Ecommerce
Ecommerce Retailers Guide to Private Label Products
- Written by Kaleigh Moore
Private label products can be so sneaky, that sometimes, they’re invisible.
Let’s say you’re shopping at a Trader Joe’s. What does this say about you? You probably enjoy quality, affordable groceries leaning on the healthy side. Thai Rice Noodles? Exactly the kind of thing you had in mind. Browsing the ingredients list, you notice no added sugars or preservatives. Perfect.
You pick it up, throw it in the cart, and move about your day without knowing you just purchased a private label product. And even if you do, you might say: “Trader Joe’s makes a heck of a Thai Rice Noodle.”
But maybe they didn’t make anything.
Private label products don’t have to follow traditional branding rules. They can be new and unrecognizable and still win your customers’ hearts.
It’s such a successful enterprise, private label makes up 17.7% of the entire retail market in the United States—a slice of the pie worth almost $200 billion.
Retailers love private label products because it gives them control. Positioning, design, messaging: the Trader Joe's of the world can dictate each variable. And since these products sell exclusively from manufacturer to retailer, they typically sell for higher profit margins. Or big-time retailers can call it a “value” sale, skip the high profit margins, and use these products as incentives to come in and browse the higher-margin brands.
Private label products are clearly a successful avenue for retailers. But if you want to make private label brands work in ecommerce, you’ll need a playbook to win your audience’s attention.
Why private label products?
Brand loyalty is a concept from a bygone era. These days, only 9% of consumers describe themselves as brand-loyal. Big swaths of millennials either shop for brand alternatives (48%) or ignore brands entirely (28%).
We see this working in the brick-and-mortar retail world. ALDI, the grocery store selling more “generic” products than any other, is about 78% private label.
For ALDI’s customers, that’s exactly the appeal: they like the cost and quality of ALDI’s “Simply Nature” label. And they reward the store with their loyalty.
Other retailers use private label products for all sorts of reasons:
Control. Brands like Sam’s Club (“Member’s Mark”) can use private products to control pricing and product size. This aligns each product with the buy-in-bulk philosophy of the chain. With tight control over profit margins, they call the shots over what sells for what, and in what quantity.
Foot traffic. Control has a potential side benefit: drawing foot traffic or web traffic. If your private label product attracts a new web visitor, they may not stay for the private label products. But if they buy something else, it’s still a win. Stores like Sam’s Club might use this strategy to incentivize customer loyalty, driving up membership revenue or repeat business.
Moving away from third-party selling. Some sellers start off reselling. Amazon is the classic example: it might sell you a stapler from an office supply store. But if Amazon manufactures its own staplers—or negotiates a reduced price with a manufacturer—it keeps more of the profit. Of course, Amazon is still happy if you build your brand with them. That’s why they offer Amazon Brand Registry. Either way, it comes down to acquiring “foot traffic.” Or, in the case of Ecommerce, clicks.
Building a private label playbook
Private labels offer ecommerce stores control, flexibility, and great margins.
Whatever your ecommerce strategy, private label products can probably help.
But it helps to know what customers expect from the private label experience, even if they’re not consciously aware of these expectations. Let’s start with the prelaunch phase.
Prelaunch: what to tackle before you start
Define your target audience. One reason Trader Joe’s private label products can feel so at-home in their store? Trader Joe’s knows its customers.
So should you. Define your target audience with key variables like demographics, preferences, and purchasing habits. For Trader Joe’s, the equation was simple: wholesome, hearty ingredients available at a reasonable price.
Your model may be different. But it should share something in common with Trader Joe’s: it should slip right into your customers’ desires.
Consider the launch of a new brand, Dollar Shave Club. They knew they were targeting younger men who wanted a simple, affordable solution for razor blades. So they built the brand around that idea.
“Club” sounds more like a convenient mail-order list than an inconvenient trip to the store. “Dollar” means affordability. And their irreverent brand (including their viral marketing video, Our Blades are F***ing Great) spoke directly to young men in their market.
Research your distribution channels. Let’s say you’re launching your brand and want a listing in the Amazon Brand Registry. How do you stand out? Trick question—you can’t know until you research the competition.
Once you know your target audience, visit the distribution channels they frequent. Enter the same online searches they’d enter. Do any gaps in the marketplace stand out as obvious opportunities? Is there a common “zig” theme from which your brand can “zag”? You’ll only know once you research.
