Private Label Strategy

SEVEN

Maximizing Retailer Profitability Using Private Labels

Retailer gross margins on private labels versus manufacturer brands: 25–30 percent higher

THERE IS A WIDESPREAD BELIEF among retailers and brand manufacturers that retailers make greater profits when they sell private labels instead of manufacturer brands. While working with one of the world’s largest consumer packaged goods companies, we heard its top managers wondering why retailers were selling their brands at all, given that the store brands were so much more profitable for the retailer! But is selling private labels truly more profitable for retailers? Is this always true? Or are there certain conditions under which this may not be true?

Retailers believe that the higher profits ...