Question

The client Circuit City is considering the introduction of private label brands into their superstores. Private label brands are unbranded products made by an OEM (original equipment manufacturer). Is there any value in this product line? If yes, what are the sources of value of this program? What are the potential downside risks associated with introducing private label products?

Answer 1

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Yes, value exists. Their price is lower and therefore more competition and benefit are higher. Its value is reduced. Further competition among producers leads to higher production and lower prices. Further good product feedback will increase profitability after their use by consumers. Based on buyers' requirements, drugs can also be added. The drawback is that the output and performance depend more on the producer. Initially, the gain can be very low due to lower prices. Because they are typically replicas of premium products, a distinctive identity becomes difficult to have. Besides, customers get less trust and this problem is worse from the outset.