Are There Advantages to Private Label Products – Business Essay
There are advantages and disadvantages of private label for consumers, distributers as well as for manufacturers. Manufacturers have lower costs of production and need no advertising, plus they produce
larger quantities. That’s why consumers are able to buy under lower prices and consistant quality and they also always find these products for distributers make sure that the shelfs are stocked and also on more prominent displays. Distributers thus have larger profit and with a strong private brand they can draw more traffic.
On the other hand, manufacturers need to spend more money on advertising their own brand and thus sell under higher prices to cover these expenses, and they also need to be careful with quality (if they sell lower-quality products under private label, consumers will think their other products are the same). Disadvantage for the distributers are that they have to search for the manufacturers who are willing to produce for their private label, they need to order larger quantities and tie up their capital in invetories, there is always the risk that the product won’t be accepted and if they knock out manufacturer’s brand, consumers have no choice which is a disadvantage for them.
So all three have advantages and disadvantages, but I guess there are more advantages, otherwise private labeling wouldn’t be so expanded.