Sometimes referred to as house brands, private brands are product brands that are owned by the retailer instead of the entity that produces the product. The concept of private branding is not new and is used in many different industries. Most people are used to seeing the private or store brands displayed alongside national brands on the shelves of supermarkets, pharmacies and many other retail chains.
The concept of private brands has been around for many decades. As early as the middle of the 19th century, there is evidence of the first major department stores contracting with suppliers to private label some of the goods that were sold on store shelves. The trend has continued on to this day, with some of the most well-known retailing entities sometimes attracting customers based on the quality of their house or store brands as well as their selection of national brands.
Retailers who market private brands benefit from the activity in several ways. First, there is no need to establish manufacturing facilities in order to produce the goods or services offered. The retailer does not have to hire additional employees, deal with the acquisition of raw materials, or arrange for storage space for finished goods until they are sold to a customer. Because someone else is dealing with details of that type, the overhead for the retailer is significantly less than if the business attempted to produce the goods on its own.
Another advantage to the use of private brands is that the retailer does not have to sink a great deal of time and money into the research and development of new product lines. The manufacturers who produce the goods and arrange for the private labeling engage in that type of activity, then offer the retailer the opportunity to private brand any new products or services the supplier decides to market. Often, the retailer is made privy to the results of field testing and the identification of the niche market where the good or service is likely to generate interest, and can determine if they wish to go after that particular market sector.
For the manufacturer, private brands also provide another outlet for distributing their products or services. By producing the same goods as for their national brand distribution and labeling them with private brands for various clients, the volume of production is often higher than it would be otherwise. This translates into more net profit for the manufacturer in the long run, helping the business to remain stable even in tough economic times.
While many people automatically think of supermarket products when they hear of private branding, the fact is that many different industries routinely use private brands. Resellers of electronic equipment, telecommunication services, pharmaceuticals, and even garments often contract to sell name brand products under their own private brand name.