By  on June 29, 1994

WASHINGTON -- Private label merchandise can be a key element in the image of a store's sharp pricing and fatten its bottom line, as well.

That's the opinion of Walter J. Salmon, Harvard University retailing professor, who spoke at the annual convention of the International Mass Retail Association here in May.

But if a retailer is to reduce national brands and increase its private label assortment, he noted, the house brand merchandise should meet several criteria:

  • It should not be too fashion-forward.
  • Quality should be equal to or better than branded merchandise.
  • It should have a consistently attractive selling price compared with the national brand.
  • It should offer a better contribution per unit of space than the brand.
  • It should be stocked in abundant quantities.
  • It should not be too closely knocked off. Private labels that are highly similar in appearance to national brands are bad ethics and may be bad for business. Private label products should not try to duplicate brands.
  • It requires infrastructure and considerable volume per sku. A good private label program is easier to establish and maintain with faster-moving items, and at larger companies.
"The underlying assumption in increasing private label while reducing brands is that consumer interest in low prices is rising, and that consumers are prepared to sacrifice marginal assortment advantages for lower prices," Salmon said. "But retailers must be careful not to go overboard on private label."

Private label has to make a greater contribution than the national brand it is replacing, he said. If it doesn't, then it doesn't have a reason for being.

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