Private Label Experts Talk Benefits, Supply Chain Challenges
- How Inflation Affects Private Labeling
When done correctly, distributors stand to gain a lot by exploring the world of private labeling. Key benefits include providing additional opportunities for customers to show loyalty, and the ability to position products as exclusive, high-quality options.
To sustain success, though, newcomers to the private labeling game should work within an established, proven framework, know which products they should target for private labeling, and what challenges they may experience in the current climate of supply chain backups and inflation. For clarification on these matters, Sanitary Maintenance talked with three established experts in the private labeling market on their secrets to success and lessons learned along the way.
How long has your company been involved with private labeling and what prompted the decision to get started?
Moody: Solutex has been marketing our private-labeled products ever since we opened for business on April 1, 1995. I came to start Solutex from my previous employer, J. Reilly Associates, where I got my start in the industry. I learned that you can be more profitable when you have a high-quality product to market that is not easily matched by a competitor with me-too salespeople. Over the past 27 years, we’ve seen many of the national brands strike great deals with big box stores or with wholesalers, making their price point either too high for a local distributor to have a good gross profit margin, or making it too available to many distributors and reducing exclusivity.
Huizenga: We’ve private branded for more than 10 years. The key purpose is to build a brand around your company name with top-quality products and competitive pricing — yet the point was never to be “store brand/generic” as a low-cost alternative to brand name. The private brand is not a price fighter/lower-cost option. Our name is on the product. Quality and performance are necessary to build a brand that customers want to purchase.
Brahms: We've been involved in private labeling for 40 years, from the time I started in 1982. I started out in this industry by traveling to tropical islands in 1979. Ten days after I graduated, I was on a plane to Guam and cold calling to open up accounts. It was then that I decided that I would someday go out on my own and when that time came, I'd rather have my own name on products than somebody else's. The other reason was because I was travelling overseas, and I wanted my customers to know that the name of the company was Armchem.
For those interested in getting started with private labeling, what resources should they look towards?
Huizenga: Interview multiple manufacturers to understand their passion, vision and ability to help you build your brand. Cost is important, but choosing the right partner is more important. Talk with your non-competing peer groups/networks. Get their input versus taking the word of the manufacturers.
Brahms: The first thing that you have to do when you get a private label is find the right market for the products you're going to private label — then pitch it so the manufacturers will make it for you. Unless you have a market to buy a certain amount, they're not going to just take one can, one dozen, or whatever it may be. It has to make money for them. You also need to have a certain critical mass that it makes sense for them to want to private label.
Moody: Many manufacturers/formulators of cleaning chemical products are willing to private label a distributor’s products. Plastic bag manufacturers and other factories of cleaning products and equipment also offer the ability to private label a distributor’s products. Trade shows are a great place to meet manufacturers in person that offer private labeling, or who can help to develop a private brand. Of course, so is Sanitary Maintenance magazine and the CleanLink online platform.
For beginners in the private labeling landscape, which types of products serve as the best starting point?
Brahms: The best products are ones that you are comfortable demonstrating and where there's a niche. You don't want to sell me-too products everywhere else, because in 2022, a whole bunch of buyers have seen whatever demonstration you're going to do on a me-too product. Then they'll ask, "What makes yours different than mine?" If you're new to it, you're not always going to know. Choose products that have more of a “wow factor” demonstration, where other people don't take the time to do the demonstrations and you can create a special label — that product will stand out to your customers because they won't see those kinds of demos from other people.
Moody: For the beginner, I would say to start with a product that really solves an issue for your main customer base. A successful distributor knows who they serve best and where they can offer something unique. Your private labeled product should look great if you want to lead in with it. Sometimes a distributor private brands a product to market it as a secondary choice to a more expensive national brand product that they also offer. In this case they might not put as much emphasis on the looks of the private label, but I think your company image always matters.
Huizenga: Can liners, paper products (towel and tissue), and cleaning chemicals are great starting blocks for developing a private label platform.
What are some of the most common misconceptions about private labeling?
Moody: Private labeling products is a lot of work for the distributor and for the manufacturer. The manufacturer has to slow down on some of the production efficiencies gained by producing a larger run of their own branded product. The distributor has to plan for longer lead times and must comply with the sub-registration of disinfectants and pesticides with the U.S. Environmental Protection Agency (EPA) and with other state agencies. Many manufacturers are being squeezed to reach greater efficiencies and are raising their private label minimums to distributors. Developing a great product name and branding image can also be time consuming and a bit expensive when hiring a professional, but the label will reflect quality when done right.
Huizenga: Some misconceptions include that private label equates to price fighter/lowest cost option. That private label will hurt your sales of manufacturer-branded products.
Brahms: One misconception I hear most often is that the private labeled product is not as good as the brand-named alternative. But the truth is, they are the same as the national brand products — it's just your private label on the packaging. And you're buying it for less money than if you use their (manufacturer) label on it. When you're selling somebody else's label, it’s easy for customers to go on the internet and find out where they can purchase the product for less. There's very little loyalty in that. Private-labeled products help create some loyalty.
How Inflation Affects Private Labeling