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Why Private Label fashion is a growth driver for retailers

When we think of own brands, our minds will immediately jump to products like food, cosmetics, toiletries and cleaning items. One product category in particular that appears to have taken off in recent years, however, is fashion. As increasing numbers of retailers have experienced great success with the launch of own brand clothing ranges, it appears that Private Label apparel is beginning to capture the attention of a growing number of people.

Private Label clothing - growing in appeal

There is no doubt that affordable prices are the key selling point for shoppers, and Private Label apparel can be fifty percent cheaper than branded products. Generally speaking, many shoppers believe that Private Label offers good value for money, which was evidenced in a Trace One study that highlighted that nearly three quarters of consumers say they regularly shop at a specific retailer because of its Private Label products.

When it comes to fashion, however, Private Label apparel has historically been thought of as dull and drab and no match for branded clothing and has therefore been neglected, in spite of the low price points. However, it appears that now things are changing, with more and more retailers investing in enhancing their Private Label clothing ranges - in terms of the quality, style and variety of products. As a result, more consumers are enticed by Private Label clothing. As Private Label fashion continues to improve and be more widely available, there is every reason to believe that more and more people will be eager to purchase own brand items.

Who is the key target market for Private Label apparel?

Due to their significant purchasing power, members of the millennial generation have been widely recognized by brands and businesses across the globe for being a highly fruitful market to target. However, attaining their loyalty is a challenging task for many, as they have proven to be much less brand loyal than previous generations.

While this has resulted in the deterioration of many big brands over the years, such as Abercrombie and Fitch, this lack of brand loyalty has worked in favour of retailers offering Private Label.  Millennials are more open to embracing own brand, in a bid to avoid being ‘over-branded or over labeled.’  A large portion of the younger generations seek out brands that are ‘unique’ or ‘one of a kind’ and will increasingly opt for function and practicality over ‘cool’ brand names.

This sentiment was reiterated by partner at leading consultants A.T. Kearney, Adheer Bahulkar, who stated that “Every new generation is becoming less and less brand-loyal,”Millennials don’t care as much about logos. They will buy anything from anywhere at any price point, and that is a big change.”

Across the pond, popular retailers have capitalized on the demise of brand loyalty by launching their own Private Label clothing brands, with great success! Target’s Private Label children’s apparel range named ‘Cat and Jack,’ for example, managed to surpass $2 billion in sales, within less than a year after its launch. 

Due to factors such as financial instability that is affecting many countries across the globe, shoppers are more open to purchasing products at a lower price point. This has been recognized by Walmart, who earlier this year unveiled four new lines for women, men and children (with items ranging from $5 to $30) and have established that their bargain prices have given them an edge among customers who are reluctant to splash out on fashion items.

So why are more retailers introducing apparel to their Private Label offering?

Savvy retailers have established that offering Private Label fashion ranges is a key way to achieve differentiation and gain competitive advantage over branded players.

Other than offering shoppers the aforementioned appealing price points, Private Labels can generally gain higher gross margins than from branded products. Plus, the profit margins for apparel far exceed what they earn for food and household items. Offering a Private Label apparel range also helps retailers to carry greater brand equity when added to the mix with other categories.

Furthermore, the nature of Private Label production means that some retailers have total control over product development and production of the garments in terms of quality, design and pricing - without giving up a margin. This means that the production process is simple and controlled, with minimal risk. Meanwhile, the retailers who choose to outsource, are required to be particularly careful when selecting a supplier with a clear process in place.

Capitalizing on affordability

Private Label fashion has contrasting objectives (and much smaller marketing budgets) compared to large fashion houses and brands. They satisfy a different need and appeal to a different consumer. But luckily, there is a place for both.

Whilst quality, variety and style must be considered, price should continue to be a key focus to achieve competitive advantage as opposed to constant innovation, newness and the latest, catwalk inspired trends. Capitalizing on affordability of their Private Label range and adopting unique marketing activities will help to build a positive brand image.

In the future, there is no doubt that more retailers will look to Private Label to help drive profits. Ultimately, when implemented strategically, introducing a Private Label apparel range to the product offering provides a great opportunity for retailers to achieve differentiation and drive growth.