The Role of Store Brands

I came across this short article recently talking about the ongoing improvement in store brands and their importance to retailers. Now, it’s not our industry but I thought everything they said applies to us.

I guess the standard explanation for store brands is that they give the retailer some more margin. True, and that margin is increasingly important to the retailer these days. Yet their success suggests that more is going on.

For a long time, I thought of store brands as competing just by being less expensive. That’s not unimportant, but it’s no longer the entire story. As brands have become retailers and retailers brands, I think I detect store brands becoming credible as brands and not just based on price. As I’ve written, the place I think I’ve seen that done best in our industry is The Buckle. They handle their mix of bought and owned brands really well.

Actually, I take that back. The Buckle does a great job, but I think shop decks in skate shops may be where it’s had the greatest impact. Not only do they create more margin dollars for the retailers, but they build a community around the shop by connecting the skaters to the shop through a product they need if they are going to skate. They differentiate the store as a brand (helping the shop build the credibility of the bought brands it carries) and give kids something to belong to.

So how can that be a bad thing? Well, it can’t if not carried to extremes. But if retailers do store brands too well and too often, all we’ve got is more brands with similar problems competing in the same space. I particularly hate SMUs (special makeups done for a brand for a larger chain of stores). It’s an attempt to give the retailer something unique to sell, but typically doesn’t come across as unique and just creates confusion around the brand because a different color or logo doesn’t really make the product special.

I guess I’d suggest that store brands for specialty retailers should serve a purpose beyond generating some more gross margin dollars (though I’m for that). Ideally, they should represent a special connection the retailer can offer its more committed customers. It’s interesting to watch the market dynamics as store brands can more and more stand on their own. As the article makes clear, it’s happened already in big box retailers like Kroger, JC Penney and Sears.