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Terra & Sky—by Walmart.
Walmart
Terra & Sky—by Walmart.
PRIVATE PARTS

You’re probably buying stores’ in-house brands, whether you know it or not

Marc Bain
By Marc Bain

Fashion reporter

Every clothing retailer out there seems to be launching its own private label. Big box stores such as Target and Walmart are launching them. Online fashion retailer Asos has several. Revolve has a whopping 19, and Yoox is currently gearing up to introduce (paywall) its own collection of private brands. Never one to be left out, Amazon is practically building an army of its own secret labels.

Created by the retailers themselves and packaged under names they own, these brands only occasionally make their pedigrees obvious to shoppers, as in the case of Mr. P, the label from high-end men’s site Mr. Porter, which includes items like an $1,185 shearling-trimmed leather aviator jacket. More often they’re named to quietly mix in among the better-known brands a retailer carries. Walmart’s Time and Tru, which offers products such as a $15 lace peasant top, can blend seamlessly amid other labels without shoppers ever recognizing it’s owned by Walmart.

Not every private label is successful, but those that are tend to offer unique products on par with the quality of the other brands the retailer is selling, potentially at a slightly better price. And because e-commerce has gotten shoppers used to comparing brands based more on price and less on name recognition, it’s helped these labels escape old notions about in-house brands being substandard.

Few retailers exemplify the approach as well as Revolve, which called out its private brands as a competitive strength in its recent IPO filing:

We have built a portfolio of 19 owned brands, each crafted with unique attributes and supported by independent marketing investments. We believe our consumers perceive these as highly desirable, independent brands, rather than private labels or house brands. As a result, during the 12 months ended June 30, 2018, our owned brands represented eight out of our top 10 brands, 27% of the REVOLVE segment’s net sales, and three out of the top five brand search terms on external search engines that led to a purchase.

Asos, which reported yet another strong year of earnings (pdf) on Oct. 17, has also seen good results with its in-house lines, noting on a recent call with investors that its private brands now bring in 40% of its sales. The activewear label it launched last year grew 200% year-over-year, it said, and it just launched a new brand aimed at Gen Z shoppers called Collusion that’s already selling well.

While the concept itself isn’t new, the growth and success of private labels has been accelerating, research group NPD noted in a report (pdf) earlier this year. Fashion was a leader. Of the clothing sales NPD tracked, private labels accounted for about one-third. “Across all categories in retail, private label is—or soon will be—more prevalent in product assortments,” it added.

NPD attributes their explosion to some of the same forces spawning all those digitally native direct-to-consumer brands, such as Warby Parker. For shoppers who are now used to doing instant price comparisons across a huge number of brands on the internet, value has become increasingly important, while brand loyalty has decreased.

For the retailers, meanwhile, the margins are better on private labels. When a retailer buys a product from an outside brand, it pays a wholesale markup on top of whatever it cost the brand to make the product. When a retailer makes a product itself, it only pays the production cost, and can still sell the product at retail for roughly the same price as the one it buys from an outside brand.

Retailers are also able to use their troves of data to get a sense of what will sell and what holes in their offering they need to fill. Revolve noted in its IPO filing that its owned brands are “significantly more productive on a units sold per style basis.”

Individually, private labels typically aren’t very big. In aggregate, they can chip away at the dominance of much larger competitors. In the third quarter of 2017, for instance, NPD’s retail tracking service found that private brands made up around 20% of the US activewear market, a greater share than that held by any other label.

They also give retailers a way to bolster their own assortments—and sales—as more of the brands they carry sell direct-to-consumer themselves.

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