It’s essential to understand there is no longer a simple one way supplier-buyer relationship in which buyers pay for their products of interest, collect it and that’s it. End of the story. If products sell well, they repeat the cycle, otherwise they stop and search for another supplier. Gone are the days of this traditional supplier – buyer relationship.
Instead, new times have come. Marketplace is full of engagement and active support between both sides. It’s a two way street where movement is based on a complex relationship that is quite a challenge to maintain on the long run.
Being an import and trading company of confectionary products for about 15 years (back in the 90s), going through the transition from trading to manufacturing company of traditional Balkan type cookies (2001-2013) and finally becoming an export oriented company of private label sandwich cookies (2013 – present), we have seen dramatic changes when it comes to supplier-buyer relationship. Since we’ve experienced both sides (buyer and now a supplier) we perfectly understand both positions. Furthermore, taking into consideration that our business has been through the whole economic and political turbulences in the past 20-25 years locally and globally, we have gone deep into the evolution of the intricate relationship between the buyer and the seller.
Illustration: Christoph Hitz. Source: Consumer Reports
Let’s be honest: there is one point that remained valid over time regardless of other business disruptions happening around and that is the following: we as sellers like to sell our products at a higher price, you as buyers like to buy at a lower price, and this will always be the case. Nevertheless, we both have one same goal: how to win final consumers’ choice, how to make them love our products and eventually make repeating purchases. For that reason, the more we help each other, the more insights we share, the greater the chances to reach our mutual goal. Here is our part of the share…
Why do you as distributors or even wholesalers need your own branded products regardless of the fact you do not own retail stores? Here is why:
1.Bigger slice of the pie: “A” brands bring great sales numbers for sure. Definitely, if you have the chance to sell “A” brands you should keep doing it. But, that doesn’t mean you can’t expand your target market and eventually increase your sales even more. Very often distributors decide to create their own branded product similar to the “A” brand they sell, but at a lower price. This doesn’t mean the PL brand is of lower quality, to the contrary: very often PL brands show quality at a level way beyond satisfactory. What distributors do when launching their own brands is amplifying their core market. One of the greatest reason for the price difference between an “A” brand and a PL brand hides in simplification of the product flow complexity. What does it mean? When it’s PL (in another post we’ll speak more of the PL brand development requests) producer manages to reach a significant production cost optimization which leads to lower net prices. Consequently, distributors and wholesalers offer the PL brand at a more competitive price than the “A” brand which results to increased number of target customers. This way distributors or wholesalers reach greater market share with one same or similar type of product (similar or complementary to the “A” brand they sell), or other times diversify their portfolio (a different product than the “A” brand) at a more effective way.
2. Long term investment: as the (exclusive) distributor of an “A” brand you are bound to serious contract terms which most of the time include head hurting sales targets. If you don’t reach expected volumes, you might lose your annual bonus or sometimes even (exclusive) distribution right. No matter the fact you have invested finances, people and resources in promoting the “A” brand, still you are never certain for how long you will enjoy the fruits. With PL brands there is certainly MOQ especially when it comes to packaging, but this is far below the “A” brands’ annual sales targets. You can’t even compare. Moreover, everything you invest is an investment in your own product. Tomorrow you might change the producer, but the brand will remain yours, thus everything you have invested remains yours. Furthermore, even someone else takes over the “A” brand you are currently selling, you haven’t lost it all. You still play the game and with smart moves and lots of hard work you could even lead the game.
3. Creativity and Innovation: if private label brands used to be focused on copying market leaders in the past (you can read more about it in our previous post onPrivate Label Brands), nowadays situation starts changing. Many PL producers are small and medium size companies eager to grow and fulfill their production capacities. Creativity and price are their greatest strengths in convincing clients to choose them instead of an “A” brand. Because of that, they are ready to innovate fast and relatively cheap. Their size and organizational structure allows them to adapt and introduce new technologies fast. The decision makers are easy to reach (generally it’s business owners) and this shortens the whole decision making process remarkably. Moreover, their cost structure is significantly different than the one of a big company selling “A” brands, thus price negotiation is most of the times in favor of the client. A small or medium size company would introduce an innovation, recipe or package adjustment fast and at client’s desired price. An “A” brand would hardly do that.
4. Marketing cost optimization: When you develop your own branded product you purchase it at a net price. What does it mean? As it’s another company’s brand (yours), the producer does not build up prices with marketing or promotion costs. It means all advertising and marketing expenses that are included in national brands price are eliminated, meaning you as a buyer get best net price possible. You have total control over the pricing, promotions and advertising. You allocate resources as your strategy demands. This will give you exceptional power over positioning your product on shelf because all marketing parameters are being customized by you according to your market needs. To sum up, PL develops custom made solutions which optimize all costs (production, logistics, distribution and marketing) and eventually the result is a lower priced product at same or sometimes even better quality than “A” brands.
5. Loyalty to your business: when you have your own brand you create the rules. You can exhibit at trade shows, create the brand image you always desired to show, market the products the way you always imagined; simply you have all the chances to make clients love your product and all this while avoiding the exhausting process of production. And here we are not talking about the traditional marketing and promotion tools only. We speak of more: use the latest trends in technology and link it to your own brand. Develop apps, games, AR experience, get active on social media and make your brand stand out on those crowded shelves. The final result will be beautiful: a strong bond between final consumers and your OWN brand, your own creation no one can take it from you. It’s a fact: you don’t have the freedom to get out of your comfort zone with another company’s brand, but with your own… even the sky is not the limit. You become the key figure.
PL brands always pay off to hard working and success oriented companies. If you are one of them, then don’t doubt it. Plant your own seeds and enjoy the fruits to the fullest. PL is everywhere, it’s a trend overtaking shelves all over the globe. It’s the right time to get into the business of PL.
Feel free to contact us and we will guide you through the process. We have done it many times, it has become a routine to us.
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