Private label market core solutions 2013
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Transcript of Private label market core solutions 2013
Retail Private Label State of the Market, 2013
Core Solutions Ltd. July, 2013
1. What is Private Label……………….…..…3 2. Why Private Label…………….……..….….4 3. Private Label Trends.….….………….....10 4. Private Label Sourcing ………..…...…..13 5. Private Label Collaboration…….…...…18 6. Private Label Strategies.……..………...20 7. How can Core Solutions help……...….25
TABLE OF CONTENTS:
Private label brands - also known as store brands, home brands, own label, own brands and retailer brands – are products made by a contract manufacturer and typically sold under a brand name of a retailer.
The current economic climate has put pressure on consumers to seek better value and in turn on retailers to provide quality, on-trend products at low prices. This has presented an opportunity for retailers to expand their private label programs, to offer greater variety, quality and value.
CHAPTER 1: What is private label?
// Page 3 Retail Private Label – State of the Market, 2013
Private label products offer significant benefits for the consumer as well as for retailers and their suppliers. These range from cost savings, margin improvements, greater product variety and shorter lead times for on-trend products.
CHAPTER 2: Why private label?
// Page 4 Retail Private Label – State of the Market, 2013
44.7% of retailers identified differentiation as the most important role of their store brand program.
What makes private label an attractive proposition?
Offers control over the
product: image, pricing, production, distribution
Builds own brand loyalty and differentiation
Customers indicate a preference for certain private label products
Private label is much more profitable
It allows retailers to undercut brands by around 20%
Consumers get to save around 30% of their usual shopping costs
Eliminates the need for an agent or middleman
Source: Private Label Store Brands Research, 2013
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Retailers rely on private label for differentiation
Retail Private Label – State of the Market, 2013
Private label is an attractive proposition for retailers on many levels. Aside from greater profits, it helps differentiate their products and respond faster to consumer trends.
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Private label drivers
What’s Driving Private Label?
Price Advantage
over branded products Differentiate
from branded products
Opportunity for higher
profits
Developing Brand loyalty
Consumer savings of 30%
Faster time to market
Ability to respond faster to trends
Greater control over the product
Retail Private Label – State of the Market, 2013
A recent British consumer research study found that consumers believe that private label products are the same as national brands but in different packaging. Consumers believe that advertising costs are the only differentiator.
Shoppers now believe they can actually get their preferred brands for a cheaper price because it is presented in a supermarket style branded packaging.”
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What do consumers think?
Source: Emmar Herbert, Canadean Research, March 2013
Retail Private Label – State of the Market, 2013
Private label is increasingly popular with consumers, who are attracted primarily by the value:
When consumers buy private label, they save around 30% of the cost of their products
U.S. consumers saved approximately $32 billion in 2012 by choosing private label.
Most consumers feel the quality of private label products is almost as good as branded merchandise.
// Page 8
Why consumers like private label?
26% of shoppers think they will buy a larger amount of a supermarket’s private label product in the coming year.”
Source: PLMA, Research 2013
Retail Private Label – State of the Market, 2013
Consumers say that there are a few important factors which will influence their decision to buy private label products in the year ahead:
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What makes consumers buy more private label?
57%
• Will buy more if satisfied with the private brand
49%
• Will buy more if the private label quality is good
46%
• Will buy more private label based on special offers
43%
• Will buy more based on greater private label variety
Source: PLMA, Research 2013
Retail Private Label – State of the Market, 2013
Private label still has much room for growth especially in North America where it is under-penetrated, also in developing market. Retailers are focused on delivering more localized private label offerings as well as extending their range of products beyond basics into premium and luxury goods, both food and non-food. Private label products are no longer just a low cost option, they offer a distinctive mix of variety and value.
CHAPTER 3: Private label trends
// Page 10 Retail Private Label – State of the Market, 2013
Private label growth continues strongly in Europe, where in some countries it accounts for the majority of all products sold. Penetration in North America still lags Europe, but is growing. In developing economies such as China and Brazil, private label only represents a small margin of total products.
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Global penetration of private Label
Source: Nielsen, PLMA, IRI
Private Label Share of Total Retail Sales by Country (2013)
Retail Private Label – State of the Market, 2013
Retailers in the U.S. continue to expand their private label product offerings to boost margins. Of the top 30, 62% saw an increase in the percentage of private label product sold.
