Articles

The Brands Are In The House

There is nothing new in “house brands”. They have been around since the advent of big department stores in 1852. But it really is about time we started calling a spade a spade. Most – and there are some notable exceptions – are more accurately described as “house labels” rather than brands.

After all, many of these so-called “house brands” haven’t:
-been based on rigorous R&D
-brought innovative new features & benefits to market
-been nurtured over time
-had marketing energy & dollars invested carefully in them
-exploited the greatest creative & entrepreneurial input

to achieve an emotional and rational connection to a consistent customer support base which buys them on value for money rather than cheap price.

Generally speaking –– house labels are exploitative and opportunistic. Volume retailers have relied on independent national brands to create the volume opportunity through creativity, ingenuity and pioneering (often high risk) investment. When they find an area where there are sufficient customer numbers to support a house label, they introduce one to take increased margin and for use as a negotiating tactic.

It is a truism of retail that there are many customers, in many categories, who will buy on price above all else. When this occurs, generic or house label products provide their owners not just with a profit opportunity but in many cases a solution to deflation. After all, if the customer doesn’t want to pay a premium for what they see as a commodity, you can’t force them.

But there are two issues here. Firstly, not all categories work this way and many can be artificially deflated by the practices of the volume retailers as they push house labels blindly across seemingly every category. Secondly, those customers who seek more than “cheap price” can eventually be robbed of choice as national brands pull back on R&D as a way of increasing profit from a deflating category.

In the end nobody wins as profit in retail is an outcome of clever merchandise and margin mix – not one size fits all. The argument of house label versus national brand really comes down to balance. All customer segments need to be served. All retail environments need to be managed for productivity – sustainable, increasing profit from the assets. Strike the right balance and everybody wins.