Opportunity and Risk

Albert Einstein once said: "In the middle of difficulity lies opportunity." Keep that quote in mind while you read three interesting new articles on the controversial private label trend.

#1: Are Brands Dead?

This article provides a succinct overview of the new book Private Label Strategy, which I highly recommend. Here’s my interpretation on their advice to distribution intermediaries about when private labels add value:

• In a category that is dominated by one or two brands, with little price competition. See the following quote on page 25 of Lead the Way in the Supply Chain: “Large manufacturers have relabeled generic accessory products for many years, thus capturing extraordinary gross margins from accessory sales. We sell what are, in essence, the exact same things more economically.”
  
• When the wholesaler-distributors can obtain a dramatically lower priced product by re-engineering the value chain. Global sourcing is the most prominent example of this reengineering. China has emerged as the most important source of imported products for wholesaler-distributors with private labels.


• Introducing new products and concepts that are not offered by brand manufacturers. For example, the case study on page 28 of Lead the Way in the Supply Chain discusses how Arbill Safety Products offers a better quality product in selected product lines than the manufacturer-branded products on the market.

#2: Opportunity is Not Without Risk

The NAW released this superb summary of the product liability issues associated with private label products. As the brief points out, it may be difficult for a wholesaler-distributor to involve a foreign supplier as a co-defendant in any litigation, especially if the foreign company has no legal presence in the U.S. All wholesale distribution executives should discuss this article with their own company’s attorneys to understand the issues.

#3: Head of China toy company kills self

I'm sad to report that the risks of chinese sourcing can also have a personal impact. The head of a Chinese manufacturer whose lead-tainted Sesame Street toys were the center of a massive U.S. recall reportedly killed himself. (Hat tip to Spend Matters.)