Brand Killers

Four years ago, Fortune magazine ran a cover story called Brand Killers that told how private label retail brands "scared the pants off" consumer goods makers. Over the past few months, I've been talking with manufacturers in business markets who are getting worried about the growth of B2B private label brands.

Here's a good example: Stanley Works (NYSE:SWK) announced a few weeks ago that Home Depot would be replacing its branded padlocks and latches with products from Crown Bolt, a manufacturer that Home Depot acquired last year and is now part of HD Supply. (Full article: Home Depot, Stanley hardware part ways)

Wholesaler-branded products are now expanding rapidly in B2B supply chains. For example, my research for the new Facing the Forces of Change® report found that almost one-half of maintenance, repair, and operations (MRO) supplies distributors and nearly two-thirds of original equipment manufacturer (OEM) distributors currently offer private label products. (See page 133 for the specific data.)

These data point to an uncomfortable new reality -- private labels will continue to grow in categories where the manufacturer's brand does not add enough value to the customer. As in consumer markets, products are becoming increasingly commoditized as supply chain customers shop for the low-cost sourcing alternatives. Distributors have recognized the opportunity to provide these products and help customers with sourcing, instead of only acting as a sales channel for branded manufacturers.

I'll follow-up on manufacturer strategies in a future post, but don't be surprised if you see more conflict due to private label brands in the future. In the meantime, check out Private Label Strategy, a new book that analyzes strategy in consumer markets from both the manufacturer and retailer perspectives. (I'll post a review in a week or two.)

FOLLOW-UP ITEMS

• You can now order the new 2007 NAW Economic Reports, which I referenced in Measuring the Growth Gap

• Friday's NAW SmartBrief had a good article on Avnet's fee-for-service logistics business, which I discussed in Capturing New Profits from Services.

• Check out Forbes publisher Rich Karlgaard's editorial about how one airplane manufacturer benefits from the positive -- and sometimes negative -- customer discussion on its online community. (I highlighted Online Customer Communities last week.)