Private Label Distributors See Poor Economy As Time To Shine
Throughout the recent recession, jan/san distributors have enjoyed the increase in interest — and sales — in their private label product sector as customers explore ways to cut costs.
"When times are good, customers don't want to make changes and they enjoy the reliability and familiarity with the brand names," says Laura Craven, director of communications and marketing for Dade Paper, a Miami-based jan/san distributor. "When the economy gets tough and customers are looking for ways to save money, but they don't want to give up quality, they become willing to listen and try a new product."
The recession and its slow recovery have granted distributors time to market and engage potential and current clients with their private label products.
"They are much more willing to try a sample or something new when it saves them money. Fortunately, our products are of good quality," Craven says. "They become happy with it and they stick with it even when their budget gets a little less constrained. We have now seen over the last two years that people are actually spec-ing our brand."
Dade Paper promotes its private label brand by displaying it prominently throughout the company's website, catalogs and brochures. The company's sales representatives have also been told to place a strong emphasis on the private label products and their quality and cost-saving benefits, during the poor economy. The sales reps have also been instructed to engage those customers who may not have been interested in private labels in the past with the company's current line of private label products.
"If they are feeling the heat from competition, it is time to remind the customer that we have this line of private label products," Craven says. "That is where we are seeing some uptick in our marketing."
In today's recessionary environment, customers have migrated away from only purchasing national brands. Reason being is that budgets have been slashed and low-priced products are taking precedent over name brands. Thus, by setting competitive price points, distributors are using their private-label products to compete with the national brands.
Quality is the name of the game, according to Craven and other distributors in the private label sector. Independent of whether the economy is sour or flourishing, private label products must be equal to or better than the brand name for them to be able to earn market share, says Craven.
"If the product meets the customer's needs and is a good quality product and the custodians that are using the products are happy with it, then they are going to remain loyal and stick with that product," she says. "On occasion, some companies might have a private label product that isn't as good quality. Then, I think we will see those customers drift back to national brands more quickly because they weren't truly satisfied with the private label product."
When marketing private label products, successful distributors couple the cost-savings and quality aspects. Without a quality product, the cost savings is wasted, according to Rick Hazard, vice president of marketing for San Diego-based WAXIE Sanitary Supply.
"If you create something that is cheap and doesn't work, the end result is our end-user customer spends more time cleaning and more money," he says.
WAXIE markets its private label line as a higher-quality option. According to Hazard, this is accomplished through the look of the products, the inherit fact that it has been around for 65 years, and its strong following.
"We invest in the quality and we invest in the look," Hazard says. "Although private label may have a stigma in the industry, in our world, it stands for quality."
During the past several years, WAXIE has put an emphasis on filling some holes in its private label line and improving the quality of the line. Hazard says, however, this is not in response to the recession.
Collateral literature also is used to support the idea of quality when it comes to the private label line. It aids the sales staff to press upon the client that the line is just as good or better than the national brand.
"The look has a lot to do sometimes with the impression that an end user has on a product," says Hazard. "You do not want to fall short with a label, literature or collateral material. They also need to represent quality as well as what's inside the bottle."
According to Craven, marketing a private label is made easier when there is a complete line of established products to put in front of a customer. For the customer, a complete line of cleaning supplies and products means continuity in terms of purchasing and stocking along with training and how to ultimately use the product.
"By having a complete line, it gives the customer a comfort level that this is a big operation and that is not a small product that someone slapped their name on and who knows where it was made," Craven says.
Private labels inherently have an advantage over a national brand. Because they carry a name that is identifiable to the private label distributor, this creates exclusivity.
Having exclusive rights to a product line helps separate a distributor from its competition. In other words, the distributor has the market cornered with its own private label, since the company is the only one that carries it, says Fritz Gast, executive vice president of P.B. Gast & Sons, Grand Rapids, Mich.
"Typically, you have a lot of competition because there are no exclusives left anymore," Gast says regarding the drawback of brand names.
Post-recession, distributors say private-label products will still have a place in the industry. As customers slowly get back on their feet and start thinking about increasing their budgets and bringing on more staff, private-label products will continue to be a popular purchase for customers. Their strong presence in the marketplace the last three years has given customers the peace of mind that proprietary products work just as well or better than their name-brand counterparts. Therefore, distributors estimate that about half the customers who have switched to private labels during the recession likely won't go back to purchasing name brand products when the economy improves.
Although private labels will never replace national brands entirely, they can be a great cost-saving avenue for customers during rough times. Proprietary lines can also be a win for distributors during recessionary times as they offer great opportunities for customer retention.
Brendan O'Brien is a freelance writer based in Greenfield, Wis.
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