Fom the Entrepreneur’s Perspective: Why do retailers have private labels? Will they rip-off my product for private label?

I am not a retailer, but I would venture to say that retailers offer private labels for the following reasons:

1)      To provide their customers with choices in price and value as most customers like choices (not too many, but they like some);

2)      To build their own brand name;

3)      To increase their incremental sales and margins; and

4)      For vendor rationalization (a cost and time savings to the retailer).

If a retailer is stocking your product and it’s unique to its category and jamming on sales, the retailer could “rip-off” your idea for private label. We live in a competitive marketplace, after all. You can take steps to minimize this from happening but there are no guarantees. Some ways to mitigate this from happening include:

1)      Owning a patent. The retailer can still create a knock off, but it won’t be the exact same as your product, and the more unique your product is, the less likely the private label version will compare;

2)      Offering an unbelievable value. If the retailer is already making great margins off your product, then they won’t have the same incentive to make their own version.

3)      Building your brand. Continue to do everything you can to build brand equity and loyalty so customers will purchase your product and not the retailers.

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