How would you market private-label brands within a retail environment?

While some retailers such as Minneapolis-based discount giant Target thrive on a diet of 80% private brands, others seem to be overwhelmed by too many indistinguishable and unrecognizable names. Target's New York-based rival, Kmart, which has long promoted its private-label portfolio, filed for bankruptcy in January after fighting a losing battle against Target and global retail leader Wal-Mart.

While some retailers such as Minneapolis-based discount giant Target thrive on a diet of 80% private brands, others seem to be overwhelmed by too many indistinguishable and unrecognizable names. Target’s New York-based rival, Kmart, which has long promoted its private-label portfolio, filed for bankruptcy in January after fighting a losing battle against Target and global retail leader Wal-Mart.

In fall 2003 Canada’s own mass merchandise chain, Zellers, will be adding the Mossimo label to its collection of 12 core private and captive brands, which includes Cherokee, Gloria Vanderbilt, Truly and Delta Burke. Zellers will be the exclusive Canadian supplier of the apparel and accessory designer, which is also sold exclusively by Target south of the border.

Zellers’ parent, Hudson’s Bay Company (HBC) boasts that its private and captive brand portfolio now accounts for 26% of its total sales and revenues. And Zellers found that its exclusive and private collections accounted for more than 30% of total sales in 2001, rising to $1.4 billion from zero in 1998.

‘The strength of our private brands helps to build customer loyalty and to differentiate us from the competition,’ says Debbie Ford, VP of brand management at the Brampton, Ont.-based retail giant. ‘The Mossimo brand is a high-fashion label which fills a need that is not currently addressed by our portfolio.’

Ford says that Zellers advertises aggressively through main-stream media including TV which focuses on key brands, as well as through a weekly circular and a free lifestyle magazine-cum-catalogue, Zellers Family, which is distributed in stores three times a year to showcase the private brands.

‘The magazine is developed for our core customer who is the 22- to 40-year-old woman with a family,’ says Ford, adding that it aims to link the private brands to the customer’s seasonal lifestyle needs, such as back-to-school time. And in-store, the brands are differentiated into different lifestyle categories, she says.

However, one name will be dropping off the list as Zellers plans to end its licensing agreement with Martha Stewart after next February. ‘There was a lot of disparity between the two of us,’ says Ford. Zellers recently said in a statement that acceptance of the brand had been uneven across the country and that sales growth did not match that of other brands in the home category. Toronto-based Sears, meanwhile has already snapped up the licensed home-décor label and will become the brand’s exclusive Canadian supplier in 2003. Sears plans to make Martha Stewart’s Everyday brand its top home goods line, with the Sears Canada Whole Home brand falling into second place. And the retailer is also considering opening free-standing Martha Stewart specialty stores with a broader range of merchandise.

Meanwhile, HBC’s department store retail chain The Bay, has signed a deal with Federated Merchandising Group (a division of Cincinnati-based Federated Department Stores), to stock eight of its private brands. The first Federated brands to launch in The Bay this fall will be fashion brand INC International Concepts, sportswear brand Style & Co and kitchen-wear brand Tools of the Trade. Other Federated brands to be phased in during the next year or so include Charter Club and Jennifer Moore.

‘Private labels give us the ability to set our own price point in the market, as opposed to fitting into national brand positioning,’ says George Smith, GM of private brands at Toronto-based Bay. Smith says that multi-media advertising is essential together with in-store marketing to differentiate the brands. ‘The real challenge is in linking our in-store marketing back to our TV ads, in terms of brand positioning, merchandising and lifestyle imaging. Without that integration, everything fails,’ he says. TV is under consideration as a medium to introduce the Federated labels, although Smith says no solid plan has yet been established.

The Bay, which culled its cluttered roster of some 65 private labels in 2000 to focus on four new lifestyle brands, will also be adding a youth apparel label, Global Mind, in the fall.

But do some retailers still fall into the trap of housing too many private-label brands and failing to build a solid image for them? And what is the best way of marketing these labels within a department store environment, in order to improve the shopper’s perception of the store? Strategy asked three industry experts.

Richard Talbot

Retail analyst, Talbot Consultants

Unionville, Ont.

