Wal-Mart offers private label with panache - Sam's American Choice, Equate private label products - Buyers & Sellers - Column

Discount Store News, April 6, 1992 by Don Longo

Wal-Mart's launch of Sam's American Choice products and the less publicized expansion of its Equate line of health & beauty care reveals a merchandising revolution underway at the nation's largest retailer.

A research report by George Strachan and J. Scott Ehrens of Goldman Sachs outlines six factors behind Wal-Mart's decision to expand its private label offerings:

* Maintaining leverage with vendors: The development of private label programs should expand available vendor resources and thereby enhance Wal-Mart's bargaining position with suppliers.

* Guaranteeing another stable source of supply: Over time, the expanded offering of private label products could contribute to improved in-stock positions and faster product movement.

* Facilitating innovative product development: A private "control" label like Sam's American Choice will permit the company to bring its own spirit of innovation to its products.

* Appealing to a value-oriented consumer: A well-managed, private label program can enhance Wal-Mart's strong reputation for delivering value to consumers.

* Shopper receptivity to private labels: U.S. consumers are growing more receptive to high-quality, private label goods.

* Margin enhancement: Increased margins on private label merchandise will probably be used to reduce prices on national brand merchandise to maintain the company's position of price leadership in the discount store industry.

I've always felt that a quality private label can help a retailer build its customer franchise, especially in a down economy. Even Wal-Mart, which built its reputation as a national brand merchandiser, realizes it can only go so far footballing name brands. Wal-Mart's latest attempt of offering private label with panache mirrors the successful efforts of many supermarket chains that sell high-quality, gourmet-style private label products. Perhaps, though, Wal-Mart's private label initiative will give its competitors an opportunity to out-assort the discounter on national name brands.