By Kathleen M. Manghan
Do you think your retail operation is too small to consider your own store brand products? Not so, say many industry manufacturers and retailers. Even single-shop retailers are increasingly introducing private-label products to build customer loyalty and generate store traffic.
In the past, only large retailers featured store brands because they had the sales volume to justify the huge production runs in China. These days, many North American manufacturers offer smaller minimum orders and a variety of private-label options to accommodate customer needs. Retailers can choose to relabel an existing product, tweak product formulas or features, or custom-design an original product.
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Plush toys offer attractive items for branding that make good impulse sales.
Courtesy of A Pet's World
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So how do you jump into the private label game?
We asked a host of industry experts for advice.
How can retailers select the right product to private label for their store?
"Know your customers and the products they spend extra money on,' said Bob Vetere, chief operating officer of the American Pet Products Manufacturers Assn.
"Make sure your store brand won't compete directly with your best-selling national products. Offer a product that customers can't get anywhere else so it becomes a destination brand."
Also, consider your objectives for launching a store brand. For Chris Gaba, co-owner of Central Bark USA doggie daycare, grooming and retail shops in Florida and Wisconsin, the main priority was to reinforce their brand through public visibility. They put the company name in bold colors on collars, leashes and tennis balls.
"Dog owners talk to each other while walking their dogs or playing at the dog park," Gaba said. "These products promote strong word-of-mouth advertising."
What are the minimum orders retailers can expect?
Private-label minimum orders vary by manufacturer and product type. The minimum order for private-label fish food through Ginger Inc. is just $50 worth of product, said Megan Forlenzo, sales representative.
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For some retailers, private labeling is a very important part of their businesses.
Courtesy of Central Bark
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Paula Turner, co-owner of The PetCare Company, a pet retail shop in California, said she orders one case (95 units) of their store-brand dehydrated pork liver treats at a time. Retail chains launchinga line of custom-blend dog and cat food could be looking at minimum orders of a truckload a week.
On the accessory side, Silverfoot, a Canadian company producing customized collars and leashes, sets minimum orders at 24 pieces of an item, according to Mark Jones, sales manager.
A PetÕs World in Manchester Center, Vt., has an eight-piece minimum for custom embellished collars, but has higher minimums for clothing and plush toys since they are made in China, explains Jane Knittle, president. Her custom toy minimum is 1,000 units, coats are 300 units and sweaters are 150 units.
How should a retailer determine the quality level and price point for a store brand?
Consider your market, competition, customers and store image when selecting product positioning. Mark Brinkmann of Diamond Pet Foods in Meta, Mo., said that quality is the No. 1 issue for private-label pet food.
"Because of the lack of pull-through advertising and promotion, a store brand must be equal or better in quality than leading brands to have any chance of success," he said.
Gaba agreed.
"When you put your company name on a product, make sure it's a quality product, not schlock," he said.
What are the options for product customization?
The degree of customization depends on your business objectives, level of investment and the manufacturers willing to private-label your product. Some manufacturers simply put your store brand label on their existing products. Ginger has a graphic designer who inserts a retailerÕs logo and information at no charge onto custom labels.
George Richter, owner of 2 Dogs & A Cat, with two stores in California, has his collar and leash supplier sew on fabric labels featuring the store name and logo.
Many manufacturers will only private-label customized products so they don't jeopardize their own national brands. Jim Brown, national sales manager for Precious Cat, said his litter company varies particle size, scent or type of deodorizer for private-label clients.
How can a retailer find and select the right private-label partner?
Once you know what product you want to private-label, start talking to sales representatives and distributors for quality branded products you already carry to see if private labeling is an option, said Hal Halliday, sales and marketing coordinator for D&D Commodities, which produces caged and wild bird feed in Stephen, Minn.
Associations like the Private Label Manufacturers Assn., the APPMA and the National Animal Supplement Council are good referral sources. You can also find private labelers through pet industry trade magazines, annual directories and trade shows.
To select a private-label partner, don't just look at production costs, Halliday said.
"The least-expensive manufacturer may not provide the product quality, order minimums or the consulting services you need for formulation, packaging, labeling, licensing, training and marketing issues," he explains.
Brinkmann adds that you should also look at the manufacturer's available capacity, cost of freight, lead times and on-time delivery.
Vetere advises retailers to conduct background research on companies to ensure there are no hidden problems or lawsuits pending.
How can a retailer ensure private-label product quality?
To ensure quality, Vetere says retailers should look for companies that carry the NASC Quality Seal, Wild Bird Feeding Industry Quality Seal, Good Manufacturing Practices certification by the National Nutritional Foods Assn., or that are registered and inspected by the Food and Drug Administration or the Environmental Protection Administration, depending on the product.
Once your product is in production, Vetere recommends periodically inspecting the plant, performing audits and testing samples, as well as holding the manufacturer contractually responsible for product defects or problems.
What do retailers need to know to get started?
First, develop a memorable product name and logo, and hire a specialized lawyer to research and register trademarks. Then determine what licensing and regulatory issues must be addressed before finalizing product ingredients and label wording. Depending on the product, regulatory agencies may include the Assn. of American Feed Control Officials and departments of agriculture in every state where you plan to market your product, as well as the EPA and FDA-CVM (Center for Veterinary Medicine). Stop Sale Orders are issued for a variety of infractions, Vetere said.
Product set-up fees vary according to the product and amount of customization. The PetCare Company only paid $100 for label artwork before they started ordering their store brand liver treats, Turner said.
In contrast, a line of store pet food produced by Diamond with three types of dog food and two types of cat food, each with three bag sizes, would cost a minimum of $75,000 for bags, brochures and point-of-purchase materials before the first truckload order is placed, Brinkmann said. Items like plush toys, coats and tote carriers require product samples prior to order, and development can be expensive and time-consuming, Knittle said.
What kind of marketing support helps move store brands?
Take advantage of marketing support services offered by manufacturers. D&D Commodities consults on category product mix, plan-o-gram design, displays and facings, point-of-sale materials, merchandising tools, coupons, advertising and special promotions. Ginger provides educational materials for retail staff.
"We find employee education is the key to success," Forlenzo said.
Turner said product placement is equally important at The Pet Care Company. She places their store brand dehydrated liver product in the cat food, dog food, treat and checkout aisles. She also offers free samples at the registers.
"Be prepared to commit yourself to the brand's success," Brinkmann said. "If a store brand is left to fend for itself, it will fail with 100 percent certainty. Converting your best customers to your store brand will require steady effort over two to three years."
Brinkmann suggests providing employee incentives to promote the product, making product placement strategic, starting a frequent purchase program for customers and planning regular in-store promotions.
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Private-Label Product Popularity
In 2005, store brands accounted for:
* 21 percent of cat litter sold (unit sales)
* 15 percent of pet supplies sold
* 12 percent of dog food sold
* 11 percent of cat food sold
Wal-Mart's sales were not included, which could nearly double these figures.
Source: Private Label Manufacturers Assn. study
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