Retail is a vibrant sector in Europe, with over 5 million companies, comprising a significant 11.5% of the total supply chain firms. As a retailer, you’re part of this thriving landscape, purchasing in smaller quantities from larger manufacturers or distributors, and rebranding these products to sell directly to consumers. This retail model applies to both brick-and-mortar storefronts and online shops.
Private Label: A New Frontier for Retailers
While traditional retail involves purchasing products from intermediaries, rebranding, and then selling them to consumers with responsibilities spanning branding, delivery, and quality control, the private label model offers a more hands-on approach. Retailers partnering with private label manufacturers control the production steps, negotiate pricing, decide quantities, and even make process customizations.
Sticking to Retailing vs. Venturing into Private Labeling
Staying as a pure retailer has its perks – the simplicity of the business model, more time to concentrate on branding, and zero attachments with the manufacturer. However, for many experienced retailers seeking more control over customizations, pricing, and quantity decisions, private labeling can unlock a plethora of opportunities.
The decision to enter the private label space shouldn’t be made lightly. Still, with the right guidance and leveraging platforms like Wonnda – a digital tool connecting brands with European manufacturers for sourcing and launching new product lines – retailers can navigate this new landscape successfully.
Some of the advantages of private labels that retailers should consider are:
1. Profit Margin
Retailers will buy the goods from an intermediate party, such as a wholesaler, and bring the products to their store, where they will sell directly to consumers under the name of their brand. This system is here to facilitate the distribution of goods and make it easier for them to get to the consumer’s hands. At every added intermediate of the process, the final sale price that the consumer will pay increases because it has to cover the profit of all the involved parties.
By eliminating the intermediate and buying straight from a private label manufacturer, the retailer now not only has the option of negotiating prices and buying bigger quantities but of expanding their profit margin, as they can now pocket the profit that would go to the middle party. They also can lower the product’s sale price, making it more competitive in the consumer’s eyes.
Private label manufacturers differentiate the most from retailers when it comes to customizations. In wholesale, you can’t make any sort of customization, and It can be hard to differentiate from the competition. On the other side, private labels can be the best of both worlds, as it’s still cheap and can be produced faster than contract manufacturing, but allows you to customize some aspects of the production line and make your product look more like your brand.
Take advantage of every customization your manufacturer will allow, and consider the best ones for your product. Size, material, and packaging are all aspects of the product that can be adapted and customized. The more you customize your product, the more it will be unique and get attention from customers.
Private labeling involves a lot more responsibilities on the owner’s side. It’s their job to research the country where the product will be produced, contact and ask for quotes from the hundreds of manufacturers available, negotiate prices with all of them, and consider which ones have customizations. All of that might seem like too much of a hassle for those who are just starting their business, but for many others, control over the production cycle comes with many advantages.
By negotiating prices and comparing the different manufacturers, you can get the best outcome that a simple retailer might not get. A retailer will have the easy end of it and, consequently, pay a higher price for the same product without being able to differentiate from the competition through customizations. Negotiation is a powerful tool for those who know how to use it.
4. Product Range
While retailers are limited by the availabilities of the wholesaler and are not able to differentiate between competition – as everyone is buying from the same place – and cannot customize the products they sell, a business that chooses to go through the private label route will be able to offer a much wider product range that varies in color, size, formula, packaging, etc.
For example, you are in the shampoo business. The wholesaler only has the lavender shampoo available, so you and all the other retailers will buy lavender shampoo, put in their packages, and sell it to customers. The business owner across the street has a private label manufacturer and will sell not only lavender shampoo but rose, mango, and citrus shampoo. Soon, all the consumers realize that the shop across the street has so many more shampoos, and they all go there to buy, while all the retailers will stand there with the same lavender shampoo.
5. Competitive Advantage
When we add up all these reasons – the profit margin, customization, negotiation, and product range – the result is a great competitive advantage on your side. The customization and product range will give you a competitive advantage, allowing you to make more revenue and expand production.
By expanding the production without the intermediate wholesaler and by being able to negotiate prices directly with the manufacturer, you will expand your profit margin and make your business grow.
By leveraging the power of private labels, retailers can redefine their position in the consumer goods industry and secure a robust future. Wonnda serves as a digital conduit between brands and manufacturers, enabling retailers to source and launch “Made in Europe” products effortlessly. Thus, embracing private label brands is not just a possibility; it’s a pathway to success for retailers.