Know thyself. It’s a great mantra for jan/san distributors, especially those considering the creation of a private brand or private label. Such an undertaking will force distributors to deeply examine both their internal structures as well as the markets in which they’re already positioned or would like to penetrate. 

“The first question we ask is, ‘Why?’” says John Wunderlich, vice president of sales at Nyco Products Co., Countryside, Illinois. “‘Why do you want to own your own brand?’ There could be many reasons for it, but they all have to do with strategy. A brand is a perception of a company. We find some customers don’t have much strategy. They just want to slap their name on a label. That’s a strategy, but one that is not very well thought out.”

Jan/san distributors should determine if creating a private label or brand fits with their business’ overall long-term strategies and goals. These typically involve a desire to build equity, create competitive differentiation or gain market protection, says Wunderlich.

Once a distributor has a desired result in mind, the rest begins to fall into place.

“If you look at it from a strategic point of view, you should ask why you want to do it and then you begin to see what makes sense to do,” says Wunderlich.

Know The Market

As important as it is to have a reason to develop a private label or brand, the self examination doesn’t stop there.

Deep internal and external market analysis will also help inform distributors as to the magnitude of the initiative as well as the type of products, marketing and support that will be involved in a private label or brand initiative, says Wunderlich.

A great first step, he says, is to conduct a “SWOT” analysis, which stands for strengths, weaknesses, opportunities and threats.

“That analysis can be a painful experience,” says Wunderlich.

A SWOT analysis — or a similar market analysis — will help distributors determine if they are ready to launch a private label or brand, as well has how far they’re willing to go down that path.

Jan/san distributors should determine whether to privatize just a few items or an entire brand, says Kevin Caswell, sales manager at Warsaw Chemical Company, Warsaw, Indiana. Private labeling involves a distributor placing its name or a new brand name on a few popular items so that those products stand out in the market; creating a private brand is a much more intense initiative that involves creating a full product line, complete with specification sheets, marketing materials and a sales program.

From there, it’s time to start talking to vendors and considering costs. There may be significant additional costs that distributors incur with a private label or brand, says Wunderlich. One of the main cost considerations comes in the form of order minimums that manufacturers typically place on distributors who are private branding or labeling. These minimums could increase inventory costs for distributors. Distributors may also need more warehouse space to store the increased inventory as a result of order minimums, which would be another cost consideration.

“There is an inventory cost associated with it. If you have a private brand, it will have an impact on your inventory space, your cost of inventory and so forth,” says Wunderlich says. “Those are factors that if there are enough reasons to go into a private brand, they certainly should outweigh those additional costs.”

Distributors should also examine how those minimums may impact inventory control and turns.

“You have to be careful and know that you are ready with your inventory,” says Caswell. “You are going to have to figure out if you have enough turns on your inventory to make a private brand feasible.”

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