It wasn’t long ago that the office products industry was debating the "threat" of private label on traditional brands. Dealers feared that the cheap, own-brand products would forever force down prices and margins as customers purchased cheap and anonymous essentials.
Now a wave of strong private-label products has appeared on the market, driven by manufacturers and dealers working together to create quality products fully backed with marketing material and sales training.
"In the last four to five years we have seen our own manufacturing of private brands move increasingly away from low-priced components, boxes or printed labels where price was the key driver," said Doug Skeggs, marketing director at Systemcare, which manufactures private-label products for the equipment cleaning and maintenance markets.
"Today we see the private-brand ranges setting the standards for new product development in both packaging and the use of the product. In the past there was a threat to traditional brands through pricing, but now many own brands are seen as a way of increasing sales and profits by adding value and quality."
Skeggs said today’s private label should be seen as a leader in creating more attractive products for the end-user, moving away from the "oceans of" copycat products flowing out of Asia.
"Look-alike commodity lines now equate to low margins to many resellers," said Skeggs. "Customers are now asking for differentiation, added value in packaging and innovation in products to justify higher selling costs and margins.
"There will of course always be resellers where the cost of the product is the key driver. However, increasingly we see own brands being used as a vehicle for premium positioned products."
It’s not just the manufacturers that have been driving the shift in private label. Dealers and their dealer groups have been improving its reputation and were quick to reap the benefits from a well-branded private-label range.
Rick Needle, president of Integra, has seen success from the dealer group’s ‘initiative’ brand, which has grown dramatically over the past five years. The brand currently carries nearly 500 SKUs and some of the group’s members now focus entirely on it.
"Private label allows resellers and dealer groups to source products from different manufacturers to their own quality specifications and competitive price points," said Needle. "This gives us clear cost price advantages and margin opportunities for the dealers."
Needle encourages his members to use all of the marketing and training which Integra offers, all designed to make the most of the mutually lucrative brand. The aim is a consistent marketing thread through the dealers’ offering, which some take as far as branding their vehicles with the ‘initiative’ logo.
"I think over the next few years private-label SKUs will grow," Needle believes. "The big boxes are focusing more and more on own brands so it will continue.
"Over the seven years since we launched the ‘initiative’ brand, the gross margins of our members have shown consistent growth. It’s all about margins at the end of the day, and a strong private label enables dealers to maintain high margins even in a competitive market.
"It also gives them a distinct marketing edge, not just in terms of cost prices but in terms of identity."