Private labeling growing among industrial distributors

by | Apr 25, 2016

There’s a lot of private labeling happening all around us. There are private-label clothes, cosmetics, supplements, even private label food. Think of your favorite grocery store’s brand or the generic brands from the 1980s, and you get the idea.

In many cases, the grocery store brand is the very same product as the name-brand product. In fact, there’s a good chance the name-brand company packaged that food in the first place. They just put a different label on it.

There’s also a lot of private labeling in the industrial distribution world, as they dip their toe into that water. Our recent Retail Insights industry benchmark survey found that 20% of distributors identified growing their private-label program as a major investment in 2016. Distributors are contracting with manufacturers to put their name on certain supplies, such as fasteners and adhesives, for example. So what’s bringing this change about, and what can we expect from it?

For one thing, there are larger margins with a private-label product. As distributors look for more efficiency and growth, this is one area where they’ve been able to find it. In many cases, the prices are lower because the private labeler isn’t spending as much on advertising and marketing compared to name-brand manufacturers.

One result of early grocery store brands is that due to their lower pricing, people sometimes equate private-label products with lower quality. In the grocery stores, they’ve worked to not only improve product quality, they’ve moved to more attractive labeling and have even increased marketing and advertising. Distributors may face some of these same biases, so they’ll need to increase their own marketing and promotion efforts as well.

Finally, it’s still important for distributors to keep track of their POS analytics for these products. It’s a common misnomer that there’s no value in POS analytics of private-label brands, because you wouldn’t share those insights with anyone else as a private-label owner. However, the distributors should still keep track of their private label products, if for no reason other than seeing which branches are selling them and which are not.

In the distribution world, Fastenal uses certain vendors to make private label products for them. Northern Tool & Supply does something similar. Meanwhile, many distributors are considering a move into this area. For the others that are not, they should know they may be a critical step behind the competition.

Demand still remains for private-label products among consumers. It’s a market worth exploring, and SPS Commerce can help. If you’d like more information on private-labeling some products in your branch or store, or would like to connect with suppliers that can provide private labeling for products, please get in touch with SPS today.

Get products in the hands of more consumers.

Get products in the hands of more consumers.

Automate processes, integrate systems, manage item info, gain data insights and more with SPS solutions.

Scott Bolduc

Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Did you like what you read? Get updates like this delivered directly to your inbox.

Subscribe to our blog to receive weekly retail and supply chain news, valuable resources, expert tips and more.