Dreaming of establishing your own high-margin, in-house private label? As the lines between digital and in-store experiences continue to blur, forward-thinking retailers are opening up new and exciting ways to differentiate themselves in a crowded marketplace. To help you get started, The Insider has gathered sage advice from some of the top private label retailers and experts in the business.
Technology may have unalterably changed the shopping experience, but there’s more to retail than carrying a large selection of items at rock-bottom prices. Any seasoned shop owner will gladly tell you that the secret to retail success is creating lasting relationships with your customers and finding new ways to serve them better.
One of the best ways to keep shoppers coming back to your store is to offer private label products — a line of goods sold exclusively through your own retail channels.
According to 2014 Nielsen statistics, 75 percent of Americans considered private label a “good alternative to name brands,” while 67 percent viewed them “at parity with name brands on quality.” In other words, private label can be as bankable as any name brand.
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Retailers & Pros Weigh In: 6 Ways to Win With Private Label
So we know that launching a private label can be lucrative — and knowledge is power. Check out these 6 tips from industry experts and navigate the private label waters like a pro.
1.) Use Private Label to Form Your Vision
“New shops can’t really stand out with even a really well-curated brand list, since most of those brands will have been available online for years,” says Jon Moy, a prominent Detroit-based menswear blogger for Complex Media. He suggests retailers can rectify this problem by establishing an in-house private label collection.
“In-house labels help stores keep their customers coming back,” adds Moy. “A well-thought-out in-house collection can help a shop stand out, as well as further express its point of view.”
Mark Walker, CEO of online menswear retailer JackThreads, echoes this sentiment: “Sometimes it’s hard to define your identity, but launching a self-named vertical is all about confidence—confidence in who you are as a brand and confidence in the product you’re offering your customer.”
“Launching a self-named vertical is all about confidence—confidence in who you are as a brand and confidence in the product you’re offering your customer,” Mark Walker, CEO of JackThreads in NYC.
A photo posted by AMPERSAND AVE (@ampersandavenue) on
Owner and operator of Mindy Mae’s Market and Ampersand Avenue, Courtney Christopherson Hansen, explains the vision: “We weren’t finding the pieces we wanted to wear. We couldn’t find what we were looking for and thought others might be having the same problem. We designed our first two pieces: a Black & White Striped Skirt and our fan favorite the Double Hooded Sweatshirt, and gained overwhelming support from our friends & fans. We knew that we couldn’t stop there!”
2.) Concentrate on the Basics
Moy observes: “A lot of times, well-known brands will ride trends or in fact create them, leaving small shops an opportunity to fill a need for basics,” which often serve as the “base DNA” for a store’s aesthetic. Once this aesthetic has been established, it can then be strengthened and augmented by including a judicious selection of other brands’ goods.
Mark Walker says he views his company, JackThreads, as “a one-stop shop for both the foundation of your wardrobe,” provided largely by his in-house label, as well as “immediately recognizable heritage pieces.”
He adds, “Our customers know we’ve done the work to not only curate the brands we carry but to make sure the quality, fit and design of the JT collection goes above and beyond their expectations.”
Having private label and recognizable brands in your product assortment is a sound strategy: the well-known brands have the equity to draw people to your store, and even introduce people to your private label at the same time.
Mindy Mae’s Market, for example, carries brands like Free People, Blank NYC, Matisse, and Keds, to add to the basics featured in the Ampersand Avenue collection.
Says owner Hansen: “Ampersand Avenue is really created with every girl in mind. We pride ourselves on designing & creating pieces that are fashion forward yet comfortable, trendy yet classic, and above all — creating pieces that make you feel confident — no matter your body type. It’s a little unique because we design, pattern and choose all our own fabrics. It sets us apart, it gives us an edge, and it offers something our clients can’t get anywhere else.”
3.) It’s All About the Margins
Beyond the issue of positioning, offering private label goods can drastically increase profit margins while still keeping prices low — because you’re effectively cutting out the middleman.
“When you sell other brands you’re at the mercy of their inventory and profit margins,” claims Walker. “By launching our own private label we control everything.”
We reached out to Susanne Kernan, Co-Founder of SNR Brand & Licensing Strategists (an NYC-based strategic licensing agency focused on growing iconic multi-channel brands at retail) for guidance.
