Stump the Consultant: Should Distributors Do Private Label?

Written by Mike Marks on Tuesday, 03 December 2019. Posted in Business Strategy, Distribution, Manufacturing

Stump the Consultant Should Distributors Do Private LabelIf branded manufacturer margins decline, some distributors may consider expanding their model to add private label revenue. This could be a good idea for the company, but it’s only one component within the greater plan.

There are two primary types of business for customers to purchase product. If a customer has a need fulfilled by a specific brand, such as if they want to buy a Caterpillar bulldozer or Rolex watch, for example, then they’ll most likely purchase directly from the source. Said another way, they’ll contact a CAT or Rolex dealer directly.

However, most of the business in B2B is channel-led. This means that the customer chooses their distributor first, trusting that distributor’s discretion in providing the most suitable product from the brands they want.

If you’re a distributor whose primary business comes from channel-led sourcing, then you may want to explore implementing private label. But first, it’s critical to know the risks involved. Other companies, potentially global companies who previously supplied private label products, may want to reach out directly to customers they’ve developed relationships with. You’ll want to prepare solutions for retaining customers in case this happens.

Take a look as Mike Marks discusses the ins and outs of pursuing a private label strategy:

About the Author

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.

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