Retail Management 12th Edition by Barry Berman ,Joel Evans

Exercise 14

Case 2: The Merchandising of Private Brands
At one point, product planning decisions by retailers for their private-label brands was a simple process. The retailers simply contracted with national brand manufacturers or with a private-label producer to make a special private-label product version. The retailers then placed the private-label brand on their store shelves. Now, retailers are much more involved with planning the specifications of their private-label products, with designing distinctive logos and labels, and with even managing "good, better, and best" versions of their private-label brands.
Many retail analysts agree that retailers need to develop a strong product-placement strategy for their private-label products so that consumers can more easily locate these items in the store. According to one consumer packaged goods executive: "While innovation is important, the fundamentals of having the right products in stock-in sight and in the right locations with the right message to offer-are key to driving shopper loyalty."
To add to today's complexity in the placement of private-label products, many retailers offer different levels of quality (such as premium products and organics) within a single private-label brand. As a result, promotions for each version need to stress price-based appeals for low-cost private-label goods and a private label's unique characteristics for upscale product categories (such as more chocolate chips than a national brand for a premium chocolate chip cookie or the use of organic ingredients for soup).
Product-placement decisions also need to reflect shelf-height decisions. Duane Reade (www.duanereade.com), a New York-based drugstore chain, places its premium cookies at eye level (the most preferred space), its value-oriented private-label brand of cookies below eye level, and the national brands of cookies at the poorest locations on its store shelves.
The traditional shelf location for private-label brands has been to the right of national brands on the same shelf. This accomplishes several objectives. It enables shoppers to compare price and quantity levels between different types of brands. In many cases, shoppers may elect to buy the private label based on its low cost, similar ingredients, or larger package size as compared with the national brand. The strategy also gives shoppers a better idea of the comprehensive selection available for a store's private labels. Some retailers use endcaps (end-of-aisle displays) for their private labels. These locations have more visibility and greater store traffic than mid-aisle displays. Some retailers give premium space to new national brands based on slotting fees paid by the national brands for preferred product placement.
In addition to shelf placement, merchandising programs for private labels need to engage shoppers. Trader Joe's (www.traderjoes.com) offers sampling stations where employees prepare light snacks using their private-label goods. These snacks are generally easy to prepare, and they stimulate the sales of multiple private-label ingredients to follow the recipes.
Retailers need to be aware of merchandising pitfalls associated with private labels. One common error is not to view the private label as a real brand. Retailers falling victim to this problem area may not give the private label prominent shelf placement or they may fail to make the brand easy to locate. Another merchandising pitfall is for retailers to promote their private-label brands solely on the basis of price.
Questions
1. What factors are behind the shift to an increased role of retailers in the development and promotion of private labels
2. Provide examples of how a retailer can offer different versions of its private-label chicken soup.
3. What is the impact of a retailer's offering multiple versions of a private label on a manufacturer's brand strategy
4. Develop a merchandising program for a new private-label line of healthy snacks at a specialty food store chain.