“In addition to higher initial margins, a second benefit of private label or own-label collections is that the store owner controls the markdown timing or ‘cadence.’ With an outside brand, you have to match the price breaks when they occur at bigger retailers. And they mark down very quickly, within just a few weeks of arrival, cutting your chance to ring up sales at full price.”
If a retailer succeeds in establishing a strong aesthetic and solid identity, an in-house label can serve as a slightly lower barrier to entry for a customer to buy into that identity.
“Well-known labels are often sold at fairly high price points and in-house labels can serve as a way for these shops to provide options at a relatively lower price point,” Moy adds. Once a customer has decided they want in on a brand, they’re likely to return to that shop again and again.
“Private label brand profit margins are around 65 percent or higher,” says Stephanie Mai, senior category manager of the online marketplace partner, Trend Nation, noting that profit margins for goods acquired via another brand “are 50 percent or lower.” This increased margin means that, by offering your customers lower prices on private label goods, you can actually make more profit.
4.) When Private Label Becomes a Brand
With the right marketing, a private label can become a brand in and of itself.
“Some in-house labels get so popular, they are sold on the wholesale level to other boutiques,” observes Moy. This strategy can create a second revenue stream for retailers. Consider the case of the haute streetwear retailer Kith, whose private label garnered so much renown that in 2014 the brand announced they would plan to sell it wholesale.
This was also the case for Canada-based vaping e-juice brand, Vap Lab. After several years of manufacturing for other e-liquid lines, Vap Lab saw the opportunity to create its own house brand, and market itself as Vap Lab.
With strong marketing and a curated selection of flavors, Vap Lab is currently sold in vaping stores across Canada.
Having already served as the manufacturer for several brands, Vap Lab’s transition as a private label was seamless since the “template” or “recipe for success” — so to speak — existed.
“It’s nice to come out from behind the proverbial curtain, and reap the rewards of our own e-juice line,” says one of Vap Lab’s partners.
5.) Think You’re Ready?
Monica Czerniak, Head Accessories Buyer for Suzy Shier, a Canada-based fashion accessories retail chain with over 150 stores, suggests that, before turning your private label dreams into a reality, you should ask yourself: “Is my market ready for this?”
“If you are going forward with a private label project, have a clear and detailed vision of what you want the end product to look like and visualize it in your store,” Monica Czerniak, Head Accessories Buyer for Suzy Shier.
A great way to determine whether or not you’ve got what it takes is to conduct informational interviews with individual customers — or even implement a large-scale survey with many customers. Or, try studying consumer trends via reports from companies such as Nielsen or Technomic.
Czerniak adds, “If you are going forward with a private label project, have a clear and detailed vision of what you want the end product to look like and visualize it in your store. Details are key here, and can be easily overlooked due to the excitement of a new product launch.”
Insider Tip: For more about Monica’s fashion accessories trend tips, check out her interview with The Insider here!
Hansen of Ampersand Avenue adds: “Stay true to you. Never waiver on quality, never accept something you don’t totally love, and always be creative. We’ve been lucky enough to find really great factories, but I could see that as being a huge obstacle to start. Make sure you trust your factory for the best prices without compromising on quality.”
6.) What About the Minimums?
Susanne Kernan adds her insight: “Realistically, it can be hard for an independent store owner to meet minimums. There are several ways to mitigate this challenge, for instance going with S/M/L sizing on a woven shirt (instead of producing a full range of numerical sizes) or repeating a fabric from one delivery to the next, or even “tagging on” to an order developed for another, non-competing retailer, perhaps one in another geographic location.”
Most importantly: Don’t cut corners when sourcing your new private label line. “If someone wants to source private label goods,” suggests Stephanie Mai, “they can go to China, India, or even here in the states.” From there, a company “just needs the right team to take them from start to finish on the order with shipping and someone talking directly to the company every day.”
The partners behind Vap Lab add that the key is “knowing your competition, knowing your market, and doing your research.”
Finally, Kernan adds this sage advice: “Always ask questions: a good sourcing partner should be able to work with you to find creative solutions.”
Craving more private label insights? Read some of The Insider’s favorites here.