Richard Talbot recommends more consumer research to establish a clear target market, together with a marketing campaign to relate products to lifestyle needs. He also suggests dividing department stores into smaller retail locations to serve different markets.

‘The difficulty with carrying exclusive house or captive brands is that you have to spend a lot on marketing and merchandising in order to get the name accepted. In the fashion category, marketers need to talk not only about the product but also about where and how it is utilized, and to relate it to lifestyle needs.

‘Consumer research is essential to make sure you target the right demographic. A lot of department stores are appalling at locating who the target demographic is. If you try to make a product that appeals to everybody, you end up not reaching anybody.

‘Whatever media you use, whether it’s TV or print, you have to make sure that you have a correlation between the target demographic and your presentation, but bear in mind that your advertising may well turn off other customers.

‘The marketing message has to incorporate two things. It has to tell people that this is as high a quality piece of merchandise as you’d buy from any national or international retailer, and at the same time, you’re getting a bargain. Unless you’ve done it right, nobody perceives the value in the brand and it can pull the brand down.

‘Some retailers like The Bay have struggled with too many house brands, most of which nobody had ever heard of, so it became meaningless. Retailers need to carry captive brands to make an impact so the exercise with Federated makes a lot of sense. But ideally every retailer wants to end up as a Gap or a Zara with 100% house brands because then you can control the market and charge whatever you want.

‘The Gap family is made up entirely of house brands that have been split into three different stores – Gap, Banana Republic and Old Navy. If department stores broke themselves up more and spread different brands through a mall it would create more of a cachet for the brand.’

Chris Staples

Partner, Rethink, Vancouver

Chris Staples advises using strong in-store displays to relate an established brand name to the image of a store, while building a strong focus around each house brand.

‘Target probably does the best job of any retailer in the world when it comes to private labels. They use a dealer approach by taking an established brand name like Philippe Starck (a French designer who launched an exclusive houseware line at Target last month called Starck Reality), and transferring it into the store.

‘If you go to a Target store, you see about 50 different products from the Philippe Starck line throughout the store, on end aisles and promoted through P-O-P kits. You end up walking through the whole store looking at various products and really absorbing the brand name.

‘Another good approach is to take your own brands and give them some kind of lustre over a long period of time, like Target did with Cherokee, and like Zellers is now doing with Truly and The Bay with Mantles. That’s much harder to do because you’re starting from scratch. Unless you do a whole bunch of advertising around your own creation, it’s not going to resonate. Truly to me means virtually nothing because it doesn’t have dimension. It is being applied to everything from towels to batteries, so the name doesn’t really stand for anything.

‘Zellers need to develop a mission statement to establish the focus of the brand, whether it is the best value, environmental qualities or whatever. Some very fundamental questions haven’t been asked about the brand’s point of difference.’

Ed Strapagiel

Senior VP, Kubas Consultants, Toronto

Ed Strapagiel suggests a strong push behind one or two key brands, using mainstream media to focus on building up the image of each.

‘Some retailers fail to tell people that a private label is available exclusively in their store. It is important to get that across in the marketing.

‘Any kind of brand has to be supported as if you were the product’s manufacturer, not just a retailer, and that means really getting it out there with the advertising. A lot of advertising is done in-store but in some cases the retailers are poor at that. They just throw the stuff at us and hope that people notice.

‘A lot of advertising tends to be focused on sales and specials, as opposed to building up a larger image around the brand, which is what they should be doing. TV can be helpful because these retailers know that a large majority of consumers go through their doors at one time or another, so getting your brands into mass media is a good way to reach that customer base.

‘The problem that arises when there are too many (private labels) within a store is that none of them gets the support it requires. Loblaws is a good example of a store that has avoided that problem. They put all their marketing into the President’s Choice and No Name brands so they have created umbrellas that are distinctly positioned as quality brands that spin out a lot of different products. If each product was labeled with a different brand name, the advertising and promotional support would be non-existent.

‘Sometimes retailers tend to switch around their private labels on a whim without giving the promotional support to a new name. You have to be quite disciplined when it comes to building up a name over a period of time.’