Big retailers continue to expand private label brands

Locally headquartered Target is adding another low-cost brand to compete with Walmart

The WCCO Morning News with Dave Lee
October 10, 2018 - 9:58 am

© Anthony Behar, USA Today Images

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Retailers like Target and Walmart sometimes do more than sell other manufacturers' products.  They sell their own under a brand name they advertise:  Archer Farms at Target; Kirkland at Costco, Great Value at Walmart, etc. Typically, they are lower cost than the outside manufacturer's competing brand.  Maybe its perceived quality is a little lower, too, which is not always the case.  Some Kirkland products at Costco are known to be of much higher quality than name brands.  

As of this week, Target's got a new private label brand following that pattern. Target unveiled a budget line of consumer products called Smartly, priced beneath not only outside manufacturers, but also private labels at Walmart, and even Target's own existing private label brands.  The Wall Street Journal reported that Smartly is priced well below similar items from Walmart's house brand, Great Value.    

Professor Paul Vaaler of the Univeristy of Minnesota's Carlson School told WCCO Radio's Dave Lee, "Target wants a spectrum of private label goods at different price and quality points.  It may seem a little unorthodox to compete with your own brands, but other consumer goods firms do this --Proctor and Gamble with detergent brands, for example."  

Amazon is also developing different private labels at low, medium, and even higher-end price and quality points.  The created their first private label brand in 2007 selling bedding and bath products.  They're now over 125 other brands, from paper broducts to kids clothing like the Spotted Zebra line. 

"As an online retailer, Amazon has more "virtual" shelf-space to sell those brands --more than 125 today-- than Target.  The idea's basically the same as with Target.  They give consumers more choice; increase bargaining power with outside branded manufacturers; develop internally rather than buy externally distinctive product quality perceptions that translate into profits", said Vaaler.

Amazon says outside brands are still their best sellers.  However, as Amazon continues to flex it's muscles, expect them to become more aggressive selling it's own brands. 

Vaaler told WCCO, "The idea is if they can beat themselves up with multiple brands, they can beat anyone up.  This is bargaining power against the big manufacturers.  It drives down cost."