A store brand, also referred to as a generic product, is acquired or manufactured by a retailer exclusively to sell to consumers. Examples of store brands include anything from bottles of jam to windshield wipers. A national brand, on the other hand, is a product developed and manufactured or acquired by a distributor for resale to the market through different retail outlets.
The Pros & Cons of Store Brand
A significant benefit of a store brand is that the owner owns it. It is a brand unique to that store that can be marketed as their own. More often than not, store brands also usually get higher profit margins. When the production and development are controlled, costs automatically reduce. However, all store brands are not made by the company that brands and sells them. There are some private label products that are made by a single manufacturer but sold by several retailers, each of them putting their own store brand on the products. Store brands are often cheaper than national brands but produce higher profits than the latter. Customers typically put greater emphasis on low-cost products during challenging economic periods.
The negative side of store brands is that they project themselves as “generic” or inferior to national brands. However, consumers have been increasingly indicating a willingness to buy store brands. Another disadvantage is that store brands can only sell their products through their own stores or online sites. This problem can be overcome by setting up licensing arrangements with other providers.
The Pros & Cons of National Brands
The greatest strength of a national brand is it has wider recognition compared to store brands. Various retail outlets distribute their products nationwide. Moreover, it is commonly promoted on national television and other media.
National brands that are highly recognised and sought-after may attract customers that wouldn’t visit that store otherwise. Discussions by Word-of-mouth are more common with these brands since more customers are familiar with them.
The appeal of national brands has been diminishing for decades now. A major reason is the increased price. Cost is the biggest drawback for a small business to carry a national brand. Supermarkets often price certain national brand goods at break-even, so that they don’t even make a profit on them. They carry the brands to look more competitive in the market and to provide what customers want, but at a slightly less price than the premium version.
Another problem is that the seller often does not have any exclusive marketing rights while carrying a national brand. Therefore, the seller is forced to compete with other providers of the brand for customer business. This places greater emphasis on the ability of the seller to compete in non-product areas such as service.