European retail is getting lost on its quest for a profile that ensures livelihood more and more into a direction that is causing the exact opposite, namely an even bigger loss of market share in favor of the vertical commercial structure of the mega brand industry and further a loss of income return which cannot be compensated through increasing the sales volume.

I see this flood of private labels as the main reason for the problems of the European retail trade. When I listen to the critics of my position I am reminded of the time when I countered the idea of retail in regards to finding a safe position in the “center of the market” with the model of the new picture of the market, the Waisted Rectangle©. I suggest leaving these well-trodden paths, courageously breaking new ground, to be aware that the consumer of today and tomorrow is expecting solid offers and that this enlightened consumer can very well assess substance and solidity of supply.

My recommendation: Stop the flood of private labels. Private labels cannot win a competition against classic brands. Why? Customers do not want a copy of the original for a seemingly more advantageous price that is, upon closer inspection, offering a lesser price-performance ratio than the original. And there is no beating around the bush, private labels are copies. Private labels are no brands at best they are markers, so-called labels. “True” progress, actual innovation takes place only in a classic brand environment. Just think of the revolution on the beverage market with the invention of Bionade and all those yogurt drinks which are seen as part of today’s classic dietary supplements. Over and above taste, private labels have their strongest presences in the grocery section with a share of 30% and this is where most of the innovation is taking place: Longer shelf life, more value, ecologically better packaging, just to name a few aspects.

The flood of private labels does not only change the structures of the market, it also makes it more expensive. Instead of distinctively structured offers, the customer today sees an almost unmanageable muddle of products in industries where private labels have gained ground. The price seems to be the guideline for everything here.

While in the segments for wants premium and luxury brands clearly distinguish themselves from me-too-brands and copies and private labels barely carry any weight, this looks worse when it comes to offers for the satisfaction of needs.

One reason for this is that there are brand manufacturers who also offer their products to consumers under a private label. The same product can thus be up to 50% less expensive. I have often been confronted in such a case and asked what I would suggest. My answer has always been out of fairness to the consumer, if the performance level is the same, the lower-priced product should be offered. So, private labels after all? If a brand manufacturer offers a product in two “brand finishes” with the same product and service performance, then there is one too many and in such a case it is the responsibility of retail as fair partner of its customers to either offer the “original” at the price of the “copy”. Or instead of the “copy” create an original with its own brand.

I want to make it clear that retail is entitled to be brand marketer, but only if retailers recognize the principles of a classic brand. The basis is the 7-elements-definition which defines a brand: Origin, history, profile, positioning, image, awareness and protection. The retailer also has to shape and support the brands life accordingly through marketing, communication, presentation and service.

I am convinced that in the future channels used to bring products to the customer are going to offer maybe even manifold possibilities to retailers to become brand suppliers just as the mega brand industry is more and more often using verticalization of its distribution as direct path to the consumer and thus become retailers.

In Europe, America and recently also in Asia there are retailers who build up and lead brands with classic brand marketing. This ties in with times when especially the big and globally present luxury brands made their way into the big wide world, often beginning in small retail stores. Many big brands were created at a retail level and there is nothing that says this could not be that way again in the future.

To reiterate this once more: There is no such thing as a “cheap edition” of a brand. This is why there can’t be a “private label” whose existence is based on a “cheap” price. It is an illusion to assume that performance can be subject to price in the long run. To the contrary, performance has to dominate the price. It is understood that there are different performance requirements and expectations on the part of customers. And it is also understood that supply under the classic rules of “supply and demand” leads to a wide range of pricing terms. However, the brand as performance guarantee and communications link between supplier and customers should not be abused. This equally applies to retailer and manufacturer.

When retail wants to live up the expectations of its task as intermediary between production and presentation of the product on the shelf and the creation of worlds of experience where the customer is at ease in a way that makes earnings and profits possible for their performance, then retailers have to accept the brand, the original. It is absolutely possible to be the brands creator and owner, sometimes it is absolutely necessary. However, he has to renounce the cheap private label.

This is the way I would like my appeal to be understood, why the flood of private labels needs to be contained.

Occasionally I hear that the development of new classic brands is too expensive, time-consuming and also risky because it is difficult to win over customers for brands. Of course, it does take time until a word matures into a name and the name becomes a brand. However, I can’t really say that the development and maintenance of a brand is expensive. One has to invest cleverly and cautiously and not just throw money out the window. But then the money will come back. In my experience, customers are willing to pay an adequate price for brands and their value. Brands do not make the product more expensive. Brands add an immaterial value to the product and they are a guarantee for a fair price-performance ratio.