Why Private Label?
“Thou Shall Not Have Any Other Brands Before Me!”
An entrepreneur’s guide to building business equity.
In the 2-year effort to create New Orleans top-rated day spa, owner’s Keith and André West-Harrison made painstaking purchasing decisions.
“Any field you work in has a vast number of suppliers. That alone can be overwhelming. We spent months deciding what skin care line we wanted to use and retail,” said spa owner Keith West-Harrison.
Their decision resulted in a $4,000 investment into using brand name skin care products. This is a high-quality, results-oriented botanical line sold only in selective locations nationwide.
“The product training and guidance was invaluable in the early days,” said André West-Harrison. “But, our growth was limited by their offerings and their ability to provide their products.”
The biggest concern with selling national branded products is that others carry them as well. With the proliferation of Internet discount retailers, the branded products can detract from your business instead of contributing to your potential for growth.
“We got very concerned when people could come see us for a fabulous facial and then go home and buy the products for 20-35 percent less than my retail price,” said Keith.
For example, the New Orleans based Miss Celie’s Spa Orléans sells a name brand Daily Refining Scrub for $30, but spalook.com has the same product for $25.25 with free shipping. This means they are undercutting the spa’s profit by 30 percent. Then for re-orders, subtract the free shipping which costs the spa $3.85 for priority mail. So the profit on the product has been reduced to $6.40!
Back to the table, the owners had to look at what would make their profit grow as well as their business equity. Selling a brand name product that other places retail does not make that location worth more to a potential buyer. Having an established private label brand that is exclusive does add value.
Private branding of consumer goods is one of the hottest and most sensible strategies for companies that are interested in being more than just another place to buy commonly sold products. With mega-malls, supermarkets, and online retailers competing with spas and salons for the beauty product customer, uniqueness, and exclusivity of brand is proving to be a sound way to attract and keep a loyal retail trade. Private branding (or private labeling) traditions extend back to the early days of fine department stores who saw brand-recognition value in labeling suits, coats, and dresses with the company name.
What is a “private label” product?
Purely put, a private label product is one of any quality, be that high or modest, created for someone other than the manufacturer to brand and sell. Peruse a vintage clothing store or your own closet and count the dresses, blouses, and accessories sporting the name of the store that sold them to you. Neiman Marcus, Barney’s New York, Saks 5th Ave, and even, yes, Sears sells clothing under their own company labels.
Image is everything
How much did J.Lo, George Foreman or Tiger Woods have to do with the design and manufacture of products that wear their names? Did they personally sketch the pants, engineer the appliance or invent the sporting goods under their “brand?” We don’t but we do love the star association with certain goods we buy. Retailers know this and it’s why the major brands will pay fortunes for celebrity endorsement deals. A supermodel recently admitted in a fashion magazine interview that she never used the cosmetic brand that paid her seven figures to promote it.
Identity is power
“We’re too new, too small, too unknown, etc. to have our own product line. We need to wait until we’re bigger, better, more this or that to sell our name,” said André West-Harrison.
Meanwhile the potential profit and brand building power was handed over to the established brands.
“We came to a big realization,” said Keith “If you’re willing to put your own name on a sign or business card, and sell services that you didn’t invent yourself, why can’t you do the same thing with a product line? Well, you can, much less expensively and quickly than we realized.”
There are many suppliers of private label products. Whether you sell coffee, toilet paper, or skin care products, there are businesses that can make a brand just for your company.
Keith and André did more research, tried many labs decided to create their own private label skin care company.
You’re ready to be seen and remembered long after the client has left the spa but performs her daily cleansing ritual. There you are, sitting faithfully and confidently in the medicine cabinet or shower shelf. Famous little you—seen, felt, and appreciated morning and night in the form of a moisturizer or bath gel. You’re soothing, pampering, and invigorating your client miles away from the spa! You fly with her to exotic vacations, brighten up her sterile business hotel room, help make interesting conversation among her product-savvy friends. She’s not another devotee of the common national brand but a member of a special club (your spa) and has something her sister on the east coast has never seen before—your wonderful products! Maybe Sis just has to have that amazing vanilla body lotion herself. Who do you call to get it? Not Bloomie’s.
“Always remember,” said André “You are a brand. You have your own special way of providing services to customers and, for better or worse, are cultivating a reputation in your market that will either win or repel new customers.”
So the solution worked, Keith and André now sell their own Jojoba Facial Polish for $33 and they see a profit of $20.50 each! There are no discount retailers selling their brand on froogle.com.
But even better for the small spa, “People love being able to buy our products, we are the ones that made their experience special.”