Private Label

Klein, in “The Discarded Factory,” provides many examples to show that corporations are much less concerned about production and much more about their brand name. The statement he uses to help explain the reason behind why they are doing this is, "The difference between products and brands is fundamental. A product is something that is made in a factory; a brand is something that is bought by a customer,” (Peter Schweitzer). Many companies believe that while their products and factories are temporary and require upkeep, respectively, their brand will live on for much longer. Because of this, they shift towards outsourcing their production to keep costs as low as possible. The companies then use this extra money to help build their brand using sponsorships and marketing campaigns. In addition to sponsorships and marketing campaigns, companies will also improve their packaging, distribution, and retail channels, and they will expand. A quote once said by Nike’s

This left a segment open for new entrants to come with no competition from incumbents.  Private labels also did not do product proliferation and were focused on limited popular brands at low costs. This helped them save costs in R&D of new products and also save costs by not experimenting new products. They did not compete with the Big 3 on all possible niches. Also, from the table below, we see that the total costs of the private label are 40% less than the Big 3 brands, which helped them to target the price sensitive customers. They are several strategies that the private labels applied which resulted in reduced cost structure. First of all, they did not use coupons, which had accounted for 23% of the total costs for Big 3 brands. The private label also offered higher margins to retailers (15%) in comparison to Big 3(12%) in order to get premium shelf space and signage. The private labels reduced packaging costs by supplying cereals in clear plastic bags. They also used less labor intensive manufacturing process and fewer expensive fruits and nuts.

Firms pursuing a specialization strategy often try to develop a competitive advantage based on customer intimacy and try to deliver unique and customizable products or services to meet their customer’s needs and increase their

If the reputation of the company and the relationships whit their clients does not affect by supplying more imitated products "which we can not guarantee".

Everyday there is the entrance of new products and services in the market. Additionally, product innovation drives competition between multiple organizations. Subsequently, there is a shift in prices and the types of services of provided. Next, there are multiple channels in which goods and services are provided to consumers. These distribution channels include producer to consumer, retailer to consumer, and wholesaler to retailer and consumer. Moreover, supplier diversity allows for economic growth. In some instances it may be difficult for diverse businesses to obtain capital upon start-up. However, many of the supplier programs provide networking opportunities to those who encounter any

The strong competition among rivals pursuing a similar strategy is vastly based on product differentiation and a niche market attraction, as companies are constantly working to surpass their competitors and seek to provide just what certain consumers want.

To fully understand what this particular term means, it is necessary to first and foremost define the first two words: private label. In the simplest definition, a private label is a brand that is owned neither by a producer nor a manufacturer but rather by an individual or business entity that contracts a manufacturer to make the said branded product for

By offering mostly main brand names and buying possibly in bulk and presumably at lower prices since they are putting in larger orders, they may be able to command better sales due to lower prices and make better profits. This is to the benefit of both the company and

Private services: purchased by a businesses and individuals. They are offered by privately owned businesses such as retailers, accountants, banks, private clients and private hospitals, publishers, transport and distribution firms, travel agencies and many others.

Global product sourcing can help in lowering the cost of purchasing the required material from other countries where it is available on low price. Mass customization can also be considered to meet the demand of periodic orders in compliance with constraints of supply chain.

Twenty plus years ago, the terms “private label” or “own brand” were usually synonymous with “cheap knock offs.” These products were viewed as inferior to the national brands and just a low cost alternative for the extremely price conscious. However, in the last 20 years, the paradigm has changed. As major retailers sought ways to expand their brand and entice customers to become loyal to their stores, private label (“PL”) and own brand (“OB”) products became a more viable and significant component of their marketing and brand strategy. However, this came with the caveat that their PL/OB offerings had to meet or exceed the quality of the national brands but at a price point of 10-20% less.

The industry within which Hansson Private Label exists is a very competitive and volatile one. It is dominated by two types of firms, namely, Branded and Private Labels. Tucker Hansson operates as a private label firm. Private Label firms are an emerging market which is competitive based on its ability to have a lower price than its rivals. This market has experienced growth primarily because of this affordability. However this growth would be regarded as organic.

The Big 3 had high advertising to sales ratios of 10-14%, also deterring entry, because average first year advertising cost for a new brand was over $20 million. We can conclude that total costs related to producing private label products are lower than new branded products. Private label products can offer greater margins to grocers and still sell at lower prices. They have a considerable competitive cost advantage over the new branded products.

If suppliers are limited, they have a greater opportunity to charge higher prices for raw materials, and they may also pose a threat of forward integration to the industry.  Similarly, if an industry has few buyers, or buyers can cheaply and easily change suppliers, they can make demands for less expensive higher quality products, causing impact to profit (Porter, 2008, p. 83).

The threat of substitutes for the Household Products of the Nondurables Industry is high. As mentioned before, each company produces a product that is very similar to its competitors. Customers also have high bargaining power in that they can buy substitute products such as paper towels and disinfecting sprays. If a company does not spend time and effort marketing its products, consumers will not be able to differentiate them from a competitor.