Private labels have always added value to retailers. Traditionally, controlling the inventory has meant keeping prices down and profit margins up. As more and more consumers gravitate to private brands, marketers are realizing that they can add store-branding value too. The idea couldn’t have come at a better time.

‘The percentage of private-label products in apparel has grown by a staggering 5% in five years,’ says David J. Howell, VP of Toronto-based NPD research firm’s apparel tracking. ‘This is remarkable when you consider that big a swing in strategy in a $17-billion industry.

‘The Bay and Sears and Zellers are clearly leading the way with The Bay and Zellers importing new programs from Federated Stores and Target in the U.S,’ Howell says. ‘The Bay now claims 60% of its apparel assortment is private brand with an ever increasing enthusiasm to continue that trend.’ That’s up from 40% in the mid-’90s.

The Bay’s not the only one. Private brands account for 25% of sales at Holt Renfrew, a company that earns most of its cachet by carrying powerful, high-fashion brand names. The trend exists even in the sports category, traditionally dominated by big-name players who spend millions on brand-based advertising. Calgary-based sporting goods retailer Forzani’s expects private brands to account for 10-12% of sales by the end of this year – a rate that’s doubled in just two years.

‘If you look at the top brands of women’s blouses or men’s jeans, generally the top 20 brands are dominated by private label,’ Howell says. ‘Those brands have become very, very strong. I don’t even think the consumer perception is that they’re private brands.’

Changing consumer attitudes are driving the trend. ‘Clearly it’s not about designer labels anymore. It’s about price,’ Howell says. ‘People are replacing Levi’s and the Gap [also a private label, but marketed and perceived much differently] with Cherokee and other private brands from retailers. Eighty per cent of the jeans business in Canada is done under $39. Casualization really drove the desire for cheap, and hence there’s less prestige associated with spending twice as much money or three times as much money. The consumer’s idea is ‘I got a great deal’ versus ‘Do you know how much I paid for these jeans?’ That was the ’80s.’

The more entrenched private brands become, the more marketers are able to use them in their overall brand strategy. For Sears, that means combining fashion with value.

‘You’ve got to put your money where you can make a statement,’ says Vincent Power, Toronto-based director of corporate communications for Sears. In the last 12 months the retail giant has discontinued a number of its in-house brands. ‘A retailer can’t have everything. We’ve gotten rid of fluff national brands that don’t mean anything, and discontinued some brands that were taking up space and that we couldn’t make a statement about.’

That’s allowed Sears to focus on its successful private lines, such as women’s apparel brand Jessica, denim line Nevada and appliance line Kenmore, all of which have been bolstered recently through television ads from BBDO Canada that suggest to consumers: ‘Put a little Sears in your life.’

‘Craftsman Tools, DieHard car batteries, all of these brands have been around for ages,’ Power says. ‘We’ve had Jessica since 1987. That’s got equity in the Canadian marketplace.’

The trick for Sears has been boosting the brand image without jacking up prices. Its tactic was to divert money from print advertising into broadcast, which will soon make up 30% of the advertising budget, compared with 15% in 2002. ‘It allows us to showcase our private brands better [and] talk about private brands without it being mixed up with a ‘this is on sale’ message.’

According to Power, private brands also ‘give the customer a reason to come to you. We would never just have a private brand and not put some kind of marketing behind it. It can be anything from store signage to TV ads. If you advertise it more, chances are you’ll sell more and bring more people in.’

While Sears boosts its private lines with television spots, Zellers is using broadcast time to focus on captive brands, including Mossimo, Request and Waverly.

‘Right now our strategy is to support those with co-operative ads,’ says David Strickland, VP marketing with Toronto-based Zellers. ‘It’s an important part of talking to consumers. It becomes a new reason, an additional reason, to shop at our stores.’ And Zellers still gets to set its own prices, without staring down the competition.

Not all retailers are using broadcast advertising to get branding value out of their private lines. Holt Renfrew’s eponymous line is showcased primarily through merchandising. The strategy leaves plenty of focus on the major-label brands that Holt is known to carry, while establishing a unique presence on the floor.

‘Private brands are a key way for us to differentiate ourselves,’ says Mary Pompili, VP marketing for Holt Renfrew Canada in Toronto. ‘Our private brand is targeting what we call the ‘Turner-Jones’ group: people in the 35-to-55 age group who want products that are contemporary, that are relevant, and suit their fashion lifestyle needs.

‘When you look at what our mandate is, and what our brand promise is – it’s all about delighting the customer with the best of the best.’ The private line is simply a way to do that while creating value for the customer, with desirable price points.

Holt’s brand is featured prominently in its book that comes out in the spring and fall. ‘We also promote the private brand through store windows, in key visuals at key focal points within the store, through signage, our Web sites, and events we have within the store.’

Sears’ Power has one good reason why private brands are doing so well: ‘Our customer is the moderately priced shopper who likes to shop. She’s time constrained, she wants good value, she wants to stretch her dollar, and private labels are a good way to do that. Unless you really want the brand name on the back of your jeans or hanging off the pillow on your couch, private brands offer great value.’

It works for Sears, and it’s working for Holt too.