Understanding Private Label
Private Label, also known as Private Brand, refers to products that are manufactured by a third-party, while still being under the name of the retailer’s brand, and sold through the retailers’ own channels, such as retail stores, supermarkets and department stores. Modes of production for Private Label include products under the retailer’s label name, retail OEM, ODM and so on. Walmart, 7-Eleven, and Freshippo all have own-brand products. Retail giants Watsons and XIAOMI are also well-known for their large number of Private Label goods.
The Private Label business is not only generating customer loyalty but becoming increasingly varied in terms of the individual products and product ranges on offer. When compared with branded products, Private Label is at the forefront of market trends, offering great potential for further expansion and development.
Since September 2017, across Europe, the Private Label sector has been growing at a faster pace than the rest of the market (+4.7%). In 2019, its market share rose to 19.9% (+0.6 points), and throughout the previous quarter, the share of Private Label has been constantly above 20%. Analysis has revealed that 2019 concluded with profits of around €11 billion. Analysis of long-term trends has also shown that, since September 2017, the Private Label sector in Europe has expanded its assortment of products at a faster pace than that of branded products.
The global development rate of Private Label varies greatly, with European and American Private Label currently occupying the biggest market shares. At present, China's Private Label takes up a share of less than 2%, but the massive growth potential is evident. In the past two years alone, the sales volume of Private Label in China has shot up by nearly 30%, which is almost 2.5 times that of the most active FMCG products!
All signs show that this is the prime time for the development of Private Label. This is the time for retailers to get ahead of the competition, expanding profitability, improving brand image, and gaining more autonomy within the dynamic retail supply-and-demand market, as well as enhancing resilience to market uncertainty. For manufacturers, private label mode can improve equipment utilization rate, lower production costs, broaden the scope of cooperation with retailers, and increase the competitive strength of their business. As for consumers and the market itself, private label can ensure that personalised consumer demands are met, and allow consumers to purchase goods more cost-effectively, improving customer satisfaction and quality of life.