Is It The End Of Private Label? Zalando gives up on 'Homemade Brands

Against the trend of its competitors, Zalando decided to put an end to its private labels once and for all.

This news is an interesting cue to take a closer look at private labels and try to analyse why they sometimes work and sometimes do not.

Let's start with the basics! What is a Private Label?

Private Label in Italian literally translates as 'private label', these are products that are usually manufactured and supplied by industrial manufacturers but are then sold under the brand name of the company acting as distributor (in this case Zalando).

In the past, they were called 'white labels' in honour of Sainsbury's a British supermarket chain that started selling its products with a white label with only the product name written on it.

No brands, logos, graphics, just an essential white label.

This is certainly not new in the fashion world as all the world's biggest brands use this ploy to de-localise their production.

In this case it is slightly different because it does not we are talking about brands that for reasonsstrategists (and cost) produce in places in the world where it is cheaper.

How does it work?

You have a very strong distribution network, with physical or online outlets.

You get tired of paying the 'well-known brands' on which you have well-defined margins and little mark-up.

You go to a manufacturer, garment maker and buy ready-made garments or at most modify a few details.

You then decide to invent a 'container brand' (at best) to which you give a fashionable appearance by first watching two fashion shows and attach your label.

Do a good shoot and a good promotional campaign. And it's done!

If you want to create your own brand, the good news is that you can do it too!

You don't have to create anything. What you need is a good idea and, above all, a strategy

Following the Fashion Business Designer you have all the tools to do it right!

Let's take another example:

Amazon in clothing is going strong (as a quantity) with its proprietary Amazon-branded brands.

In fact, according to drecent events clothing accounts for 88% of Amazon's branded creations but generates only 1% of its sales.

This translates into a puzzling fact: Amazon has brands that sell less than 100 items per month.

If you had an Emerging Brand and sold 100 items a month I would probably shake your hand and celebrate with you but here we are talking about Amazon.

Zalando, Asos are in effect distributors, distributors e-tailers or digital retailers.

They can count on a very effective and online distribution seemingly unbeatable.

They have unbeatable CRM and remarketing systems that put the CIA to shame (you know when you DON'T buy something and it starts appearing everywhere on every page you visit).

But they are very weak on the product side, on story telling and all those strategies you need to convey your message and positioning.

They work well as price comparators, for unrepeatable offers that you would never find in a 'physical shop', but they imply a simple but lapidary assumption:

"In any multi-brand online shop you already have to know the brand and the product you want to buy, have an idea of the price and if it really is worth it, otherwise you DON'T buy."

Corrado Manenti.

If you do not know the brand, and you are put in an urgent position to buy (or not) you only have two options:

• YOU BUY ON AN EMOTIONAL BASIS: What you saw represented exactly what you were looking for and also matched your risk expectation.
• YOU MUST JUSTIFY THE NON-PURCHASE ON A RATIONAL BASISYour brain doesn't have enough information to evaluate. It's not about discounts, it's not about price. You simply don't buy. You look at something else, after all you are on a site with thousands of alternatives.

"Private label, if exploited correctly, is an extra marketing lever in the hands of the retailer. With it, the image of the brand, its convenience and/or its quality can be reinforced in the eyes of the consumer".

Wikipedia

This is the canonical definition they give in Economics and Marketing faculties but nothing could be further from the truth.

Let us start from a simple assumption the business of fashion is aspirational.

What does aspirational mean?

It means that you have to strongly desire that garment, not just any garment, not a similar one! You don't care about cost, you care about quality, you care about how it will make you feel, how others will see you and what they will think of you, on what occasions you will wear it and so on.

As much as we try to assimilate fashion and its dynamics to the world of large-scale retail (the fault of strategic management mostly on a financial rather than a marketing basis).

Trying to sell any kind of fashion product as a 'commodity' i.e. as a product that can be evaluated by the customer with 'cost' 'quality' criteria. This is a completely wrong assumption.

And that is precisely why private labels will never be very successful, especially in fashion that has pretensions to being considered fashion.

In Italy we lag behind all other European countries with regard to private labels, especially those in mass retail and pharmaceuticals)

The truth is that they never really convinced us.

We are a sceptical people, terribly attached to the brands we know

Would you ever take a packet of Coop pasta over Barilla pasta?

Have you ever taken any equivalent medication with a fever of 40 instead of a 'classic' Tachipirin?

The basis of the purchase is on an emotional basis, with the great unconscious promise that it will make us feel good.

It is the same principle valid for a drug as for a dress.

How can an Amazon, Zalando garment gratify us?

Mystery Solved.

On to the next article.