Battle of the brands

A brand is more than a logo slapped on a box or an image on a T-shirt. The true value of a brand holds many intangibles that are sometimes recognizable only when said brand starts to lose value, is threatened or placed on knockoff products.

"Brands are shorthand, a very valuable shorthand for a whole range of stuff," says Bill Wade, managing partner of Wade & Partners, who, along with Dr. Bruce Merrifield Jr., president of the Merrifield Consulting Group, conducted a presentation on private labels vs. branded products at the Global Automotive Aftermarket Symposium.

For example, the company Caterpillar is known for its heavy-duty construction vehicles and equipment. But when Caterpillar made a deal with Wolverine Boot Company, the result was wildly successful, with 60 million pairs sold in 140 countries, says Wade. "That's what brands are all about. That's the power of the brand."

Audience votes tallied by handheld remote devices punctuated the session, showing almost 80 percent of the symposium's participants think private labels can create stand-alone brand equity, an answer that surprised Merrifield and Wade, who believe that some companies such as CARQUEST have created equity even with their private-label lines.

When distributors in attendance were asked if their brand-name suppliers should carry private labels, about two-thirds answered "yes." When manufacturers were asked if they should carry private labels along with their brand names, the answers mirrored those of distributors.

Attendees overall were split in determining if private labels are a positive trend for the aftermarket; manufacturers, however, answered 29 percent "yes" and 71 percent "no" to the same question.

Despite earlier answers favoring private-label products, almost 70 percent of attendees said they think private labels are corrosive to brands.

In the automotive business, rotors — important parts of the braking system — were one of the first products to take on private-label prominence, Wade says. In the heavy-duty business, brake drums were one of the first choices for private labels, he adds.

"Private labels, by the way, are hardly new to the aftermarket," says Wade, who adds NAPA has used private labels for some time, and even Standard Oil offered private-label lines dating back to the 1930s and 1940s. He adds: "And of course, one of the all-time greats of private label was Craftsman, introduced by Sears in 1941."

Additionally, Western Auto sold private-label shotguns in 1939, says Wade.

Brands were a regional phenomenon at first, says Merrifield.

If, as a distributor or manufacturer, you go down the private-label road, the strategy has to completely change from a brand-driven way of thinking. For those who sell private labels, they're selling more of a one-stop shopping experience than the brands themselves, says Merrifield. "You're not selling your catalog and your lines as much as your ability to have one-stop shopping, highest fill rates, closest location, quickest response time, zero errors, on-time delivery. You are in the up-time, keep your workers busy, get the truck-out-the-door, the car-out-the-door business," he says. "And that's how you build your customers' bottom line.

"If you're a distributor, I would say arguably in this day and age, what you're selling is service, and that's what you need to brand," he adds. Also, if, as a distributor, you decide to sell your own private-label goods, "you better make sure that you really do have great quality and, you know, even equal or better fill rates, because it's got to always be there and be available. That's a big part of brand — service brand value." He adds: "Fill rates are foundational."

In fact, private labels should be stocked at a higher frequency than other labels, adds Merrifield.

He uses Wal-Mart as an example of how private-label brands play into a buyer's decision: "I go to Wal-Mart and look at Listerine vs. Equate mouthwash. I'm inclined to just buy the Equate mouthwash. Do you think I would drive someplace else if anybody else had Equate? Do you think I go to Wal-Mart just to buy Equate? It's part of the total market value proposition."

Forty percent of what Wal-Mart sells is private label, continues Merrifield. About 20 percent of the total U.S. consumer business that goes through big boxes and chains is private label, says Wade. Most important to this, he adds, is "70 percent of shoppers (who) were studied said that they believed that the private label was as good as or better than the national brand."

From the manufacturer's stance, if your products have become commodities, you must "innovate and augment" your products, a total supply chain value proposition.

Wade points out that when speaking with a CARQUEST official, he was told that private brands are the most effective way to control returns in a market. "You know that either you sold it or one of your brethren sold it if it comes back in a CARQUEST box."

Caterpillar's boots notwithstanding, Wade says brands are not particularly transitive. For example, as successful as Coca-Cola is, what would happen if one were to place that tag on spark plug wires? According to the stock exchange, the Coca-Cola brand is worth about $67 billion, says Wade.

A lot of emotions can be wrapped up in brands, as evidenced by some of the top consumer brands in the country, like Harley-Davidson.

And sometimes brands can flood a marketplace to the point of saturation: "Once everything becomes excessively excellent, that's sort of the end of the brand game," says Merrifield. "It doesn't mean you can't shift the niche to try to create a subcategory. You're constantly looking for new ways to refresh and reinvent the categories. That's where advertising pays off when you have a new definition."

Merrifield reiterates: "If you're going to have private labels, you better have them in stock and in higher frequency."

Wade describes the different types of private-label brands found in the marketplace: store brands, umbrella brands, exclusive brands, group brands (not wildly popular outside the automotive aftermarket, he adds) and copycat labels.

And the question arises of who makes these brands. Some companies only make private labels, and they can be found everywhere from Canada to Mexico, the United States and China.

Some private labelers are looking to get into the "brand name" game, however.

Says Wade: "One of the reasons all those people are downstairs at the AAPEX show is because they don't know how to get upstairs."