National brands are well-known and popular brands of manufacturers such as Coca-Cola, McDonald’s, KFC, Maggi, Colgate, Hershey’s, Evian, Knorr, etc. These brands are usually well-known and popular among consumers. They are associated with high quality, availability, feelings, and experiences. However, their popularity is increasingly threatened by private-label brands. Private labels are brands of retailers and distributors that have conquered many consumers since the 14th century and especially today. Initially, private label brands appeared among consumer goods (food products) and were without name, style, and design. they were of relatively low quality and with much lower prices than national brands. Economic crises, low living standards and poverty that existed in several countries in the middle of the century caused consumers to become more conscious about prices and they began to show interest in private labels.
Economic crises with low living standards, that existed in several countries in the mid-19th century caused consumers to become more price sensitive and began to show interest in private labels. The greater the demand for these products, the richer the retailers. Retailers had a big advantage: they knew the needs and wants of consumers. Over time, retailers invested more in the quality, taste, packaging, design, style, and colors of their brands, which attracted more customers. Today, private labels pose a serious competitive threat to national brands. Some recent research shows that private labels are more popular and in demand than national brands. In this article, we will throw light on the main reason for the emergence of private labels and the power of private labels.
Sectors of Private Label Brands:
Below are some examples of industries where private labeling is most prevalent:
- Nail care and personal care – nail salons, hair salons, and other establishments may sell nail polishes, shampoos, etc.
- Food & Beverage – Condiments, sauces, etc. own brand grocery stores.
- Clothing – High-street clothing stores often sell their ranges alongside branded alternatives.
- Pet Food and Accessories – Pet stores sell pet food, toys, and other products with their brand.
Main Reason For The Evolution of Private Labels:
The following are the main reasons for the occurrence of private-label products.
- Need To Create Low-Cost Products and Services:
The poor economic condition changed the trend the power and they began to rely on low-cost products. As the rate population rate is increasing day by day and some countries failed to manage their economy according to population. That’s why people started preferring private labeling products.
- Fulfilling the Needs of Unsatisfied Consumers:
As white brands somehow failed to satisfy all needs of people, retailers of private brands took advantage of this. As the needs of people in every region and region according to the atmosphere and taste, it’s hard for white brans to satisfy all needs of people. Then people started preferring local retailers’ private brands that especially focused on local people’s needs.
- The Continuous Change in Shopping Habits of People:
Everyone loves change, whether it be in clothing or taste. National brands do not deviate from their regular products. Private-label brands introduce different things from time to time. Thus, this changing desire in shopping promoted private brands greatly.
- A Need For Creating Loyal Customers:
Private label manufacturers having in mind the economic crisis, poverty, and low living standards began to sell things accordingly, and on the other side, consumers showed an interest in these products, and with time they became loyal customers of private brands.
- Taking The Opportunity to Make Great Profits:
Retailers began to make large profits by selling their private labeling brands that had much larger margins than the profits made from selling other brands. Larger profits were primarily a result of the fact that retailers cared for the design, production, promotion, and distribution of products by themselves. They specialized in promotion and distribution which helped them to reduce costs and sell the products at a lower, more competitive price than national brands. With time, retailers started to invest in product quality, design, style, and packaging that attracted consumers even. As a result, the dominance of national brands has decreased.
As noted in a 2014 Nielsen report, private labels are mostly developed in Western Europe. Switzerland has the highest private label share at 45%, closely followed by the UK and Spain at 41%. Private label is less developed in Eastern and Central Europe, where the share varies greatly from 24% in Poland to 5% in Ukraine. The percentage of private label participation in Canada, the USA, and Africa is 18% each. The weighted global average in 2013 reached 16.5% of the dollar share of private brands. Some marketing experts believe that this percentage will increase in the future and private brands will dominate the global market.