Since Pieter The Great times Russians were forced to the western system of valuables. This process is still running nowadays under uneven consciousness. When we discuss something here in Russia we always tend to say that the right things are the things done at Western civilization. It is always very hard to build counter-argumentation to that statement lacking pure Russian technologies or business models in the main economic or social areas. There are simply non of any Russian-made concepts in the fields of Marketing, Retailing, Advertising, Private Labelling, or even Time Management. Unfortunately, we did not develop an alternative way of handling above mentioned tricky teachings except space technology and weaponry. So, even many top-managers tend to copy-paste the western way of leaving into the Russian reality. Here comes the main hurdle. Western concepts look like future destination points where the Russian market will be in 3-5 years and therefore considered as mandatory to implement. But the implementation is a whole different story and it may dramatically distort the final result. At this stage, many debates go wild. One side says Russia is a pure European country and should copy-paste every single novelty. Full stop. Another side says Russia is a mixture of European and Eastern ways of leaving. The truth is Russia does not belong to both extremes, it is completely different on its own. That is why if you port something new from abroad you always get a damaged copy. The Private label is not an exception. Even the entire Russian retail being ported over 20 years ago is very specific in its core and in further mutations. We can not say that Private Label adoption was a good thing for Russian retail. Actually it creates more problems than goodies. Either it’s a bad copy or a bad implementation. We say the Private Label idea is bad in general especially for the Russian market and what is why. Here is the list of considerations in the order of importance.
Supplier brands are still a top-notch concept. Human society did not invent anything more efficient and reliable than real Trade Marking and Branding. It embraces people’s dreams, life stories, lifetime, and life efforts lasting for years and decades. Remember the brand stories of Mercedes, Sony, or Aeroflot. You have to spend 30-40 years of your life creating a proper well-shaped and recognizable brand. Modern retailers simply do not have such luxury assets. No time, no dreams, no efforts. All of that stream to the next devastating misleadings.
Lack of time – lack of quality recognition. If you don’t have time and you don’t have a passion for brand creation you do dummies then. Customers feel a lack of energy inside those dummies and do not magnitude toward them. Visually it looks like disorientation at the front of the shelf, shaky decision making, and perceptual misconduct. Retailers make it even worse by implementing the Private Label team KPIs in the form of a sale share of PL inside an entire company. Obviously, buyers are forced to artificially create private labels in a great quantity kicking out worthy supplier’s brands from the shelves. In this way they get PL share rapidly increased and bonus received.
Retailer’s Private labels do not have the Master. Who is responsible? Nobody and all together at the same time. This collective responsibility leads to poor after-watch for created babies. Nobody watches the performance of a single PL SKU for months and years. Often it degrades in the margin, sales, and quality of content. If PL Buyers are being changed this sad story can last for long years.
I do Private Labels, You do Brands. The most “advanced” top-managers split the purchasing department into two parts – The Private Label department and “all the rest stuff”. Of course, later on, they get two forces pulling the company out of phase. Brave speeches in the form of “you have to work together in peace” are good for pop-speeches but not for a high-drive business. Many can say that Russians can not cooperate with each other and you will be completely right. Our nature contradicts with matrix-type organizations with double targets. We are a one-line one-effort machine. So why to use complex cross-directional commands for the simple device?
Being working on different targets those two teams constantly collide in the areas where further division to Private Label/Supplier Brand are not physically possible – shelf-space, promo-space, logistic-space, budget responsibility, target responsibility, and so on. Supplier’s Brand Buyers find themselves with Private Label team hanging on the neck, experimenting on a huge scale with assortment without any responsibility for general results. This is the final nail in the hood.
Remember the slogan used by Private Label prophets – we get cheaper products because they don’t include supplier’s marketing and advertising expenses anymore. Yes, it’s cheaper, but it’s WORSE in ideology, quality, history, support, energy, and philosophy. This state we call as MENTAL PALE.
So, here is the law – Private Label is good to the extent as it looks like the supplier’s brand. Full stop. You can not substitute quality created by time with one-day cheapish trials.
We can not say how long Private Label decease will continue worldwide but in Russia, it has no future potential anymore. Even those who try to build their stores from scratch using only custom-created products face limited recognition and poor category destinations. It looks super-cool to play in the production sand-box at the beginning but afterward “something wrong” retards the development. As customers tend to zoom their attention to the singe SKU level they start to see this sloppy work smudged across the shelves. Then comes the problems with profitability, sales, and traffic.
All in all that artificial implant called Private Label sucking juices from your business unit and created by someone’s dead-end head probably trying to invent a new “genius idea” on the fly about “how to do even better” should pass by as a seasonal virus. As earlier we wake-up as better for our prosper future.
firstname.lastname@example.org – keeping your eyes open