Most retailers start out with one Private Label brand.  The range of products starts with commodities and then expands to national brand equivalent.  The retailers decided they wanted to increase their Private Label percent of sales so they add items.  This has lead to more and more Private Label brands on the shelves.  In recent years we have seen an explosion of Private Label brands.  In food there are basics, national brand equivalent, organic and gourmet or premium brands.  In non-foods there are health and beauty care, children, teen, women and men appeal, automotive, etc.  There is no absolute rule as to how many Private Label brands a retailer should offer, but there are common sense considerations.

 Marketing is the business process used to create and manage brands.  This is the same for regional, national and Private Label brands.  Marketing starts with customer identification.  There are two sides to customer identification.  First is identifying the socio-demographic characteristics for the target customer.  This can be coupled with consumer buying habits for a more in-depth consumer descriptor.  Most retailers have moved from mass to target customers.  This provides the foundation for Private Label brands.  Second is to identify the brand/product characteristics that appeal to the target consumer.  This includes product quality, size and packaging.  A retailer with a narrow target consumer should have fewer Private Label brands than one with a wide or multi target consumer.  Wal-Mart and Aldi both have narrow target consumers and have few Private Label brands.  Tesco having multiple target consumer segments is successful with different Private Label brands.  Creating a super-premium Private Label brand for a lower income target consumer will likely fail.    The number of Private Label brands a retailer should consider therefore is determined by the composition of its target customer.

Brands require consumer communication to be successful.  The consumer needs to know what the brand stands for before they consider purchasing an item.  This communication usually is accomplished by advertising.  The message can be value, quality, easy use, etc.  Each brand requires their own unique positioning communication.  If there is not a specific target consumer and different brand characteristics there is no reason to have multiple Private Label brands.  Often overlooked is the consumer communication cost.  As stated, unless consumers know what a brand stands for they are less likely to purchase.  This means each Private Label brand requires a budget for consumer communication.  The budget varies based on the size of the brand and where the brand is in its life cycle.  New brands require greater spending on consumer communication to create awareness.  Brands at the end of their life cycle may require consumer communication to slow their decline.  Having too small an advertising budget may result in not achieving consumer communication objectives.  Consumer communication is increasingly fragmented and crowded.  A minimum spending level must be met in order to be received positively by the consumer.  Private Label communication is in direct competition to national brand.  Branded manufacturers provide retailers with significant funding for consumer communication and results in limited advertising time slots for Private Label.  The more Private Label brands a retailer offers, the more communication time slots are required.  On a common sense level the more Private Label brands the greater the overall consumer communication cost.

Each retailer has their own identity and situation.  Having 2 or 3 strong Private Label brands is better than 10 labels that consumers don’t relate to.