Retailers and sector players from around the world will in November this year converge in the city of Dubai in the United Arab Emirates for an international convention on private labelling and licensing. FILE PHOTO | SHUTTERSTOCK
Retailers and sector players from around the world will in November this year converge in the city of Dubai in the United Arab Emirates for an international convention on private labelling and licensing.
This convention will be taking place at a time when the conversation on private labels is growing in intensity amid a concurrent expansion of physical and online retail stores.
In Kenya, as elsewhere across Africa, private labels, sometimes referred to as store brands, house brands, own brands, or generic brands, are trademarked and managed by the retailer.
Private label products are specific to individual retail chains, whereby the retailer retains exclusive rights to the product. They are not new locally and are currently present in many of the retail chains across the country.
But what is the driving force behind the rise of private retailer labels? Retailers contend that the shift is being driven by consumers’ need for quick ‘in and out’ shopping experiences.
This concern has also led to a sharp decline in the number of shopping trips, which means if products were out of stock, a shopper would only return to a store in a week or a month.
Purchase opportunities are limited and product availability is vital.
Within this context, it is the manufacturers’ and retailers’ ability to meet this need, via an increase in the distribution and assortment of private-label products, that ultimately leads the increase in value sales.
The upshot of this growth in private labels is that local manufacturing, packaging and logistical capacity has been developed to serve these specific needs. Ultimately, these own brands provide benefits to consumers, for example, by helping to deliver new products and value for money.
In addition to the direct benefits, consumers of other brands benefit indirectly where increased competition forces alternative brands to compete more vigorously in terms of offering higher quality, increased levels of innovation, or lower prices.
They also help to stimulate competition and innovation between retailers, for example, by providing an additional dimension on which retailers can compete with each other.
For instance, in introducing niche sub-brands, retailers can win customers by differentiating their offerings from rival chains.
In addition, retailers can work more closely with their suppliers to source the products that consumers demand and achieve better terms and lower input prices.
For suppliers, the existence of retailer private labels provides new routes to market for small suppliers to produce for mass markets which they may otherwise struggle to access given the costs and risks involved in developing a brand.
Post the Covid pandemic, we realise that times have changed, of course, and with greater sophistication around customer understanding has enabled many retailers to rethink and expand their private brand models.
Looking to the future, the private label will continue to be a very good space to play in for manufacturers and retailers alike. Despite the onerous retail environment, we have identified some sweet spots that are still up for grabs for those who have the data and insights to analyse the market and move faster than anyone else.
There is a likelihood that the retailers sustaining their private labels will need to make substantial investments to build, steward and grow them into brands.
The writer is the CEO of the Retail Trade Association of Kenya.
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