Private label cosmetics: positioning and product line optimization

Private label cosmetics are sold under the brand name of a retailer and may be created by the retailer for exclusive marketing purposes. Various products, including cosmetics, are widely sold through private labels.

Positioning optimization

While refrigerated food products are much more common as private label products, cosmetics account for 5% of that market. One of the key factors that make these products stand out is pricing. Private label prices are on average 31% lower than the national brand equivalent (NB). For cosmetics, the average price difference can be up to 46%, compared to 16% for refrigerated foods.

While some retailers mark their brands as premium, most enjoy discounts. Premium products are not always needed when low quality products are sufficient for the existing market. The main reason for retailers launching a private label trademark is to segment the market and strengthen the retailer's market position with suppliers and manufacturers of competing products.

The introduction of private label products impacts supply, making pricing more competitive and attractive to consumers who are in financial distress. Reduced prices can make a private label brand ideal for shoppers shopping at bargain prices.

By increasing the surplus of the industry, private label brands can cause a market change. Positioning depends in part on product quality. If a private label product is comparable in quality to a national brand product, then a private label product can be positioned as the best deal for the consumer.

Private label and suppliers

Some private label organic cosmetics manufacturer may use their own brand as a strategy to buy national brand products at lower levels so they can increase their profit margins. Suppliers gravitate towards developing two types of products: one is innovative and highly promoted, and the other is an alternative at a lower cost. The strategy of suppliers developing two different items for the same product category allows them to work with retailers to address quality inefficiencies.

Private label retailers can play an influential role when national brands compete actively against each other. Once a private label retailer evaluates the quality of both brands and is able to provide a sufficient substitute at a lower cost, they may be able to bargain with suppliers to place the national brand on the shelves and reduce costs.

Conclusion

Both the quantity and quality of private label cosmetics that challenge national brand products can affect the retail market. The retailer has the advantage of competitively pricing its private label products in line with the established quality of competing national brands.