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Why Private Label

There are many reasons your company may decide that it is best to private label your own products, as opposed to selling products branded by another company.

One reason is that you now have the “Power of the Brand” working for you. When someone is buying a product that you have branded, they are much less likely to switch to purchasing from a competitor.

Now, getting right to the “bottom line”, a major reason to private label your own products is profit margins.

When buying another company’s...

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There are many reasons your company may decide that it is best to private label your own products, as opposed to selling products branded by another company.

One reason is that you now have the “Power of the Brand” working for you. When someone is buying a product that you have branded, they are much less likely to switch to purchasing from a competitor.

Now, getting right to the “bottom line”, a major reason to private label your own products is profit margins.

When buying another company’s product line, you are paying more for the product. Depending on quantities, relationship with your suppliers, and other factors, you may save as much as 25–50% or more when private labeling.

In addition, it’s a fact that many high-grade privately labeled products can actually comand higher retail prices than the traditional “brand name products”, and you have the possibility for much higher margins products as alternatives to
national brands. This has resulted in a growing shift in the balance of power between retailers and manufacturers. Retailers not only become less dependent on manufacturers, but actually make manufacturers dependent on them for sales volume.

Private labels offer several benefits to both retailers and customers, driving the segment’s rising popularity. For retailers, margins on private labeled goods are on average 10% higher than those on similar branded products. Customers benefit from private labels’ lower prices, which are often significantly less than those of national brands. This combination, while beneficial to
retailers and consumers, can put substantial pressure on the manufacturers of branded goods, who have to compete against
their own customers (the retailers) for market share.

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Lower Prices/Higher Margins

Private labeled goods are generally much cheaper to produce than branded goods, due to the lack of advertising and marketing expenses. As such, retailers are able to purchase private labeled goods for much less than they would have to pay for comparable branded products. The cost difference is usually large enough that retailers can offer customers lower prices while still making higher profit margins themselves. Lower prices can
be enticing to customers and eliminate a stop on a product’s way from the manufacturer to the consumer. Retailers are now becoming increasingly established as brands themselves, marketing their private label

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