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A new book discusses the benefits and downsides to private label and what manufacturers can do to strengthen their brands.
Anyone who is occupationally affected by, or intrigued with, the rapid increase in global PLP sales should carefully read the book, "Private Label Strategy: How to Meet the Store Brand Challenge." (Published January 2007; authors: Kumar and Steenkamp.) This well-researched, well-written and comprehensive book focuses on the global best practices for consumer PLPs or "store brands." But many of the book's statistics, economic studies and summary guidelines can be readily applied to the accelerating sales of PLPs within commercial/industrial distribution channels in the U.S.
This article will summarize some of the book's findings and then pose some questions for distribution-channel players to think about.
First, PLP sales are growing at the expense of manufacturers' brands around the world:
* Worldwide (retail) PLPs' total sales have passed $1 trillion.
* Total PLP share of global retail sales was approximately 14% in 2000 and is on trend to hit about 22% by 2009, a 50% increase. In North America, the share gain appears to be going from 20% to 27%. However, Wal-Mart has already achieved 40% of its sales on store brands.
* The U.S. is actually a laggard in total PLP sales among first-world economies. Western European countries range from a low of 25% to a high in Switzerland of 38%. The U.S. will presumably close some of that gap as retail consolidation catches up with Europe's.
* Store brands are present in 95% of consumer product goods categories. Even Barnes and Noble is shooting for 10-12% of its sales to be on store brands by 2008. Their Sparks Notes series, for example, is an equal or better quality knockoff (at least they have more pages) of the Cliff Notes series that I relied on in high school, but costs $1 less per volume.
* Number one factory brands around the world are still, on average, growing very slowly. Therefore store brand growth is coming entirely, again on averages, out of the share that has belonged to all of the other lower-ranking brand names.
* The simple reasons as to why store brands are succeeding are: too many name brands have become unchanging commodities...