Upping the Ante on Private Label Sourcing
Private brand sourcing capabilities for retailers of tomorrow
For the past decade, retailers have increasingly embraced private brands as a strategy to continue bottom-line growth. However, most have focused disproportionately on branding and positioning and have not fully rolled up their sleeves to address sourcing strategy and execution — which could be critical to unlocking the value of private brand profits.
Higher quality merchandise and economic pressures have convinced consumers to embrace store brands more than ever before. Worldwide, the private brand industry is approximately $1 trillion, representing 17 percent of global consumer spending1. In the U.S. alone, private brands made up 23 percent of consumer goods unit sales in 2010, showing significant growth for the third consecutive year2. However, to capitalize on these trends, retailers should focus on delivering their private label brands profitably, which has become increasingly difficult due to rising commodity prices.
In this article, we will outline the sourcing capabilities needed to be effective in today’s private label environment. We will also explore the risks, rewards and influence that private label has on a retailer’s competitive strategy.
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1 Private Label: Turning the Retail Brand Threat Into Your Biggest Opportunity, Keith Lincoln, Lars Thomassen
2 SyphonyIRI MarketInsight, 52 weeks ending 4/18/2010 versus same period prior year