand in a favourable position to compete in the marketplace and make them more likely to attract consumers, boost sales and achieve long-term success.
Private label has the following advantages over national brands
1. Price competitiveness
Private labels are usually positioned at more competitive prices. Since private labels do not have the brand premium of a middleman, consumers can purchase products of similar quality at a lower price. This makes private label the first choice for consumers who are looking for an affordable option.
2. Flexibility and customisation
Private labels usually have a higher degree of flexibility and customisation. Retailers have the autonomy to decide on product specifications, packaging design, and pricing strategies based on market demand and consumer preferences. This allows private labels to better meet the needs of specific consumer groups and offer customized product options.
3. Exclusive formulations and product differentiation
Private labels can develop unique formulations and products that differentiate them from national brands. This allows private labels to have a competitive advantage in terms of product features and differentiation, appealing to consumers who are looking for fresh experiences and unique options.
4. Strong retail partnerships
Private labels often have strong partnerships with retailers. Retailers can customize private label products to suit their needs and achieve greater supply chain efficiency and flexibility by working closely with manufacturers. This strong partnership provides private labels with broader market channels and better sales opportunities.
5. Brand control and flexible supply chain management
Private labels have greater brand control and can make quick adjustments and improvements based on market demand and consumer feedback. In addition, private labels can choose to work with multiple suppliers and manage the supply chain flexibly to ensure product quality and delivery time control.
6. Reduce brand conflict and competition risk
As a retailer’s own brand, a private label can avoid direct competition with another national brand, reducing brand conflict and competitive risk. This allows retailers to better capture market share and improve profitability.
Overall, private labels offer advantages over national brands in terms of price competitiveness, flexibility and customization, uniqueness, strong retail partnerships, brand control, and flexible supply chain management, as well as reduced brand conflict and competitive risk. These advantages enable private labels to meet specific consumer needs, offer affordable choices, and achieve close cooperation with retailers to achieve commercial success.
FAQ
What strategies does a company adopt to differentiate between private label and national brands?
The strategies that companies adopt can vary by market, industry, and brand, here are some common ones:
Quality Positioning
Companies may differentiate between the two by offering product quality in their private labels that is comparable to national brands. They may invest more resources in quality control and product development to ensure that private label products can compete with national brand.
Uniqueness and innovation
Companies can differentiate themselves from national brand by introducing unique product features, innovative formulations or designs in their private labels. This will attract consumer attention to the private label brand and establish a unique brand image.
Brand Marketing
Companies can build awareness and recognition of their brands through branding, advertising, and marketing. They can emphasize the private label’s specialization in a particular field and unique selling points to attract consumers’ attention.
Do private label and national brands offer the same range of products?
Private labels and national brands can differ in terms of product range. National brands usually have a broader product line across multiple categories and sub-brands. They may offer a wide range of choices in different product areas to meet the needs of different consumers.
Private labels usually focus on specific product categories or market segments and may offer a more limited product range. This helps retailers to establish themselves as specialists in particular areas and to offer a different product choice to national brand. However, some retailers’ brands can also offer a broad product range comparable to national brand, particularly in large retailers or supermarkets. These private labels may cover several categories, including food, household products, personal care products, and so on.
Overall, there may be differences in product ranges between private labels and national brands, depending on the retailer’s strategy and target market.
What is the price difference between national brands and private labels?
Typically, private labels are priced lower, while national brands are priced higher. This is because national brands usually have a higher brand premium and market position, and national brands usually differentiate themselves in terms of product quality, innovation, and brand value to support their higher price positioning. Private labels are usually positioned at more competitive prices than national brands. The pricing strategy of private labels usually depends on the retailer’s target market, consumer positioning, and competitive strategy with national brands.
