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VALUE IDENTITY
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McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 13 - 1

Brand Alternatives CHAPTER 1
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• National (Manufacturer)
Brands
• Designed, produced, and
marketed by a vendor
and sold by many
retailers
• Private-Label (Store) Brands
• Developed by a retailer
and only sold in the
retailer’s outlets
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Categories of Private Brands CHAPTER 1
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• Comparable to, even superior to, manufacturer’s

Premium brand quality, with modest price savings

• Imitate the manufacturer’s brand in appearance and

Copycat packaging, perceived as lower quality, offered
at a lower price

• Developed by a national brand vendor and sold exclusively

Exclusive Brands by the retailer

• Target a price-sensitive segment by offering a no-frills

Generic Brands product at a discount price

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Exclusive Brands CHAPTER 1
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National Brands or Private Labels? CHAPTER 1
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National (Manufacturer) Labels CHAPTER 1
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• Advantages • Disadvantages
• Help retailers build their • Lower margins
image and traffic flow • Vulnerable to competitive
• Reduces selling and pressures
promotional expenses • Limit retailer’s flexibility
• More desired by customers
• Customers patronize
retailers selling the
branded merchandise
• Push some of the financial
risk onto the vendor The McGraw-Hill Companies, Inc./Lars Niki, photographer

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Private Labels
• Advantages • Disadvantages
• Unique merchandise not
available at competitive
outlets
• Exclusivity boosts store
loyalty
• Difficult for customers
to compare price with
competitors
• Higher margins
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• Require significant
investments in design, global
manufacturing sourcing
• Need to develop expertise in
developing and promoting
brand
• Unable to sell excess
merchandise
• Typically less desirable for
customers
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Developing and Sourcing
Private Label Merchandise
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• In-House: Large retailers (e.g., JCPenney, Macy’s, The

Gap, American Eagle Outfitters) have divisions
specialized in
• identifying trends, designing, specifying products
• Selecting manufacturers
• Monitoring and managing manufacturing conditions and
product quality

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Developing and Sourcing
Private Label Merchandise
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• Acquisition: Limited Brands acquired MAST Industries

• MAST
• one of the world’s biggest contract manufacturers,
importers, distributors of apparel
• Have manufacturing operations and join ventures in 12
countries
• Also provides private label merchandise for Abercrombie &
Fitch, Lane Bryant, New York & Company, Chico’s
• Outsource: ex. Li & Fung – partnered with many
specialty retailers
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Sourcing Merchandise CHAPTER 1
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After decisions are made on what and how much private

label merchandise will be acquired,

• Designers develop specifications

• Sourcing departments find a manufacturer, negotiate a
contract, and monitor the production process, or
• Use Reverse Auctions to get quality private label
merchandise at low prices

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Reverse Auctions CHAPTER 1
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Why reverse?
One buyer (the retailer), multiple sellers
Sellers bid for buyer’s business
Price falls
No strategic relationships with vendors

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Global Sourcing CHAPTER 1
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• Costs Associated with Global Sourcing Decisions

Foreign currency fluctuations, tariffs,

Remote production
longer lead times, increased
facilities in developing
transportation costs
economies with low
Obsolete costs and inventory
labor costs
carrying costs from larger inventories

• Managerial Issues
• Quality control, time-to-market, social political factors
• Difficult for collaborative supply chain management (CPFR) based on short and
consistent lead times
• Human rights and child labor

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Strategic Relationships CHAPTER 1
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• Retailer and vendor

committed to maintaining
relationships over the
long-term and investing in
mutually beneficial
opportunities

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Types of Relationship CHAPTER 1
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Strategic Relationships CHAPTER 1
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Win-Win Relationships -- Concerned about expanding

the pie, not how to divide the pie

Retailer vs. Vendor

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Building Blocks
for Strategic Partnerships
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• Mutual Trust
• Open Communication
• Common Goals
• Credible Commitments

•Stockbyte/Punchstock Images
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Building Partnering Relationship CHAPTER 1
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• Discrete
• One Purchase at a Time
• Short-Term
• Focuses on Price
• Win-Lose Negotiations
• Governed by Contracts
• Partnering
• Anticipate Future
• Long-Term
• Considers all Elements
• Win-Win Collaboration
• Governed by Trust

Awareness Expansion

Exploration Commitment

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