FD Buyer: Pricing Your PL
By Bob Anderson
Bob Anderson, retired VP/GMM of private label at Walmart, is president
of Store Brand Consulting, Rogers, AK.
Through a special arrangement, presented here for discussion
is a summary of a current article from Frozen & Dairy Buyer magazine.
private label products and packaging are as good as, or better than, the national
brands. Yet some retailers still treat their private labels as a stepchild. They
see the manufacturer as a piñata, and they beat out
every penny. And they go for quantity of SKUs, not quality of SKUs, sometimes
adding a store brand item simply as a bargaining chip with the national brands.
many retailers fall into the trap of using private label as the opening price
point, or the “cheapest brand on the shelf.” Pricing too
low cheapens the perception of the private label. But pricing too high helps
make your private label just another brand, without the differentiation that
Here are some guidelines around PL development that worked
well for me:
- Above all else, always be sure the quality is equal to or better than the
targeted national brand. Always!
- Understand what the item’s cost and profit need to be as part of
the category and in the total mix. Maybe stiff price competition on the item
requires a retailer to make less here and increase pricing elsewhere to make
up the difference. If the numbers are just too tight, consider whether the
item is needed at all.
- Establish average costs, markups, profit and shelf prices for the total
- Keep your penny profit on PL higher than both the national brand and the
- Know the true net cost of the product.
- Cost, and profitable retail, must be lower than the national brand.
- Margin must be higher than the national brand and category average.
- Be aware of the lowest retail on the leading national brand’s comparable
item, both in your stores and at your competition.
- Make sure your packaging looks as good as the national brand’s, and
represents the value of your brand.
- Merchandise private label next to the national brand, with promotions that
are in balance to the national brand.
- Give your private label as many facings as the leading national brand.
A personal favorite of mine: Treat your manufacturers fairly. If they’re
not in business, you won’t be either!
Discussion Questions: What would be some of your
key pointers around private label development? What other points would you add
to those mentioned in the article?