SMALL RETAILERS ARE DISCOVERING THAT PRIVATE LABEL LINES ARE NOT JUST FOR LARGE CHAINS

Retailers are constantly on the lookout for new, innovative ways to get customers to return to their stores. Promotions, loyalty clubs, coupons, events and classes are all effective ways to up the traffic coming through the doors. But to set itself apart from the competition, a store may want to look into offering its own private label line.

While many small retailers feel that private label is only a profitable idea for larger stores and chains that do big business, they are mistaken. “Small retailers need to think like the larger chains, which see the value in private label and use it extensively,” explained Peter Sokoloski, private label manager for Illinois-based NOW Foods. “If they can get their consumer base to purchase their own brand while the economy is soft, they will tend to retain those consumers when economic conditions bounce back. More often the perception of quality for private label brands has increased to a point where they’re almost indistinguishable from national brands.”

Damian Paul, owner of The Source Natural Foods in Kailua, HI, saw the Potential in having a private label line for his 1,400-square-foot store. The line, fittingly named “The Source,” currently offers 90 products and Paul intends to add more as they become available. “The Source Natural Foods decided back in late 1998 to shop around for a company to private label our supplements,” he explained. “Having a private label vitamin company makes good business sense. Every day the customer opens that bottle and takes their supplement, which makes an advertising impression.”

Betsy’s Health Foods in Houston, TX will also soon begin carrying its own private label line. Ramona Billingslea, marketing manager for the 998-square-foot store, which is currently celebrating its 19th year in business, expressed that launching its own line will give Betsy’s a competitive edge. “We have decided to start carrying a private label line to increase customer loyalty in a retail environment where more manufacturers are turning to the mass market,” she said. “We want a product our customers can only get at our store, not at their grocery store or on Amazon.”

The Benefits

While the recession has hit a number of name brands hard, many private label lines and store brands are flourishing as a result. According to Michigan-based NSF International, consumer demand has risen significantly—reports show private label goods continue to be a strong growth opportunity for retailers, accounting for as much as 90 percent of new revenue in retail channels.

“Savvy independent retailers are now seeing the importance of private label,” said Kenny Flores, vice president of sales for New Jersey-based Reliance Private Label Supplements. “They understand that private label brings customers back to their stores. They realize that they don’t have to worry About their private brand being sold at heavy discounts on the web. They don’t have to worry about their brand ending up at the drug store or conventional grocery store. These retailers don’t have to hit the panic button when competition moves into town.”

Besides offering a product that a customer can only purchase at that particular Store, another benefit is a daily advertisement— every time a customer opens up the medicine cabinet, the bottle stares at them in the face and reminds them of the line and the retailer. “When the customer finishes the bottle they look at it and think ‘I have to go to that store and get another,’” said Paul. “Your name is right there in front of them. In a competitive business where people have different choices where to shop, having your store name in front of them really helps.”

Step by Step

There are a number of factors to consider when deciding to carry a private Label line. First, a retailer needs to decide how much focus they want to put on the brand and whether the line will be positioned as a value line or a premium line. According to Sokoloski, private label shouldn’t automatically mean lower prices or margins.

“If you have a loyal customer base, you may be surprised by their willingness to buy a premium store brand with a cost slightly under the branded counterpart,” added Tina Nelson, vice president of sales and marketing, consumer products for SunOpta Grains & Food, Inc. in Minnesota. “If it’s better than the brand in quality, you have the opportunity to truly set yourself apart from your retail competition.”

Another thing to consider is not to go overboard. According to Kenn Israel, vice president of marketing for California-based Robinson Pharma, starting out small with staple products, such a multi-vitamins and omega-3s, is a good idea to get customers acquainted and loyal to the line. After the line has been established, ask customers if they think there are any products missing from it. If there is an overwhelming response, consider adding those products as well. The line can grow over time; there is no need to go “all in” at the beginning.

“For a small retailer starting a private label program, focus on your most important products when selecting your private offerings,” explained Israel. “Don’t try to start with 200 products, look to start with 10-15 SKUs that are relevant to most of your client base— core products that are already commodities.If clients are already shopping around for the best value in a product, this is a great candidate for your stores brand. This is a more viable strategy and will not cost a ton of money to implement.Working capital is critical and investing in slower-moving products without a proven market can be risky.”

