Supermarkets, drug stores and department stores have known for years that private-label products sold under their own brands are popular–and profitable.
Now, on-line merchants, seeking to boost sales and promote their names, are turning to this old retailing practice. Luxury-goods store Ashford.com, Pets.com, Mothernature.com and Drugstore.com are just a few of the Internet retailers selling everything from pearl earrings to dog chow under such names as the Ashford Collection and Pets.complete.
And private-label lines from other electronic retailers are on the way. EToys, for example, plans to add about 500 items–such as dolls and toy chests–under its own name in time for the 2000 holiday season.
What these companies hope to do, explained Gomez Advisors analyst Alan Alper, is reinforce their brands with consumers and “be heard above the clutter” in crowded markets like the one for on-line pet stores.
“If we offer more unique products, customers are more inclined to purchase from our site,” said Julie Wainwright, chairman and chief executive of Pets.com.
Pets.com began selling rawhide chews and squeaky toys under the Pets.com name shortly before Christmas and introduced its Pets.complete brand of dog and cat food, dog treats and cat litter in March. The company is adding grooming kits, beds, carriers and other new items practically every day.
Because retailers contract directly with manufacturers to produce private-label products–cutting out suppliers and distributors–these sales tend to be quite profitable, Alper said. According to Wainwright, margins on sales of Pets.com food and litter, which are made by Purina and sold under the Pets.complete name, are two to three times higher than those on sales of brand-name products.
Ashford.com claims it pulls in sales margins of more than 50 percent on its private-label Ashford Collection jewelry line, basic pieces that the company introduced about a month ago at prices below much of the designer jewelry sold on its site. That compares with margins of between 40 and 50 percent on the designer jewelry and average margins of 19 percent for the site overall, said Ashford CEO Kenny Kurtzman.
Despite these advantages, Alper questioned how successful on-line retailers will be in selling their private-label products since most of these companies are young and still building up trust among shoppers.
“Do these companies have the consumer awareness and clout to push their own brands?” Alper asked. “Or are they putting the cart before the horse? … It’s unclear whether this will work because a lot of these companies don’t have much of a track record with consumers.”
But, so far, e-tailers insist their bets are paying off. Wainwright expects Pets.com’s private-label products, which are less expensive than premium labels such as Nutro but more costly than Friskees, to drive 10 to 15 percent of the company’s total sales within the next two years.
And almost overnight, Ashford’s private-label collection has come to make up about half of the site’s total jewelry sales. Next, the company is planning to introduce its own leather goods, scarves and writing instruments.
