Editor’s note: This article was first published in April 2012, during the Spanish economic crisis. The market context and the list of retailers reflect that time.
Until very recently, if a consumer product wasn’t advertised on television, it wasn’t to be trusted. There are whole manuals on how to build up your own brand, yet with the crisis, many factories are willing to sell “behind the scenes” to get by. They’ll focus their efforts on their brands again once consumer spending picks up.
Consumers have less and less money for everyday goods, and according to the OCU (Spain’s main consumer organization), we could save up to 47% on average on the weekly shop if we opted for private labels. The advantage for a manufacturer that takes this route is the business volume it can reach by getting its product into big retailers such as Alcampo, El Corte Inglés, Carrefour, Día, Eroski, etc.
For the consumer, the advantage is without a doubt the price, although in terms of quality, a private label sometimes has little to envy a well-known brand.
In times of crisis, there’s no question that having the big retailers as customers can be a lifeline that helps us weather the economic downturn.
The drawback, according to some manufacturers, is the tough conditions the big retailers impose for taking on their product. The biggest complaint is how they pay: some of these companies pay suppliers at more than 90 days, which can leave a small manufacturer struggling to stay afloat.
Even so, there are still many consumers who say they would stop going to a big retailer if they couldn’t find the leading brands they’re used to.
So if, as a factory, you’re facing the dilemma of investing in building your own brand or making a private label to sell through big retailers, it’s a matter of working out what will pay off for you in the short, medium and long term. It’s often much more profitable to have two lines of business: one under your own name and a second “fighting brand”. That’s the strategy some well-known brands follow, so that their competition is themselves.
What is clear is that private labels today have strong potential demand.
Featured image: Andy Mitchell, CC BY-SA 2.0, via Flickr.