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Top 30 U.S. Private Label Retailers
Source: Retail Systems Research, PLByer, October 2012
U.S. Retail Private Label Sales (US $ millions) Company Name 2011 Rank 2011 % PL Sales 2011 $ PL Sales
Wal-Mart 1 18.0% $31,385
Kroger 2 27.0% $24,401
Costco 3 24.0% $11,244
Safeway 4 25.0% $10,158
Loblaw 5 27.0% $8,360
Trader Joe’s 6 85.0% $7,650
Aldi 7 95.0% $6,935
Target 8 20.0% $6,025
Supervalu 9 20.8% $6,000
Publix 10 21.0% $5,663
WMT-Sam’s Club 11 18.0% $5,326
Walgreens 12 20.0% $5,096
Delhaize 13 26.0% $5,000
Sobey’s 14 27.0% $4,387
Ahold 15 17% $4,143
CVS 16 18.0% $3,401
H.E. Butt 17 16.7% $3,000
Giant Eagle 18 30% $2,790
Metro 19 21% $2,419
Dollar General 20 22% $2,383
Meijer 21 25% $2,356
Hy-Vee 22 28% $2,044
A&P 23 20% $1,688
Winn Dixie 24 23% $1,583
Wegman’s 25 25% $1,550
Rite-Aid 26 18.3% $1,525
Whole Foods 27 11% $1,112
Shoppers Drug Mart 28 20% $1,092
Wakefern 29 31.6% $1,010
Family Dollar 30 17% $959
Retail Private Label – State of the Market, 2013
Private label sourcing is going through a shift in the face of emerging retail trends, more competition and increasing costs. Facing these pressures, private label has evolved from a low cost alternative, into the role of product differentiator, offering greater quality and value. As such, more sophisticated sourcing expertise is required to select the right sourcing markets and handle more complex requirements. Retailers also need to work closely with their suppliers to collaborate on ways to offset the increase in wage rates and volatility in currency rates and commodity prices.
CHAPTER 4: Private Label Sourcing
// Page 13 Retail Private Label – State of the Market, 2013
With the growth of mobile, online commerce and the omnichannel market, global retail is going through a period of massive change. This is forcing retailers to leverage their private label supply chains to drive differentiation, grow market share and increase margins. This is not easy with commodity cost fluctuations and wages increase. Consequently retailers are looking at how to optimize their private label sourcing.
Sourcing can help open up new supply markets, serve international retail markets with varying tastes and manage raw material cost volatility.”
// Page 14
Sourcing can enable the development of more sophisticated and unique private label offerings to combat online competition.”
Source: Private Label Sourcing: Strategies to differentiate and defend, Deloitte: July, 2013
Sourcing: A private label supply chain lever
Retail Private Label – State of the Market, 2013
Retailers in categories including apparel, general merchandise and hard goods are facing a lot of pressure from volatile cost structures in their supply chain. Top pressures include variability in commodity costs and wages. Along with transportation these costs comprise 80-84% of landed cost.
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Supply disruptions
International productcustomization
Need to customize productspecs for multichannel market
Consumer sustainabilitydemands
Transfer pricing policy changes
Regional tax policy variability
Availability of productionfacilities
Supply chain integrity andtransparency
Fee trade policy changes
Rising production labor wages
Fuel price volatility
Raw material cost volatility
Top market pressures on private label sourcing
Source: Private Label Sourcing: Strategies to differentiate and defend, Deloitte: July, 2013
Top pressures on private label sourcing
Retail Private Label – State of the Market, 2013
According to Deloitte, raw materials, production wages and transportation costs make up 80-84% of landed cost paid. This means that retailers must source more strategically. This climate provides an advantage for private label producers who can leverage a more streamlined supply chain to reduce costs.
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Private label sourcing trends Product sourcing cost structures (% of landed duty paid)
Source: Deloitte, July 2013
Retail Private Label – State of the Market, 2013
Retailers are currently actively responding to private label cost pressures across their value chain and their sourcing footprint. They are also increasingly looking at more strategic response such as diversifying their sourcing countries, re-shoring to domestic vendors and consolidating existing vendors.
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Strategic responses to private label sourcing trends
Source: Private Label Sourcing: Strategies to differentiate and defend, July, 2013
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Diversify country source ofsupply footprint
Re-shore production todomestic vendors
Consolidate the number of vendors
Align metrics and systems to fostersupply…
Implement vendor performance…
Enhance ethical sourcing capabilities
Negotiate raw material sourcingon behalf…
Disintermediate supply chainmanagement…
Engage in advancedplanning/scheduling
Guarantee volumes or…
Enhance quality assurance programs
Engage in innovation/product design/R&D…
Collaborate with buying houses/supply…
Provide logistics support to vendors
Strategic responses to private label sourcing pressures
= Do not use strategy, but plan to = Currently use this response
Retail Private Label – State of the Market, 2013
Suppliers who focus on branded products need to manage the different requirements of multiple retailers. They likely have different lead times, minimum order quantities, delivery cut-off times and packaging requirements. This makes it difficult for suppliers to optimize their operations. Life is more simple for private label suppliers. They usually have exclusive relationships with retailers and are better able to serve their need. Collaboration is easier which allows for reduced costs, increased efficiency and better decision making.
CHAPTER 5: Private Label Collaboration
// Page 18 Retail Private Label – State of the Market, 2013
Why private label enables improved collaboration?
