Private label sales continue to climb
The success of private label sales - up five per cent over the past five years - means retailers will continue to invest in this category. Private label offerings are likely to increase, not only for apparel but for many other markets as well.
While overall apparel sales have been down for the last four years, private label sales have increased five per cent over the last five years, according to market information company The NPD Group Inc.
A key reason for this growth is that retailers are now using private branding to increase sales of their private label merchandise.
Private label is generally exclusive to a parent company or individual company offering unique products and designs. Examples of private labels include Stafford at JC Penney and Sonoma at Kohl's. Private branding utilises the marketing familiar to national brands, including designer names and celebrity endorsements. Examples of private brands include Mossimo at Target and Jaclyn Smith at Kmart.
"The industry is putting a new face on private label and that face is private brand," said Marshal Cohen, senior industry analyst, The NPD Group.
"The biggest difference between private label and private brand is that private brand offers the ability to establish a personality behind the product, to give the consumer the ability to be more loyal and aware of the exclusivity factor.
"JC Penney is an example of a retailer that has done a great job for many years in developing 'Arizona' into a brand that consumers believe has its own product integrity and identity."
$60 billion sales
Private label and private brand merchandise represent 36 per cent of the total apparel market, taking in almost $60 billion in the 12 months ending April 2003. National brands represent 34 per cent of the apparel market and designer brands account for 7 percent. [The remaining 23 percent represents an "other" category.]
Jaclyn Smith ladies' chemise at Kmart
Mass merchant retailers are posting the strongest gains in private label apparel sales, with a six per cent increase over the past three years. Annual private label sales now represent 51 per cent of total apparel sales in the mass merchant channel, up from 45 per cent in 2001.
"The success of the private programs is based on their perceived value and the consumer's perception that these products are worth investing in," said Cohen. He also said that private labels enable retailers to distinguish themselves from competitors. "Introduction of a private label gives the consumer a reason to favour one retailer over another."
Private label transition
In apparel, private label was first introduced as a generic product that offered the lowest prices. This quickly transitioned into department stores using private label to create basic programs offering their very own basics at lower costs and, in turn, at slightly lower retail prices. These private label items soon were the focus of promotions, offering savings and incentives to stimulate sales during key promotional periods.
Today, private label takes on new meaning and importance. Many retailers have invested in merchandising teams to develop private label programs throughout their corporations, big and small. Stores are marketing home-grown private labels and brands as if they were national brands.
For a retailer to be successful with private label merchandise, it must find the right balance between its private labels and its national brands and designer merchandise.
"Retailers must continue to control the amount of private label available in their stores in relation to their other branded and designer offerings. When utilising private label or private brands, there is nowhere else to go for support if the product doesn't sell.
"With the national brands and designers, there is always the option of help from them, but with private label, you [the retailer] own it, from start to finish. You may have the best mark-up, but when it has to be marked down to $9.99 to get rid of it because it won't sell…ouch, that really hurts the margin," continued Cohen.
Consumers will be seeing even more private brands from retailers. Retailers will continue on an aggressive track to increase private label offerings not only for apparel but for many other markets, as well. "There's not a category out there that won't have private label. I wouldn't be surprised to see a private label automobile," said Cohen.
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