A small number of companies have actually used own-brand production as a temporary strategy to improve competitive advantage. In Europe, PepsiCo Foods International has succeeded in attracting private label stores from its main competitor by forcing it to close factories and, more importantly, weaken its domestic brands. In the United States, General Electric Company used a two-step process in the light bulb industry. It first covered private label commercial contracts between competitors and then demonstrated, through comparative in-store experience, that commercial accounts could make more money, storing only GE bulbs than by storing both GE bulbs and private label bulbs. Private label marketing brings you the shelf, but that doesn`t mean the product is supported by an advertising campaign. Your product must “sell” on the shelf to be good in a private label program. You need a product sold at 5 to 6 times the manufacturing cost to have room for additional discounts. The most ideal products with own brands are easy to manufacture by volume and to manufacture at a lower cost. The private label was not part of Michael Levin`s first game plan. The idea of his innovation, a clear plastic overlay for broken nails, glued with a nail glue, first struck Levin in 1989, when his then girlfriend tore off a nail. At the time, she couldn`t find a product to repair the nail – and she complained to Ljewin that cracked nails were a common problem in all women. Levin, who had a chance, decided to hire a market research company to evaluate the market.
The results were upsetting. Levin, now 42, reports that 60% of the women surveyed broke a nail once a month and 35% broke a fingernail once a week. Inventors of a single product generally do not have much chance of selling this product to mass distributors, as wholesalers do not want to buy from small unknown companies that could be unreliable suppliers. But instead of accepting a defeat, inventors often turn to self-identification. You will find another company that sells to mass distributors and offers their product to that company to sell under its name. Mass distributors, storage clubs and other channels account for an increasing share of dry product sales, household cleaning products and health and beauty aids. Wal-Mart Stores is already one of the top ten food distributors in the United States. In 1994, own-label brands accounted for 8.8% of mass distributors` sales; In some categories, this percentage was much higher. For example, 39% of the volume of soft drinks sold in bulk is a private label compared to 21% in supermarkets.
Some national brands have encouraged the growth of new channels, but they may regret it later. Unlike supermarkets, mass merchants and storage clubs are national chains; they are encouraged to develop their own national brands using private labelling lines and have an influence on public procurement to ensure consistent quality at low cost.