Private labels a double-edged sword? - Off-brand sales are surging, but some consumers still swear by brand names - Aftermarket Business - Wholesaler, retailer automotive parts

Private labels a double-edged sword?Off-brand sales are surging, but some consumers still swear by brand names

Source: Aftermarket Business World

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When it comes to vehicle maintenance, Robert Britton is more than a DIYer. He has an auto repair background, so friends and family often come to him first with vehicle problems. Call him a DIFO (do-it-for-others.)

With everyone looking to save money, he does whatever he can to keep their cars running without breaking the bank. He’s an example of why across the U.S., the aftermarket is seeing private-label parts growth outpace the national brands.

“When I’m buying parts, price does matter, but dependability and durability are important too,” says Britton, currently serving in the military in San Diego. “Brand names are nice, but a lot of the time the off-name part outlasts and outperforms the name brands.”

According to research from Frost & Sullivan, private label sales of components such as brakes, lighting and air conditioning is growing at 6.2 percent annually. In comparison, national brands registered annual growth of 2 percent.

Likewise, NPD’s Automotive Aftermarket Industry Monitor (AAIM) — which tracks retail and commercial sales at the point-of-sale for more than 18,000 auto parts stores in the U.S. — reports that private label dollar volume increased by 8.8 percent for the year ending April 2009.

“The recession has focused consumers on value,” says David Portalatin, industry analyst for NPD’s auto unit. “The lower prices often offered by private label brands are a compelling offer for consumers looking to cut back.”

But growth in private-label sales can be a double-edged sword for distributors. Private labels offer higher profits, but their lower price could negatively impact total sales revenues. Also, as noted in the Frost & Sullivan report, distributors cannot invest too heavily in private labels at the expense of national brands and OE brands because the majority of customers prefer a wide array of brand choices.

Plus, many DIYers, or in this case, DIFOs, feel the same way. Ryan Beesley, a handyman in Cleveland, swears by name brands.

“Brand names can be a little more expensive, but they are worth it in the long run,” he says. “With brand names, you are going to get more horsepower, more torque and better performance. You are actually getting more quality for your money.”

Also, in figuring private vs. brand name product mix, distributors must keep commercial customers in mind. And a majority of repair shop owners surveyed by Frost & Sullivan found private label products inferior to OE and brand name parts.

“Despite the popularity of private label products, shop owners delivered scathing reviews to aftermarket private label brands,” says Frost & Sullivan Global Program Manager Mary-Beth Kellenberger. “Complaints of poor quality, variable quality between part numbers within the line, and fit issues indicate that shop owners are unwilling participants in the growth of private label brands.”

“The takeaway is manufacturers need to understand where consumers stand on quality versus value, and they must clearly differentiate those attributes that will best drive purchase behavior,” says Portalatin. “Retailers likewise should evaluate brand assortment to make sure they are meeting the requirements of both quality and value driven consumers.”

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