License Magazine - August 2007 - (Page 24) chartbuster The Power of Private Label By Marshal Cohen, Chief Industry Analyst, The NPD Group Inc. Not too long ago, private-label products were seen as less desirable than recognizable brands and, frankly, they were considered boring. Remember those plain white boxes of spaghetti in grocery stores? Those days are gone. We can now find grocery stores stocking their own high-end brands, with names, packaging, ingredients, and promises that rival some of the better-known national brands. There has been a private-label evolution in fashion retailing, too. Private-label and/or exclusive designer brands were once the territory of highend stores like Neiman Marcus and Barney’s. It gave them a distinct style and a degree of cache that previously had been available only in the swankiest boutiques. Private-label offerings allowed stores to take off in a unique direction and become known for their particular mix of designers, labels, and merchandise. This generated consumer interest and, importantly, sales. The bigger stores noticed and saw an opportunity to convert their basic private-label commodities into distinct “designer” brands. As private-label business grew, mass merchants like Target, Kmart, and Wal-Mart developed their own unique brands. Now, shoppers seek out these labels, some of which have become strong competitors of many well-known national brands. Department stores, on the other hand, are not new to the private-label business; they’ve been in it for more than 35 years. As their business evolved, they discovered how to raise the bar and, as a result, many department-store branded products are now considered coveted merchandise. J.C. Penney’s private brands have been so successful that the company reports that private label makes up more than half of its sales; some of the Macy’s/Federated private-label brands, like I.N.C., have taken on lives of their own, with very strong sales and customer followings. Many consumers think of these private labels as national brands—they don’t consider them “store brands” at all. Today, private label represents the essence of a store’s image. It’s no longer about the few top brands a store carries. Instead, it’s about offering exclusive products that define a retailer’s image. One look at sales growth for private-label products tells the story: From January to December 2006, private-label sales grew by more than 10 percent. This was partly due to private labels’ continued evolution, and also to the increasing amount of floor space these products occupy. Private label now accounts for 52 percent of fashion product sold—by the year 2010, we expect it to command 60 percent of industry sales. In contrast, just 30 years ago private label made up only 24 percent of sales. © Private-Label Dollar Volume 2006 Dollar Volume (000) Mar-Feb 2005 Brand Type Dollar Volume (000) Mar-Feb 2006 Dollar Volume (000) Mar-Feb 2007 Dollar Percent Dollar Percent Change Change Mar-Feb 2006 Mar-Feb 2007 vs. vs. Mar-Feb 2005 Mar-Feb 2006 Average Price Mar-Feb 2005 Average Price Average Price Mar-Feb 2006 Mar-Feb 2007 Total Private Label National Brand All Other Designer $174,579,532 $70,966,914 $58,886,126 $33,835,446 $10,891,046 $181,222,867 $75,230,564 $61,519,446 $33,733,527 $10,739,330 $194,511,339 $82,868,347 $65,237,943 $35,170,741 $11,234,309 3.8 6.0 4.5 -0.3 -1.4 7.3 10.2 6.0 4.3 4.6 $10.10 $10.86 $8.14 $11.29 $20.97 $10.09 $10.90 $8.09 $11.44 $21.58 $10.39 $11.10 $8.38 $11.76 $22.95 The data represented in these tables are estimates based on projections from our consumer panelist data. Created on May 3, 2007. Copyright 2007. The NPD Group Inc. All Rights Reserved. Proprietary and Confidential: This report and all information contained herein is the property of The NPD Group, Inc. and its affiliates, is provided for the confidential use of NPD clients only, Source: The NPD Group, Inc./consumer tracking service 24 www.licensemag.com August 2007 http://www.licensemag.com
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