Create a unique value proposition (UVP). Ideally, your private label differs from others, even in small ways.
One of the key advantages of private labeling is that you get to design and sell your own products. If you’re selling corn chips, you don’t have to look like Frito-Lay. Depending on your market, maybe it’s better if you don’t.
But while Trader Joe’s brands fits right in, if you’re building a brand from scratch, maybe you don’t want to fit in. So ask yourself: what’s your product’s UVP? What’s the main feature you offer that someone else doesn’t? How might your message stand out if you promoted it in a YouTube short, or on TikTok?
Take “Death Wish Coffee” as an example. Some coffee brands want to evoke feelings of peace and harmony—of sipping a cup over a morning newspaper. Death Wish is for the caffeine addicts. The black bag contrasts with a skull-and-crossbones logo that seems to say: beware. What’s the UVP? “We’re strong coffee for strong coffee drinkers, and we’re leaning into it.”
Get ready for launch. Where are you going to sell your products? Amazon exclusively? Your own Shopify store? This is a decision you’ll have to make well in advance of the launch. You need to know how you’re going to distribute your products.
The answers will depend on how well-funded your ecommerce business is from the start. You also have to think about what else your business is doing. Are you spending a lot on marketing? Acquiring business insurance? Answer these questions as part of your pre-launch check-up.
Launch: setting your private label products up for success
Next up: a successful, attention-grabbing launch. There are two keys here. You’ll want to lay the groundwork for strong brand social proof. Your brand is new, after all.
People don’t know what to make of it until they hear someone else talk about it. And next, you need to build powerful incentives so your brand can hit the ground running.
Establish product reviews. The chief challenge for private label products is brand recognition. Brand loyalty may not be what it used to be, but product positioning can be tricky if no one’s heard of you.
Your job is to build a private label with the credibility of an established brand. You can do this with high-quality positioning, but that should all be part of pre-launch. You’ll need to get as many online reviews as possible before the launch.
In the Amazon Brand Registry, they recommend doing the same. They advocate Amazon Vine as a way to kick-start slow-moving product reviews with an influx of “insightful reviewers.” Once your product launches, people will be searching for your product. The more reviews that show up, the better.
Build incentives. Even with laying the groundwork for brand trust via product reviews, customers still need something more. They may be teetering on the brink of trying out your new brand. Give them one good reason to click. That can come in a number of ways:
Product bundles. On Amazon, you can use “Virtual bundles” to create better shopping experiences for customers. Bundling also means you can “upsell” more products, giving customers a discount if they commit to buying more.
Upsells. Maybe you want to do a direct upsell. You can attract more customers by giving them savings incentives if they commit to more than one initial product. This is the reason it’s so common for ecommerce outlets to offer monthly discounts if customers commit to a subscription model.
“Launch day” savings. Sometimes making a splash is about leveraging all you can into a smaller timeframe. You might not have the budget of Coca-Cola, but if you focus on one day, it can feel like it. Create an email list and offer special “launch day-only” incentives to maximize the impact you have on the big day.
Sponsored products. Sometimes, you simply need more eyes on your product incentives. You may have a great brand, but if no one knows about it, that brand may go nowhere. Take Good Hair Day, which built “a network of professional stylists” as part of its rolling out campaign in 2014.
Post-launch: making your private label stick
With a splashy launch, you should have momentum and incoming orders. But what’s the elusive quality that makes a brand stick?
According to Jenny Henderson, there’s a psychological factor in becoming memorable. You first have to be simple. The simpler your brand is to witness and understand, the more it will stick. Brands like Good Hair Day and Dollar Shave Club are testament to that fact.
You can also enhance post-launch success by matching your private label to modern demographics. Gen Z’s purchasing power is on the rise, as Fortune notes. How can you resonate with them in the long-term? Since 70% of them report being open to new brands, you might want to make younger consumers a part of your demographic target.
Private label products into private label brands
A good private label brand can be one of two things. In traditional retail, “sneaky” is best—you might barely notice you’ve bought store-brand pretzels at the grocery store. In ecommerce, private label should stand out. Match your messaging to your demographics. Know the type of customer who’s open to trying a new brand, then build for them. The rest is a matter of building a smart launch—and sticking to the playbook.
