IADS Exclusive - Do department stores still need private labels?

Private label development is in full swing for some retailers, especially for the big-box ones in the United States, reflecting a successful business model that Millennials are also favouring. The penetration of private labels amongst Millennials is 1-2 points higher than prior generations and continues to grow. 

Usually considered as a margin enhancer, a great tool to recruit customers, a way to develop loyalty thanks to attractive price points, or an asset to emphasize the store brand message, private labels can meet tremendous success for retailers such as Target. But for others, they struggle to reach profitability.

To stay relevant these days, private labels not only have to offer an excellent product implying a great deal of research and creativity, but also differentiate from competitors, and even outdo national brands. As retail consultant Stacey Widlitz sums it up when discussing Target’s success in launching private labels: “They’ve basically been going around saying, ‘Who does it best and who does it worst?. Let’s replicate what the winners are doing and take on the losers and do it better.’” Is it really that simple?

Private labels currently represent an average of 6-7% of the IADS members’ turnover (data from IADS Merchandising meeting dedicated to private labels, January 2021). This part of their business has been reorganised in the past years and months raising critical questions: do department stores still need private labels, are they still good at this historical part of their business?

IADS provides its members with a weekly in-depth analysis on retail-oriented topics. This is an example of the themes the Association regularly addresses, and the topic of an article from the IADS members-only newsletter date 17 November 2021.