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Private labels in automotive refinishing market

I have had an idea of writing this article since long time ago. Initially I believed that as the owner of a private label brand, I would be biased and subjective. Yet, now I feel that it is the right time to share with you my vision. If you visited the last Automechanika Fair last September, you would have realized that there are more and more new brands in the market, mainly private labels. For the known reasons, I cannot use the names of the companies and brands in the article, but in any case, the intention is not to discuss any particular company or brand, but to shed the light on the place of private label companies in the car refinishing market overall.

A little bit of history

In order to understand why there is a growing number of non-manufacturing brands, one should analyze first the very nature of the products portfolio needed in a car body paint shop. The reality is that a contemporary painter requires a wide range of tools and consumables to get the job done. Abrasives, masking products, sealing and anticorrosive materials, personal protection products, fillers, clear coats, primers and, of course, paint itself, are just a few to mention. The range is vast and diverse. It is not possible, even for big multinational brands, to produce chemicals and, let’s say abrasives, at the same time. Yet the end user searches for a one-stop shop to get all his consumables needs covered. Inevitably, even large manufacturers go after the outsourcing of the big part of their products portfolio. Actually, the concept of the private labeling has been introduced by the producers, not traders.

Different types of private label companies, partial manufacturers as I mentioned before, the very first private labeled products have been introduced by the leading paints producers, who wanted to enlarge their offerings by non-paint products, like tapes or sanding discs. I call them “partial manufacturers”. A typical example of a partial manufacturer would be a liquid chemicals producer, who has under its brand’s umbrella all the rest of materials needed in a car repair process. However, for the last couple of years, we see the opposite examples just as well. Producers of abrasives, for instance, add chemicals and other products to their catalogue, and with a great success in certain countries.

Pure private label brands

You can find nowadays a good deal of the brands, which do not produce any or the vast majority of their products they sell. These companies are assembling their products range like a puzzle, working with different manufacturers virtually all over the world. A part of those companies became really sizable businesses, and, they are actually lined up with many leading physical manufacturers. Success here depends on how well-tuned their range is, how the marketing works, and whether they have enough financial background to back the endeavor. Building successful private label brand involves a huge amount of time spent on sourcing and testing the products, which would fit the existing range and create a uniform product offering with consistency and coherence.

Fake manufacturers

I know at least one company, which built its corporate story around a decades old factory, which never existed. The intentions are clear, this brand wants to attract customers, who want to work with “real” producers. Is it good or not? I don’t want to judge.  But believe me, the false or misleading marketing has been used by many companies in different areas of business. One famous notebooks producer boasts that it notebooks were in favor of Ernest Hemingway. Small detail, the world renown writer died before the brand was born.

Advantages and opportunities of private label brands
  • Flexibility. Most of the private label brands are very quick and flexible. They react much faster on the market’s shifts than the physical manufacturers. For example, if a customer of Etalon needs a particular product, which is not in our range, within 30-45 days we can have it ready. Larger companies may need months if not a year to react. The secret here is that we don’t rely on a single manufacturer with its existing range and production restrictions.
  • Using the best producer for the product category. It is not a secret that every manufacturer has strong and weak production sides. A purchasing manager of a private label brand knows very well where he or she should go “shopping” for bodyfillers and where for clearcoats.
  • No geographical limits. This is my favorite. If your market is saturated and/or the local economy is in recession, with your own brand you can literally sell anywhere in the world. Etalon is a proof of this. Actually I am writing this post on my way to Australia and New Zealand.
  • Possibility to serve diverse customers segments. If you are a physical manufacturer in Switzerland or Germany, for example, you may experience a difficulty to cater for the price sensitive markets simply because your fixed costs are high. However, if you are a private label owner, you can create two product ranges, by placing your orders with different producers depending on their price levels.
Disadvantages and difficulties for private label companies
  • High order volumes. If someone decides to launch a private label brand, he or she must be aware of high order quantities required by manufacturers. Usually it is minimum a pallet per product, size or color. Therefore financial backing in this case is very important.
  • Logistics. Big order quantities will require large storage facilities and a fine-tuned logistics are imperative. It is also important to have really professional people in the purchasing department, who will monitor constantly the stock levels and place the needed orders just in time.
  • Overstocking and under- stocking could ruin all the efforts.
  • Marketing. Don’t even think about starting private label without professional marketers and designers onboard. Poor appearance, slow webpage, outdated labels design will never allow you to grow. Unfortunately, many private label brands go unnoticed because of unprofessional marketing. Also, since we are dealing with chemicals, it is crucial to have experienced labels’ designers, who would know all the regulations for safety and dangerous goods handling.
Takeaway

The main idea, which I wanted to share with you is that private label brands could be as valuable suppliers as physical manufacturers. However, launching a brand or a product group with your label is much harder than one could imagine. Constant market prospecting, product testings, innovative marketing techniques, smart brand name, catchy corporate identity, trade mark registration, professional design, miles and miles of traveling, all these are required for success.

Enjoy!

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