Private label faces new challenges



Private label ventures are finding it increasing challenging to create value for both resellers and suppliers, according to a recently-released report.


The staggerin g rate of change in the industry is being part-driven by strategic private label programmes which are restructuring the category and brand structure of the market.


And according to US consultants Retail Performance Solutions further change is coming. Their research reveals private label value share is estimated to be at least 15 percent of total industry sales and accounts for nearly US$35 billion.


This dramatic development represents more than the entire industry growth over the past five years and according to the report, Private Label Office Products: Threat and Opportunity, the private label phenomenon is likely to continue growth in the ten percent range.


Historically, private label office products have lagged behind other best practice retailers such as Wal-Mart and Tesco. But the gap is quickly closing and in some categories OP has surpassed many consumer goods categories in PL development.


Report co-author Tim O’Connor told OPI: "Our research suggests that the private label phenomenon is really as much a symptom of an industry in need of change as it is a driver of change. Spending time and analysis on how the industry got to this point is less useful than assessing the current and likely progression, and building off of learning in other industries. This will help determine alternative and appropriate strategies for resellers and suppliers to successfully work collaboratively for sustainable growth as well as profitability.


"Our research into private label office products found many common elements with other consumer goods industries and ‘retail’ business models that can be drawn upon for guidance.


"Although the rate of change in the industry is phenomenal, it is important to focus on basics. Truly understanding the customer decision process, basic item management with its necessary SKU rationalisation, integration of innovation into a product lifecycle management process to strengthen the customer proposition and brand equity, are all common needs that both resellers and suppliers need to address.


"It is a profound statement on the industry that the largest and arguably most successful reseller’s brand proposition is all about making it easy for the customer. This strategy seems to fit where the industry is today and addresses a core need for improving relevance with customers."


Tim said the OP industry is lacking a sense of collaboration and transparency, and added: "There are glaring exceptions to this where resellers and suppliers work together for mutual gain, but there is general dissatisfaction from suppliers as to the opportunity for collaboration from office products resellers. This is a major barrier to resellers and suppliers collaborating to drive top line growth in this industry through shared insight development, category management and shared recognition of the value of both parties’ brands."


"For suppliers the real threat is the failure to understand the retailer’s strategy in private label, and in this way, how to innovate and market their brand. If you don’t understand what’s really going on out there, how can you really be successful in that category-


"Resellers are the front line with customers, and are not waiting for help from suppliers. However, all indicate they would appreciate it. Both suppliers and resellers need trust and transparency in this process.


"Our research found that many elements of the conventional wisdom about retailing, brand and category management apply, provided the shared focus is on the "customer/consumer" and all parties enter the process with transparency. Transparency does not require giving up self-interest, only being candid about it. Private label is here to stay. It’s not a short term strategy, yet it can’t stand alone. Resellers need suppliers with leading brands who can bring relevant and exciting insights, innovation and retail marketing to them. With resellers focusing on fundamentals, a little excitement and engagement for the customers could go far."


For more details contact or call OPI on +44 207 634 9445.