Things to Consider

When considering a private label partner, Billingslea suggests that retailers should do extensive research potential manufacturers and, if possible, speak to Retailers that have similar business situations and are also working with the manufacturer to learn about their experiences.

Further, Billingslea offered a number of questions retailers should ask themselves when looking into different manufacturers:

• How long has the private labeler been in business?

• Who are some of his/her clients?

• Are these clients successful?

• Do you personally know someone who uses this private labeler, so you can speak to that client and get a feel for what kind of treatment you will get from the private labeler?

• Is the private labeler up-todate on his/her product line?

• Does he use patented and trademarked ingredients?

In addition, ensuring that the products are safe is a must. Manufacturers should offer quality, safe products and a wealth of information about them.“Transparency should play a major role in a retailer’s decision to choose a private label supplier,” said Reliance Private Label’s Flores. “They should be allowed behind the curtain. If they are not, the question becomes, why?”

Retailers should make sure that the manufacturer they are considering for their private label line is certified by a third party to ensure quality. “NPA GMP, NSF GMP, STR RQP (Retail Qualification Program) and USP DSVP are all outstanding independent third-party certifications for quality manufacturing,” explained Robinson Pharma’s Israel. “Make sure that your vendor has at least one, but preferably all of these certifications. Other third-party certifications that add value are kosher, halal, GFC (gluten-free certified), ISO, organic and/or a drug manufacturing license. Manufacturers Need to make significant investments in their businesses and quality systems to achieve these standards, and it is a clear demonstration that quality is taken seriously by them (and by you).”

For example, NSF has developed a variety of test methods to verify product quality against a national brand or technical specification. According to NSF, these are the most important criteria that retailers should consider before sourcing private label. Product quality issues can also be identified and isolated. With a team of consumer product experts and state-of-the-art testing capabilities, NSF offers a full range of product evaluation services including: chemical analysis, microbiological analysis, toxicological review, claims verification, packaging integrity and functionality review, sensory panel reviews, risk assessment, physical product characteristics and product and labeling regulatory review.

Finally, coming up with the right name for the line and packaging for products says a lot to the customer at The shelf. Consumers want a brand they can trust that looks professional and not thrown together. “Often store brands in independent health food stores looked Almost home made, but that is changing,” said Sokoloski. “Retailers really need to create strong graphics that look like national brands; their brand needs to look as professional as possible.”

The Debut

Once the line has been produced, educating the staff to know the ins and outs of the line will give customers more confidence in purchasing the line. If an employee’s only reason for suggesting a customer purchase the store brand is because “it’s ours,” shoppers won’t buy it.

Making customers aware that the store now carries its own brand is essential, according to Sokoloski. Announce it on the store’s website and newsletter, place posters around the store and behind the register, or hold an event to introduce the line to the public. In addition, Sokoloski suggested giving the line good placement on the store shelves. “If customers can’t see it and no one is telling them about it, what was the point of working so hard to launch a private label in the first place?”

Ultimately, Nelson expressed that private label lines can be key to retailers achieving “retail success,” if they make the proper commitment. “Private label lines give the retailer the opportunity to create product unique to their store, which means their customers will come to them with more frequency, with a specific purpose,” she said. “The key to retail success isn’t necessarily basket size, it’s the frequency with which customers come into the store. Get them coming back with unique items that meet—or exceed—their expectations.Be prepared to make a three-year commitment to your brand.This will give you time to nurture the message, connect with your customers and build a loyal following. It can be painfully slow at first. A solid marketing and promotion plan coupled with demos and customer engagement will make all the difference in the world.”

“Remember that you are representing your store’s reputation with each bottle that goes out the front door,” concluded Israel. “Make certain that these products present the best possible value, and that value’s foundation is quality.”

Visit vitaminretailer.com to for tips on what to consider when starting the process of developing a private label line

For More Information:

NOW Foods, (800) 999-8069
NSF International,(800) NSF-MARK
Reliance Private Label Supplements, (732) 537-1220
Robinson Pharma Inc., (714) 241-0235
SunOpta Grains & Food, Inc., (507) 451-4724