Many successful apparel manufacturers also opt to develop lines for other retailers that will carry another’s label other than their own branded label. This can mean additional sales but often entails that the retailers require cheaper wholesale prices. Manufacturers’ should fully understand the impact of this type order on their own costs of doing business before accepting to develop Private Labels for retailers.
When a branded manufacturer produces “Private Label” specifically for a retailer it will usually have a similar look and feel to their own branded label. The manufacturer is expected to price the private label products at a lower price point usually with a lower markup. It is another way for the manufacturer to get more orders and keep the cash flow active. Due to the volume of orders placed, production of styles often go offshore to get produced at a considerably lower price than if it were to be done domestically. Since the manufacturer has already spent the money to develop the line, generally, it is only a matter of minor changes to a style, trims and fabrication
Major Stores are moving more and more into the sphere of developing their own “LABEL” and promoting it to compete with the higher prices of “Name Brands.” In many cases, it is a very similar product in style, fabric and quality to the Branded Label and may indeed be competing with their own branded label they are producing as private label for the retailer. With an economy that is watching their discretionary income purchases, Private Label products are being promoted to a much higher degree.
Manufacturers that spend money to create and show a line at a trade show have made a large investment in the design, sampling, duplicate and pre production processes. These same companies that had been seeing substantial profits by doing Specialty Store and Boutique business have found themselves struggling due to the following reasons. 1. Most small stores are no longer getting Factor Approvals. 2. These stores are placing smaller orders but when it comes to shipping the order, manufacturers are finding the small stores are refusing the goods due to either shrinking sales, no funds available on their Credit Cards, or are requesting Net 30 to Net 60 as a House account. In some cases CONSIGMENT sales!!! A big NO NO!!
In most cases, a Major will “test“one or two pieces with a manufacturer in relatively small quantities for the first purchase. If the items are delivered on time, with acceptable quality and sell well in the store, it is likely the Major will place larger orders in the future. Additionally, the manufacturer will be able to “design” along with the Private Label dept. of the store and become “partners” with them in the development of new styles.
Though it may be an “EGO” issue with many designers and manufacturers, not seeing their name on the product, it is certainly a way to increase sales. Ultimately it often leads to a profitable partnership between the retailer and the manufacturer.
WIN WIN Approach: Target has taken private label to whole new level. Now some branded labels are being developed and produced specifically for Target. This enable both the branded label and Target to both enjoy cross branding. Target gets the cache of the brand and the brand gets to realize huge orders from Target. This is a win win model for all concerned.
In some instances a large retailer like Macy’s will develop their own brand “INC”, which cuts a pre- branded manufacturer out all together. They have become so successful as a private label they have creating their own branded label! I am seeing more and more specialty store buy branded product, then attach their own retail label over the branded label. This seems to me to be unethical, but I guess if they have purchased the goods then they own them. From the stand point of federal law, each manufacturer must have an RN number in the garment, which identifies the manufacturer in case there is a problem with the product, e.g. dyes used that may causes
the branded label. The orders are often so large the manufacturer will produce for a small mark up, and or developed the product with cheaper materials which will then mean that the retailer can sell for what is perceived by the customer as a markdown price. This is also often the case with branded labels producing cheaper product for their own outlet stores. In the case of Costco they may only mark up a small percentage but as the qualities are enormous and Costco makes a profit from their membership sales it is again a win.
Manufactures just have to watch out for those nasty Chargebacks that larger retails have a habit of doing! But that will have to be another blog… Frances Harder