As we noted in our last post, Amazon is now offering fashion clothing and accessories under its own private labels. Why private label you may ask? First, "fashion sales are very profitable… clothes and food are where the biggest money in retailing is," according to Forbes article, Amazon's Endlessly Fascinating Push Into High-End Fashion. Second, "Apparel margins are as high as 80 percent depending on the product, price, and materials and labor used," says Forrester retail analyst Sucharita Mulpuru in a recent WIRED article. Another reason Amazon seeks to compete via private label is that many brand names that used to sell through Amazon switched away when they saw that the eCommerce giant (Amazon) was going to school on their transactions, adding competitive products of their own on quite short notice.
What are some advantages of private label?
1. Private label apparel is manufactured solely for the wholesaler. It doesn't have to compete head-to-head with name brands.
2. You deal directly with your suppliers and sources.
3. With private branding, you create your own unique image, which begets a marketing identity and promotes stronger customer recognition and loyalty.
4. The packaging and labels are tailored to meet the private label owner's specifications, including product name, description, company's logo and contact information.
5. Private labeling gives you more control over pricing, marketing, sales and distribution.
6. Sales of store brand are often more profitable than those of national brands because private label items are (usually) cheaper to make. (It's a given that the lower your expenses, the higher your profits will be).
7. Private label allows the retailer to get the styles a customer is looking for in stock or quickly acquired, and ready to ship.
8. Specific private label products are available only from the retailer - that is to say, customers can't go onto another website or into a store and find the specific private brand product name that you have.
9. It is YOUR "brand" name that is identified with the product. (Note: In this case, Amazon is NOT using its own name, rather has signed on at least six companies with cheery-sounding fashion names).
10. Private labels make it harder for competitors to match and price check similar products.
"Accurately identifying comparables when comparing private label and brand label products is a major challenge," says Dr. Shai Geva, co-founder and CTO at Upstream Commerce Retail Intelligence Company. "Highly-sophisticated intelligence solutions have the capability to take the attributes of private brands/private labels, establish comparables (which is very difficult) and make price comparisons," he continues. "That means applying our in-house engines that can discern the differences and similarities, tease out the details, and also use experts to apply human judgment -- and manually fill the gaps to be sure that the comparison is accurate and correct."
What are some disadvantages of private label?
-- House brands build on brand reputation. This is a mixed bag for Amazon. Will its private label items catch on? Amazon will have to strive for recognition and this takes time.
-- Private label products are sometimes perceived to be of lesser quality than those of established brand-name retailers.
-- Customers may not feel the same about private brand fashion items as they do about other brand-name items. For example, customers have said that they find name brands and house brands pretty equal -- when it comes to things like cereal -- but they're not so sure when it comes to fashion.
More things retailers have to do to succeed with private fashion labeling:
-- Forge strategic collaborative marketing partnerships.
-- Conduct in depth analyses of consumer purchase attitudes and behaviors.
-- Collaborate to optimize in-store inventory management programs at the store level based on unique needs and wants of key and target consumer segments.
-- Set up special staff to deal exclusively with this important business subject.
Bottom Line For Your Bottom Line:
Fashion is a high profit moneymaker. Amazon itself has stated that fashion is its quickest growing category. However, fashion is still a highly personal, tactile and emotional experience for the customer. So whether people will buy Amazon house brand clothing as replacements for the fashionable brands missing from the Amazon assortment remains an open question.
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