The Art of Private Labeling
When you think “private label,” you probably imagine high-end, exclusive private stock with a limited offering, or its opposite: your local grocery’s cheap store brand that’s all about budget shopping. Whether high or low end, private labeling may seem out of the domain of small business. True, private labeling is not for every business, but when approached as a strategy and branding technique, it can be a powerful tool to get your store noticed and create customer loyalty.
We all know private labels that have taken off and defined the identity of a store: Trader Joe’s; Bed, Bath & Beyond; and Spencer’s Gifts are just a few. You don’t have to be a mega-bucks retailer to create your own private label strategy, though. Many small, independent stores like yours have proven that private labeling can bring independent stores the same perks the big guys enjoy.
Consider private label products an investment in your own brand and business identity. As you establish yourself in the marketplace, adding a product that is exclusive to your store can anchor your company brand and reputation. Private labels also can eliminate some of your competition, because competing stores can’t sell a great item that is so clearly and uniquely yours.
Which product is for you?
With private labeling fast becoming a trend, conventions and organizations have sprung up with the sole purpose of finding the right private label product for you. It’s easy to get caught up in dreams of great items sporting your logo and big orders from loyal customers, but before you proceed, take a step back and define what you want this product to do for your store and what kind of product would be the best fit. With a little creativity, private labeling can be something as simple as assembling and packaging small, loose items from your store that you group together thematically. For instance, do you sell lots of jewelry or stones and crystals? Create small, reusable, drawstring bags for them with your logo and a whimsical saying for an easy and inexpensive private label product.
Custom consumable items are a great way to generate repeat business. Your label on a custom fragrance or blend of tea that customers love and can only buy from you will bring them back again and again. Or, gain new customers by packaging free samples of your private label items for shoppers to take home, try, and review for you.
Be wary, though, of consumables that are a standard item in a new package. A bar of chocolate with your name on it makes a good impulse buy, but if it’s not the best darned candy bar in town, it’s just a bar of chocolate with your name on it.
Hard goods work differently. These create a strong brand for your store because they become walking billboards. Unique designs on colorful T-shirts (with your company name somewhere on them) are a great way to promote your store to new customers. Hard goods are keepers. Customers will hold onto well-designed travel mugs, for instance, particularly if you add a sample of your private label coffee or tea. You want items that people will stop your customers to ask, “Where did you get that?” These durable products need a bit more creative thought to produce something different and powerful.
Finding the right manufacturer
There is no lack of information on private label products and manufacturers. A quick Google search of “private label soap” will result in more than 300,000 hits, from large companies to home businesses. Google “private label” anything, and you’ll receive an overwhelming amount of information—but how to filter so much information and choose the right manufacturer?
I recommend starting with your favorite manufacturers, the ones you use to stock your store. Ask each if they will work with you on custom and private label products. Also talk with your sales reps. They are sure to have the inside track on the private label capabilities of the companies they sell for.
Another idea is to shop outside your immediate area and look for small stores with their own branded products. When you find one, ask the owner if she would share her store’s resources. (Don’t try this locally—neighboring stores may think you are trying to take their business.) You also can find a lot of small manufacturers at local farmers’ markets and craft fairs, and many may be open to using their expertise to produce a custom product for you. If the company has a popular brand of its own, that is a strong sign of a good reputation.
Private label trade shows are a great way to go if you are serious about investing in your own brand. Manufacturers that invest in a trade show booth are looking for big buyers like chain and big-box stores. That may be a bit off-putting, but you can always find vendors at these shows willing to work with smaller minimums for smaller stores. The Private Label Manufacturers Association puts on a large trade show each year in Chicago. Its website, www.PLMA.com, is a good place to explore if you are drawn to the energy and excitement of trade shows.
When choosing a manufacturer for your private label products, make sure it’s a reputable company that will be around tomorrow. Also make sure it holds liability insurance on everything you buy. You’ll want to ask these questions of any untried private label or custom manufacturer: 1) Can I get a sample? 2) Do you have references? 3) Are you insured for liability? 4) What are your minimums? 5) Can you design the finished packaging?
Manufacturers will expect at least 50% down for a custom product. Though most manufacturers want large purchases for custom items, not all do, and even some of the big guys will work with you to help grow your private label business.
Finding the original manufacturer of a particular product can get you the best price, but best price comes with large minimums. If you want to start out small, look for the middle man or distributor. Sometimes they have a bit of pull with the manufacturer and can help you sort out your needs. If you have difficulty finding the original manufacturer, middle man, or distributor, call the manufacturer directly and talk to the sales department. For instance, if you want a new line of soaps labeled for you and you love Dr. Bronner (or Kiss My Face or any specific brand), call the company’s home office and start asking questions. If they can’t meet your needs, they may know someone who can or will steer you to their middle man for help.
As you research, keep in mind that the original manufacturer will have the best price, but it will also have the highest minimum. If you can’t possibly meet the quoted minimums, ask if the manufacturer has a reseller who can work with you on smaller private label orders. The reseller will have a higher price, but you can get a quantity you will actually sell through.
First published in Vol. 25 No. 1 of Retailing Insight. © 2011 Continuity Publishing Inc. All rights reserved.