Private Property

Distributors know the importance of building relationships with their customers — of thinking about more than price and creating value-added services. Not surprisingly, manufacturers view their relationships with distributors the same way. One way manufacturers can enhance relationships with their distributors is offering them the option of private labeling.

As more manufacturers of cleaning supplies give individual distributors the option of putting personalized labels on the products they sell, distributors gain brand identification and leverage in marketing their own products.

What’s the Right Fit?
The jan/san industry has seen a wide range of private labeling partnerships in recent years. Some distributors have invested heavily in making their inventory part of their identity. Others have little experience with private labeling, preferring to keep the lines between distributor and manufacturer clear; distributors sell products and manufacturers make products.

However, knowing how manufacturers view the service will help distributors make an educated decision about whether or not it will benefit their business. In the recent past, manufacturers required distributors to order large quantities of inventory in order to receive private labeling. But now, with the struggling economy, manufacturers are using private labeling as an opportunity to strengthen relationships, and placing less emphasis on high volume minimum orders.

“From our standpoint, we have a direct relationship with the distributor,” says Kevin Hayes of Carroll Co., Garland, Texas. “They’re able to control their own brand and their own business destiny. We can help them promote and advertise with that brand name.”

Taking Ownership
According to Hayes, taking control of a business’s destiny requires that distributors work at being known for their quality products in addition to quality service. With price and service no longer the only elements of leverage, the distributor has the opportunity to add a third weapon to the company’s sales arsenal: the integrity of the product.

Bob McClennan of MISCO, Reading, Pa., says that once a distributor gets a good sense of optimum inventory levels, private labeling enables the company to establish its own line, unique from that of other manufacturers or even other distributors.

After using an effective product for a length of time, customers start looking for where they can get that product at a lower cost, says Hayes. “If they begin to trust in the product name, they may even try to close the loop on the supply chain and buy directly from the manufacturer,” he says. “But when the distributor puts his name on the product, then the customer knows that the product is only available from that particular distributor.”

McClennan agrees, adding that distributors know their customer niche better than anyone else and private labeling gives them another advantage in catering to that niche. “A national brand can become a commodity or a name that customers just always look for,” he says, “but if a distributor sells his own label, then his customers can’t get that same brand from another distributor.”

More Than Just Price
Too many times, customers will concentrate strictly on finding the best price, Hayes says. But when the product comes from only one source, the distributor has greater ability to control the price, as well.

“They’re able to have the freedom to decide the margins that are best for them because they have more control,” he says.

Private labeling makes up 75 percent of MISCO’s business, says McClennan. The company has discovered that giving its distributors the tools they need to be productive allows distributors to achieve higher profits, in turn strengthening their partnership.

“We partner with our distributors and we want to give them whatever they need to be successful,” he says. “We’ve even elevated our design team to provide full-color graphics for the labels. We want them to have a quality brand identity for the products they sell.”

In addition to making sure distributors can create a characteristic brand identity, some manufacturers are helping distributors in other ways.

The Total Package
According to Karin Karez of Amrep, Marietta, Ga., entering into a private labeling partnership with a manufacturer means that the distributor is getting all the services the manufacturer has to offer.

“Once we’ve established a good labeling system, there are also brochures and literature that usually need to be developed,” she says. “A distributor should make sure that the manufacturer not only has a good design team, but also a good technical support team and good organization. We often have distributors call us up and ask us to put together various materials for print.”

Buzz Hill of AlfaKleen, San Luis Obispo, Calif., says that one of his distributors is now free to concentrate strictly on selling, because the company has started using private labeling, making it easier to sell its own product. The distributor has been so successful that AlfaKleen has started providing it with inventory space as well.

“The company is up in Oregon, and we’re taking care of everything for them now,” says Hill. “They’ve always done really well on the sales side, and now that they’re marketing their own product they’re doing even better.”

Although in the case of Hill’s distributor, the partnership has contributed to each company’s increased specialization, private labeling often causes the opposite result, making the distributor more independent and multi-functional.

When a manufacturer equips a distributor for private labeling, that distributor should be getting a lot more than just some new labels, says Karez.

“Of course the No. 1 thing is going to be the product, but distributors should look at the services that manufacturers can provide,” she says. “Private labeling is a lot about giving support to the distributor. Putting a label on a can is just a small part of it.”

With increased support for distributors and increased orders for manufacturers, private labeling has the possibility of being a profitable investment for both parties.

All For One
“It’s really a win-win situation, because the distributor doesn’t have to put energy into labeling and packaging, so instead he’s able to focus on what he does best, which is sales and marketing,” says Eric Scharski of Athea Laboratories, Milwaukee.

“Most distributors don’t want to invest in a lot of very expensive machinery,” he says. “So it gives them the freedom to have product identity without completely changing the structure of the company.”

The hope for manufacturing companies is that by providing a private labeling service, their reputation in the industry for taking care of their distributors will continue to grow.

“It helps create a good awareness around the industry for us,” says Scharski. “Word of mouth tends to filter down, and if one distributor is happy with how we handle his products, then hopefully he’ll share it with other distributors.”

The Road Ahead
Manufacturers say that the biggest challenge for distributors who are considering investing in private labeling is simply committing to a particular product line. Distributors sometimes have a difficult time deciding what products to put the company name on, says Karez. “Then, once they’ve decided on those products, they have to be able to keep up with the manufacturer’s production schedule,” she adds.

Another common drawback for some distributors is that manufacturers often require a high minimum order of products in order for them to arrange the private labeling service. However, with all different sizes and markets, minimum orders vary greatly from manufacturer to manufacturer.

In an effort to increase business, many companies have decided to base decisions on each individual distributor. For example, a manufacturer might allow orders for assorted products, rather than a shipment of just one kind of product, to meet the conditions for them to private label. Many manufacturers have also lowered the amount of products that need to be ordered to have them private labeled.

“Some manufacturers have a 500-case minimum, others have a 50-case minimum,” says Hill. “But, in general, manufacturers will try to do what it takes to make the relationship work.”