Private labeled items have long been saddled with the reputation of being cheap, lower-quality alternatives to brand name products. Brand X was the product of last resort, chosen only to save money. But times have changed. While private labels may never command a market share equal to the big names, cynicism about “generics” is dying.

“The old perceptions were that it was just thrown together in somebody’s garage,” says Brad Bobbitt, vice president of sales for Eagle Maintenance Supply in Pennsauken, N.J. “Now, maybe only 40 percent of people are skeptical of private labeling.”

As customer acceptance grows, so does the number of distributors that offer a private line. Just a few years ago, very few jan/san distributors had a proprietary brand, and many that did, offered it only as a discount line. Now, four out of 10 distributors sell some kind of a private label product, according to “Facing the Forces of Change” by Adam J. Fein.

“A lot of companies are doing private label, which has really solidified it in the marketplace,” Bobbitt says. “When very few were doing it, the customer wanted to know why you didn’t carry a big line. Now so many do it that customers are more willing to look at your private label.”

Availability isn’t the only thing behind the change of heart. Fein credits the sluggish economy; customers “trade down” to private labels when times get tough. While price may be one motivation, distributors believe other factors are at play, including the quality, aesthetics and quantity of privately labeled products.

A Cut Above

Resistance to private labeling has been fueled by concerns about quality. In the beginning, it was often true that the products were inferior to brand names. Over the years, however, distributors have focused on improvements to make their proprietary lines as good as or better than big name competitors.

Convincing customers that a private line can rival a branded line isn’t always easy. One way to do it is to eliminate the comparisons by dropping all brand names from the inventory. St. Louis-based Continental Research Corp. has private labeled 100 percent of its chemicals for all of its 40-year history.

“The biggest mistake people make is they don’t focus their products as niche products,” says Tom Epstein, president of Continental, which has been growing at 12 to 15 percent a year. “It’s hard to believe someone’s private label floor finish would be better [than a name brand] unless you don’t carry a branded line. In that case, you can say you’ve scoured many manufacturers to find the best product.”

For distributors that do not carry only private label products, the best way to convince customers of quality is old-fashioned show-and-tell. The best advocate for a proprietary line is the sales staff, which must take the time to introduce customers to the products, including demonstrations of their effectiveness.

“It comes down to service more than anything,” Bobbitt says. “When you demo the product, the proof is in the pudding. That’s where you create brand recognition for your private label and show that it is comparable and that you can rely on the product.”

Sometimes proving yourself to customers is a matter of reputation. It’s much easier to introduce a new private label line to existing customers with whom you have established a trusting relationship. Likewise, new customers are more likely to buy into a proprietary line if the company has a proven track record.

“Initially people asked what happened to the other lines,” says Rick Grandfield, director of janitorial sales for Miami-based Dade Paper, which switched to carrying only private branded chemicals three years ago. “But we didn’t lose any business because of it. Their perception is that after 25 years in this industry, we know about quality.”

A New Look

Another important improvement in private labeling is the packaging. There are distributors that sign up for an entry-level branding program in which a manufacturer provides a generic label to slap on the product. Becoming more common, however, is a specialized approach that has distributors investing in completely custom designs.

Dade Paper’s private label line uses a two-color reverse print silkscreen label on all of its items, incorporating different colors for each of its product categories. It also uses white boxes for every product. Eagle Maintenance’s packaging is similar, with a silk-screen, color-coded label that features the company’s logo.

Because it sells so many private label products, Continental is committed to creating the most custom line possible. The personalized approach starts from the beginning; the company works with more than 40 manufacturers to design its wide range of products.

“People have a tendency to develop a private label with one manufacturer but no one manufacturer is going to make the best of everything,” Epstein says. “What I would encourage people to do is actually not just look for a company who will design a whole private label program for them but to take the private label program in house and look for superior products.”

Truly an in-house operation, Continental also has a five-person marketing department that creates all of the company’s artwork, Web design and other communications. It also owns a $100,000 printer that is used to make product packaging.

Every Continental product includes a modern-looking label with the company’s name, URL and logo. The packaging has evolved to now include sub-logos for certain products, including an eco-friendly line and the Top 100 products.

“We clearly brand ourselves because we want people to ask for Continental by name,” Epstein says. “We do a lot of self promotion. It’s not cheap, but we get some of the very best margins in the industry.”

Many distributors can’t afford Continental’s level of customization. But Epstein suggests distributors invest more time in pushing their manufacturers to make the private label products as personal as possible.

“People who are trying out private labeling generally rely on the supplier to do all of those things for them so they aren’t in control,” Epstein says. “Control as much as you can. Ask suppliers to not give you standard stuff but to customize it for you. Try to differentiate your products. If it has a unique feature, market it.”

Growing To New Categories

Early private labeling programs included just a few chemicals. Today, some proprietary lines include hundreds or thousands of SKUs and cover most product categories including aerosols, floor machines, towels, tissue, plastic bags, plates, cups, cutlery, and more.

“We can go into a bid situation and get our private branded line speced in and two years later there is no substitute for [private label products],” Grandfield says.

Even if a distributor offers every possible product in its private label program, there will always be customers who aren’t satisfied with anything but a brand name. Knowing that old habits die hard, most distributors continue to carry a mix of their own line and national brands.

“You have to have a marriage of both,” says Bobbitt. Eagle Maintenance sells about 80 percent national products and 20 percent private label. “I think there’s room for everybody from private label to the national brands.”

As Eagle has discovered, private labeling will never replace traditional brands entirely, but it can be a great enhancement to the product mix. Proprietary lines offer amazing opportunities for higher margins, customer retention, and are great perks in any industry.

Becky Mollenkamp is a freelancer based in Des Moines, Iowa. She is a frequent contributor to SM.

 

 




POSTED ON: 4/1/2008