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Retailers are turning to private labels to combat the economic crisis. Technology can be used to hit the target.

The retail industry is facing challenges due to high fuel and energy prices and a significant drop in the consumer confidence index. Furthermore, consumer purchasing habits are rapidly changing, polarising and evolving in unexpected ways. On the other hand, technology is advancing exponentially, and there are more opportunities than ever to generate new revenue streams, reduce costs, and improve agility. The retail industry is facing a new reality as these forces collide. The winners of tomorrow will be those who can use data and technology to address challenges and capitalise on opportunities presented by a downturn in the economy.

Private Label Management - or own brand management - has the potential to be one of these opportunities. However, when introducing private labels - or what is often called own brands when they are fully executed - retailers must manage end-to-end delivery throughout the value chain, which adds layers of complexity. Retailers are better prepared to face operational challenges by using technology to optimise some of these processes. Here is how.

The secret weapon

Own brands are becoming increasingly important for many retailers. The post-covid-crisis recovery and the uncertainty of tomorrow’s economic landscape prompted retailers to focus more on own brands, as consumer demand has increased significantly in the last two years. There are more store-brand goods than ever before, and more retailers are announcing plans to invest more in own brands, believing that these will drive revenue in the future.

Own brands give retailers more control over the design, cost, materials, and quality of the finished product. Retailers also have more flexibility in producing their own brands, allowing them to respond to consumer trends faster and more effectively. Combined with retailers access to first party data it can give retailers a competitive edge.

Furthermore, own brands reduce retailers’ reliance on global brand supply and enable retailers to expand their product assortment without involving other brand owners. Thus, own brands allow retailers to establish market positions and build consumer loyalty for their own brands, implying that retailers can use their own brands to build their brand while extending and improving the quality of the customer experience.

Getting the job done

So, own brands can provide retailers with numerous advantages. They enable retailers to gain control of the supply chain, establish their own market positions, and achieve higher margins. However, the process of sourcing, through the supply chain, to product development and design, and finally to the point of sale, is extremely complicated and not very agile. This process is knowned to be ~50 weeks. Handling this complexity, in our experience, can be managed by supporting the process with a Private Label Management solution where all involved internal and external stakeholders can collaborate and work on the same data. With a greater emphasis on time-to-market performance and a desire to increase the number of SKUs available at the right time and price, the need for execution focus has never been greater.

A well-integrated and transparent development process is essential for own brand success. Creating own brands necessitates input from various parts of the organisation regarding product design, product descriptions, labels, logistics, and more. Furthermore, it includes external stakeholders such as vendors or third-party manufacturers who manufacture the products. A complete and configurable Private Label Management solution enabled by technology assists retailers in facilitating numerous interactions and fostering greater collaboration and data sharing among all stakeholders.

This leads to further benefits for the retailer:

Reduce time-to-market

Among others, the platform eliminates the need to send e-mails back and forth by streamlining the workflow and allowing stakeholders to work on the same data in real-time. This optimised workflow reduces time to market and will enable retailers to develop their own brand products faster. 

Enable collaboration across the value chain

People from the retailer’s organisation, manufacturers, and third-party packaging and design providers can access the platform and participate in each workflow efficiently and collaboratively. This ensures collaboration across the entire value chain and strengthens partner relationships. 

Cost savings

Retailers can reduce the cost of bringing new products to market by streamlining the process and eliminating costly steps in the development phase. As a result, retailers require fewer people to drive the development process, lowering labour costs. Furthermore, own brand portals have been shown to support economies of scale - retailers can combine production batches and reduce overall production costs by having a structured process that provides an overview and clarity of which products to produce and when to begin production.

How to hit the target

A recession can benefit those using data and technology to address challenges and capitalise on opportunities. During this economic downturn, many retailers are turning to own brands, which provide them with new revenue streams, lower costs, and improved agility. Retailers can develop own brands more quickly with a Private Label Management Solution while ensuring (more) agility, control, and profitability. So, if own brands serve as a secret weapon when battling an economic downturn, it is safe to say that leveraging technology helps you hit the target.

To find out more about Encodify and the services they provide to the retail industry, click here.

This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.