Shampoo to vitamins ... batteries to hair conditioner ... and more.

Sales of

private

brands up



High quality,

lower prices

 
By Mark Ziegler
The Monthly
Pay 'n Save Corporation


The quality is comparable and the price is right.

That's what customers are discovering, and what company executives already know, about the Corporation's varied private brand items.

Private brands are becoming big business for more and more companies today. The Pay 'n Save division, for instance, sells more than 200 private brand products, and Bi-Mart, Schuck's, Yard Birds, Sportswest, Ernst and Malmo also market under their own labels.

"We increase our sales by offering name brand-quality products at substantial savings to customers," said Jim Agopsowicz, director of pharmacy and over-the-counter drugs for Pay 'n Save. "Private brands improve profit margins and give customers a choice of more than one product."

At Schuck's, private brand doesn't necessarily mean competition with national brands. While Schuck's antifreeze competes favorably with a national brand at a 20 percent savings, other items such as auto batteries and rebuilt parts are available only in Schuck's private brand.

"We use market research to help determine which private label products will sell," said Ron Weinstein, vice president of merchandising for Schuck's. "This is a major financial undertaking and, naturally, we want to be successful."

Like other divisions, Pay 'n Save does not manufacture its own private brand goods -- which include such items as cough syrup, non-aspirin pain reliever, cosmetic puffs, alkaline batteries, dental floss, cassette tapes, kitchen bags and more than 100 types of vitamins. Instead, purchase contracts are made with producers of similar products.

"Naturally, we're looking for manufacturers whose product quality is equal to or better than national brands," Jim said. "And our cost has to allow a big enough savings to sway the customer from a national brand while still providing us with a good enough profit margin."

"The customer saves about 40 percent with Pay 'n Save brand merchandise," Jim said. "If we don't offer at least a 20 percent savings, most customers won't change their allegiance to national brands. For example, we give the customer sizable savings on our decongestant tablets, 'Acti-tabs.' That's why they outsell the national brand, 'Actifed.'"

Rick Abel, drug buyer at Bi-Mart, concurs.

"We try to show consumers a 40 percent savings on our private brand products," he said. "Otherwise, it's very difficult to get them to change their minds."

Ernst markets only a few private label items, but they do well, according to Kit Hinrichs, housewares buyer.

"Our trash bags are big sellers," she said. "They're less expensive and just as good a quality as name brands. We're able to offer a solid deal because we cut out national advertising costs."

Malmo, Ernst's lawn and garden section, depends heavily on its private brand merchandise, which comprises approximately 20 percent of total sales. Among Malmo brand items are mowers, sprinklers, soil, bark and fertilizer, as well as a vast array of other lawn and garden products.

"Our merchandise is usually better because we have it produced to our own specifications and market needs," said Buddy Sliva, assistant nursery buyer. "We're able to do our own advertising and yet offer competitive prices."

Jim said that several factors are taken into consideration at Pay 'n Save in determining product quality.

Prospective products are tested at independent laboratories, and competing private label products and their manufacturers are evaluated. Even the condition of a manufacturer's plant can influence management's choice of a supplier.

When a product is decided upon, Jim works with Gale Peck, creative advertising supervisor, to create a satisfactory package label and design.

"We try to come up with something that suggests to the customer that our brand is similar to the national brand," Gale said. "We also receive advice from manufacturers, based on their prior experiences.

"Often, we'll send one of our designers to the store to see how competing products look on the shelves, how lighting plays on them and what we can do differently. Ideally, we'd like our brand to jump off the shelf, while keeping the labels easy to read."

After Jim and Gale determine the label design and the shape and design of the container, the manufacturer prints the labels and packages the product to their specifications.

Some Pay 'n Save brand items are purchased, warehoused and distributed by Northwestern Drug Company, another corporate subsidiary. Pay 'n Save initiates contact and determines packaging design with the manufacturer, then Northwestern provides the product to the stores.

Toothpaste, a variety of snack foods, and toilet tissue are among the new private brand products which will appear in Pay 'n Save stores in the future. Meanwhile, new promotional methods are being discussed and a coupon system for private brand goods is being explored. For example, a consumer buying Pay 'n Save brand cough syrup may find a coupon printed inside the box lid offering savings on another Pay 'n Save brand product, or a trial-sized version may give a cash amount off still another product.

"It's free advertising, and we'll be creating further interest in our brands," Gale said.

In addition, Pay 'n Save brand merchandise is 100 percent guaranteed and will soon feature a quality seal on each package. If consumers are not completely satisfied, the items will be returnable at full refund.

"We think this is really important in establishing further credibility for us," Jim said. "Not all national brands stand behind their products the way we do."

Jim expects Pay 'n Save brand goods to increase in importance for Pay 'n Save, and the division is preparing for it.

"Statistics show that 35 percent of consumers buy some type of private label goods," he said. "We think, with our new merchandise and guarantee program, shoppers will become more aware of what we have to offer."