The power of private-label brands in distribution

The past three years, the distribution sector has navigated a dynamic market landscape characterized by both challenges and opportunities. It has grappled with supply chain constraints, high labor costs, and the ongoing threat of disintermediation. Despite these headwinds, industry leaders have been able to rebound, achieving 16 percent revenue growth post-COVID-19. But the tides are shifting again. The current market landscape poses new challenges, including economic uncertainty, interest rate moves, and the stabilization of supply chains. These trends are making it increasingly difficult to safeguard hard-won profit margins and unit volume growth.

Fortunately, a robust private-label offering can be used as a powerful tool to address margin and volume challenges. In many industries, private-label products can carry about two times the gross margin that national brands can. Moreover, about 92 percent of buyers say they plan to purchase private-label or distributor-branded products in the coming year and expect to increase their private-label purchase volume by approximately 21 percent over the next one to three years.

Winning in private labels can be a critical factor in remaining competitive in an ever-shifting industry and is strongly correlated with improvements in gross margins.