Alignment of orders is simple due to greater visibility
Improved forecasting, order and replenishment
Optimized production schedules, batch sizes and lower inventory
Greater visibility into demand,
Open-costing is easier to enable
As retailer cost pressures intensify, collaboration with suppliers will play an increasingly greater role. Retailers will look to suppliers for greater input on design and require open costing. Suppliers will expect more visibility into planning and forecasting. Both sides will expect to support each other to mitigate currency and commodity cost fluctuations and ensure quality and compliance. At the same time, retailers will look consolidate their supplier base.
// Page 19
Private label enabled supplier collaboration typically results in a 2% reduction in end-to-end supply chain costs.
Private label collaborative benefits
Retail Private Label – State of the Market, 2013
To ensure the ongoing successful of their private label programs, retailers need to focus on new strategies, processes and tools. Successful players are developing unique products for individual markets, at they same time leverage their commodity buying and sourcing scale across markets. They are also consolidate suppliers and extended the scope of tools such as product lifecycle management (PLM) which help optimize their supply chain.
CHAPTER 6: Private label strategies
// Page 20 Retail Private Label – State of the Market, 2013
Retailers are shifting toward creating more unique products for individual markets. They will also increasingly leverage common components and raw materials across these markets. Other strategic changes to improve their private label product development include consolidating suppliers and in some cases looking for suppliers closer to home.
Ongoing retail private label process improvement
// Page 21
Retailer plans for product development process improvements over the next five years
Source: Accenture, 2011
82%
64%
45%
36%
36%
Unique products developed forindividual retail markets
Common products developed formultiple retail markets or regions
Common suppliers leverage acrossmultiple retail markets
Common components leverageacross multiple retail markets
Common raw materials leveragedacross multiple markets
Retail Private Label – State of the Market, 2013
Retailers recognize the need to leverage more advanced tools to enhance their private label programs. Many still rely on desktop tools such as spreadsheets and other manual processes which limit the ability to scale and improve efficiency. Most retailers expect to adopt more advance tools in the next five years.
Tools to enhance private label capabilities
// Page 22
Percentage of retailers who plan to use specified tools to support their private label programs
Source: Accenture, 2011
83%
75%
75%
75%
67%
67%
Product Lifecycle Management (PLM)tools
Sourcing applications
Import management tools
Collaboration tools
Product costing tools
PO and SKU visibility tools
Retail Private Label – State of the Market, 2013
PLM enables retailers to manage complex processes involved in product development
Line Planning – PLM helps manage various product options, developed internally or externally, employing tools such as critical path management, to ensure on-time delivery
Specification Development – PLM helps to manage the entire product specification for a range of product types
Supplier Management – PLM manages supplier information ranging from profiles, audits, performance, capabilities and compliance related information
Sourcing and Costing – Retailers can issues RFQ’s through a PLM system, compare quotes and calculate landed costs
Product Commitment – The PLM system centrally manages all information in the commitment process and can effectively track work-in-progress (WIP)
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PLM systems support private label product development
Retail Private Label – State of the Market, 2013
What makes a private label program successful? The following are three key attributes of a successful private label program:
Visibility – a single version of the truth
Intelligence – ability to aggregate data for decision making
Collaboration – communication on a high level, with central archiving of information and social-media like capabilities
// Page 24
Three elements for a successful private label program
Retail Private Label – State of the Market, 2013
Core solutions provides systems and processes which help retailers and brands scale and optimize their direct sourcing and private label programs. Core’s CBX extended supply chain management platform automates manual processes and builds visibility and collaboration across the retailer’s supply chain.
CHAPTER 7: How can Core Solutions help?
// Page 25 Retail Private Label – State of the Market, 2013
We helps retailers
drive speed, agility,
efficiency and profit
in bringing private
label and branded
merchandise to
market on-time and
on-trend.
// Page 26
Plan
Develop
Source
Order Make
Deliver
Pay
CBX Extended Supply Chain
Management
CBX enables Retailers, Brands, and Manufacturers to
streamline their end-to-end product development, global
sourcing and supply chain processes, from concept
through to production and delivery.
CORE’s clients include large multi-national, multi-brand
retailers, including: Safeway, LiDL, ICA, Redcats, Migros,
Dairy Farm, Home Retail Group and Wesfarmers.
A platform to efficiently manage private label sourcing
Retail Private Label – State of the Market, 2013
This leading retailer increased their direct sourcing from approximately $250 mln in 2009, to a projected $1.2 bln for 2013. This represents on ongoing shift from branded to private label product, which are expected to comprise over 60% of the retailer’s product offering in the next few years.
CBX helped us to scale our direct sourcing without a corresponding. increase in headcount and costs.”
// Page 27
Case Study: $5 billion retailer
Retail Private Label – State of the Market, 2013
0
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FY09 FY10 FY11 FY12 (Forecast) FY13 (Forecast)
USD
$ M
illio
ns
If you’re interested in learning how to grow your private label and direct sourcing with minimal additional cost or resources, request a consultation or demo of Core Solution’s CBX platform.
Fine-tune your retail private label program
www.coresolutions.com [email protected]
Americas: 1.908.898.1880 Europe: 44.20.8133.0328 Asia: 852.2378.6300