Book Review - Private Label Strategy by Nirmalya Kumar and Jan-Benedict E. M. Steenkamp
Category Book Reviews
I always thought that store brands were just manufacturer brands that had different labels on them. But Private Label Strategy: How to Meet the Store Brand Challenge by Nirmalya Kumar and Jan-Benedict E. M. Steenkamp opened my eyes to what exactly goes on in the world of private label branding. And it definitely made my Saturday morning shopping trip more interesting today...
Contents: Brands Under Attack from Private Labels
Part 1 - Retailer Strategies Vis-a-Vis Private Labels: Competing on Price with Traditional Private Labels; Competing on Quality with Premium Store Brands; Competing for the Rational Consumer with Value Innovator Own Labels; Encircling Manufacturer Brands with Retailer Brand Portfolios; Creating Successful Private Labels Is About More Than Just Price; Maximizing Retailer Profitability Using Private Labels
Part 2 - Manufacturer Strategies Vis-a-Vis Private Labels: Produce Private Labels for Greater Profits; Partner Effectively to Craft Win-Win Relationships; Innovate Brilliantly to Beat Private Labels; Fight Selectively to Marshal Resources Against Private Labels; Create Winning Value Propositions for Manufacturer Brands; Are Brands Dead?; Retailer Facts
Notes; Index; About the Authors
As I mentioned in the opening, I never have given much thought to store brands except as a cheaper alternative of the same thing the brand name is selling. But the authors point out there's a wide diversity in private label strategies. There's the generic brand... black and white labeling, low quality, cheap pricing. Then there's the copycat brand... Made to look nearly identical to the leading brand, only at a cheaper price. It often even mentions the leading brand as a comparison point. These copycat brands also encompass the store brands you often see throughout major chains. Third on the list are premium store brands. These are private labels with additional qualities (more flavor or ingredients) or features than the brand name. These often sell for the same price or even slightly more than the leading brand due to their higher quality. And finally there's the value innovators... the labels that have redefined the product group with the best price/performance combination. Think Ikea. Obviously there is far more to private labeling that I imagined...
The first part of the book examines private labels from the point of view of the retailer; how they are positioned, the profit margin, and the power they provide over brand manufacturers. The second part of the book focuses on the other side of the equation. That would be what manufacturers can do to effectively compete against this situation. The option to farm out excess capacity to make these lower-quality knock-offs is tempting, but can lead to lower profits and dependency on that income. Often the best option is to partner with retailers to create a lower-priced branded option, or to innovate at a rate that prevents private labels from keeping up and copying the design. It's a fascinating game of cat and mouse, and one that has a significant amount of money at stake.
When we went shopping this morning, I paid a lot more attention to store brands, product placement, and how the shelves were laid out. I also spent more time analyzing prices between name and store brands, understanding how these forces work against each other. Although the book is really targeted at manufacturers, the informed consumer will also learn quite a bit by reading it. This was definitely an enjoyable and eye-opening read...
I always thought that store brands were just manufacturer brands that had different labels on them. But Private Label Strategy: How to Meet the Store Brand Challenge by Nirmalya Kumar and Jan-Benedict E. M. Steenkamp opened my eyes to what exactly goes on in the world of private label branding. And it definitely made my Saturday morning shopping trip more interesting today...
Contents: Brands Under Attack from Private Labels
Part 1 - Retailer Strategies Vis-a-Vis Private Labels: Competing on Price with Traditional Private Labels; Competing on Quality with Premium Store Brands; Competing for the Rational Consumer with Value Innovator Own Labels; Encircling Manufacturer Brands with Retailer Brand Portfolios; Creating Successful Private Labels Is About More Than Just Price; Maximizing Retailer Profitability Using Private Labels
Part 2 - Manufacturer Strategies Vis-a-Vis Private Labels: Produce Private Labels for Greater Profits; Partner Effectively to Craft Win-Win Relationships; Innovate Brilliantly to Beat Private Labels; Fight Selectively to Marshal Resources Against Private Labels; Create Winning Value Propositions for Manufacturer Brands; Are Brands Dead?; Retailer Facts
Notes; Index; About the Authors
As I mentioned in the opening, I never have given much thought to store brands except as a cheaper alternative of the same thing the brand name is selling. But the authors point out there's a wide diversity in private label strategies. There's the generic brand... black and white labeling, low quality, cheap pricing. Then there's the copycat brand... Made to look nearly identical to the leading brand, only at a cheaper price. It often even mentions the leading brand as a comparison point. These copycat brands also encompass the store brands you often see throughout major chains. Third on the list are premium store brands. These are private labels with additional qualities (more flavor or ingredients) or features than the brand name. These often sell for the same price or even slightly more than the leading brand due to their higher quality. And finally there's the value innovators... the labels that have redefined the product group with the best price/performance combination. Think Ikea. Obviously there is far more to private labeling that I imagined...
The first part of the book examines private labels from the point of view of the retailer; how they are positioned, the profit margin, and the power they provide over brand manufacturers. The second part of the book focuses on the other side of the equation. That would be what manufacturers can do to effectively compete against this situation. The option to farm out excess capacity to make these lower-quality knock-offs is tempting, but can lead to lower profits and dependency on that income. Often the best option is to partner with retailers to create a lower-priced branded option, or to innovate at a rate that prevents private labels from keeping up and copying the design. It's a fascinating game of cat and mouse, and one that has a significant amount of money at stake.
When we went shopping this morning, I paid a lot more attention to store brands, product placement, and how the shelves were laid out. I also spent more time analyzing prices between name and store brands, understanding how these forces work against each other. Although the book is really targeted at manufacturers, the informed consumer will also learn quite a bit by reading it. This was definitely an enjoyable and eye-opening read...
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