Let’s be careful not to confuse private “labels” with private “brands.”
Private label merchandise is generic goods, sold as a commodity (and commodities have price as their value proposition). Private brands, when properly executed, are truly brands, exclusive to a retailer or channel of distribution, with distinct brand attributes, supported by significant marketing.
Overall, private “label” continues the “race to the bottom,” favoring low cost producers. The problem with the race to the bottom is that you might just win — or worse, come in second.
Amazon‘s current approach is that of private label. Costco’s approach with “Kirkland Signature” is that of private brand. Over time, and with constant diligence and quality controls, Kirkland has become a powerful brand known for very high standards. Other private “brands” include Macy’s “INC” and “Alfani,” Kohl’s “Croft & Barrow” & “Apt. 9”, Belks Department Store “Saddlebred”, JC Penney “Arizona Jeans” and, Target has shown success with “Cat & Jack” and “Goodfellow.” Brands make a difference, they separate products from the herd – as in the origin of the word “brand,” for cattle.
“In the golden age of brick-and-mortar retail, resellers and brands partnered closely to drive sales. Direct-to-consumer strategies were less common, as brands paid for shelf space and the critical consumer visibility it provided.
Today, retailers and brands are pitted against one another in fierce competition. Warren Buffet, CEO of Berkshire Hathaway, recently confirmed that a “huge struggle” is taking place between brands and retailers.
Retailers building brands
In the past, retailers’ “private label” brands were lower-cost alternatives to national brands, capitalizing on price-sensitive buyers with low brand loyalty. Retailers are now focused on a new value proposition: building highly desirable “owned brands” exclusively available from their store or website.”