This is a question that a lot of retailers and even distributors seem to struggle with. Why do I need a private label product line? Why not just pick up products already branded from other vendors and just sell them?
If you ever doubt the power of brand equity you need only look to the sale of Indian® to Polaris®. This was a brand that at one time had little to offer but history and a name. Despite this, Polaris® spent millions of dollars acquiring the name. Now Indian® is again a thriving brand.
Years ago, not having your own private label line could have some benefits. Less products to manage, no liability risk, and a lower inventory dollar amount. These are the main benefits you will obtain from not having your own private label line. These few benefits do not outweigh the absolute need to have a unique product offering.
Private label products are an absolute necessity in today’s global market. Having a unique product offering is the only thing that separates you from the competition you face. It is what sets you and your business apart from the rest of the world and it is a major contributor to the equity in your parent brand. When you have your own private label brand, not only do you have the ability to create the most profitable brand in your assortment, but everything you put into the brand helps create the brand equity. With a private label brand you also have the ability to completely control the assortment developing products that the market demands and your customers want.
In the motorcycle industry, the majority of the dominant brands have gone to great lengths to retain the market position and brand value that they have spent years trying to create. They know the value of building a unique brand with a unique product offering. Many of these brands have implemented MAP (Minimum Advertised Price) policies to protect the brand from retailers that would de-value the brand by selling the products for lower profit margins. These MAP policies have to be monitored and enforced by the brand and its partners in order to ensure the brand keeps it value and all the resellers are on a level playing field. The down-side to this is that resellers have to trust the brand to enforce the MAP policy. If the brand does not enforce its own MAP policy it’s like trying to win a game where your opponent is not playing buy the same rules.
The other major down-side to a MAP policy for any reseller is the inability to discount the brand beyond the limitations of the MAP policy. This can be a big problem for retailers that initially purchase too much inventory or over forecast the products. If this happens the retailer cannot discount the items to deplete the inventory. They now are stuck with aging inventory and have no way to get rid of it.
When you have your own private label brand you create the ability to completely control the pricing. This is important because it gives you the ability to draw customers in with special pricing and offers when you need to.
A major consideration for any private label brand is that building one is something that takes time. It’s an investment in the future. This doesn’t mean your brand will not be profitable in the beginning. It does mean that you will have some up-front cost and it will take time for customers to recognize and rely on your brand and its products. Since you have the ability to control the assortment, you have the ability to control the pace. You can invest up front and fill the assortment, or you can pace the product development and adjust based on market trends. You control the risk.
With time and some proper direction, the value of your brand will be worth far more than the value of the inventory within the brand. The equity you build will be something you retain for the life of the brand and sometimes even longer.