When Paul Simon wrote his 1977 smash hit, “Slip Slidin' Away,” he wasn't talking about the erosion of brand equity in the electrical market because of the increasing popularity of private-labeled products. But I couldn't get the lyrics out of my head as I thought about the response to Electrical Wholesaling's series of articles on private labeling that has run the past few months.

Is brand equity really slip-sliding-away in the electrical wholesaling industry because of private labeling? For some products, maybe. The landmark study on private labeling by Allen Ray, president, Allen Ray Associates, Kennedale, Texas, and David Gordon, Channel Marketing Group, Raleigh, N.C., clearly shows this practice is on the rise in the electrical market.

This month's article “The Five-Ton Elephant Returns Again” (page 34), delves into the most intriguing aspect of private-labeling — customer acceptance. Ray and Gordon received several hundred responses from electrical contractors and other EC&M readers to their e-survey, and you will be fascinated with what they have to say about private labeling.

Respondents said they will buy private-labeled products for certain applications. But because of concerns over product liability and product specifications in high-end commercial and industrial applications, there appears to be a limit to how far private labeling may spread in the electrical market.

That being said, in those product areas where price reigns supreme, products are perceived as commodities and end users aren't concerned about product liability, private labeling is a game-changer. Respondents cared least about brands when buying cable ties, fasteners, chemicals and lubricants and metal fittings. Indeed, private labeling landed first in these markets. However, Ray and Gordon discovered that brand preference is alive and well in some product categories, such as circuit breakers, switchgear, industrial controls, hand tools and wiring devices. Interestingly, brand preference was strong in these product categories more than 10 years ago, according to a Electrical Wholesaling survey of that era that asked distributors, “About what percent of time do your customers ask for these products by brand name?” In that study, end users said they asked for a specific brand least often when buying building wire, flexible conduit, power cable, portable cord, lugs, connectors and fittings, and were most brand specific when asking for circuit breakers, manual hand tools, panelboards, safety switches, motor controls, switchboards and switchgear.

While private-labeled products are here to stay in many product areas, they apparently haven't yet totally permeated the customer consciousness. The soon-to-be-published EC&M “2007 Brand Preference Study, ” which has ranked brands by product area for decades, shows that electrical contractors, facility maintenance personnel, specifying engineers and other end users or buying influences still think first of traditional electrical brands when they are buying or specifying products. Respondents are asked to write in their top three brands in several dozen product areas.

Deciding whether or not to market private-labeled products is a profit-driven decision. The manufacturer, distributor or rep must ask themselves:

  • How strong is this battle-tested traditional brand?

  • Is the customer willing to continue paying a premium price for it when less-expensive alternatives are available?

  • In which product categories are customers searching for value (read “cheaper”) brands?

  • Would a dual-brand strategy work where my company could offer premium (traditional) and value (cheaper) product options?

  • How much exposure to product liability exists in this product segment?

  • Does offering a me-too, privately labeled commodity product pigeonhole my company as a low-cost provider, and all the baggage that perception carries with it?

  • Does the new generation of electrical contractors and other end users have the same affinity for electrical brands as their parents and predecessors?

In the future, electrical brands will live or die based on the answers to these questions. Love it or hate it, private labeling has become a fact of life in the electrical market. It's way too easy to wax nostalgic about the wonderful electrical brands of days gone by that didn't survive an acquisition. Heck, I have shelves full of electrical magazines loaded with advertisements for product brands that you just don't hear much about anymore. For instance, Electrical Wholesaling's 176-page October 1989 issue, the magazine's largest in the past 20 years, was loaded with advertisements for brands that manufacturers spent millions to build, such as American Insulated Wire, Challenger, Eagle Electric, Furnas, Laribee, Royal and Benjamin. You don't hear much about these brands.

You can't get nostalgic about brands. They have to earn their keep. If a brand continues to draw customers, a company is insane to kill it off to save a few bucks. But there's little doubt that private labeling will force some well-known electrical brands to slip-slide away.

Private Labels: Welcome to Our World

While private-label products have only recently taken center stage in the electrical industry, they are a huge factor in the U.S. retail world. Take a look at some of these numbers:

  • Store brands account for one out of every five items sold in the United States — an estimated $65 billion in sales — according to the Private Label Manufacturers Association (PLMA), New York.

  • Target, Minneapolis, plans to increase private-label penetration by 2 to 3 percentage points each year over the next several years. That's big money for a company with approximately $59.5 billion in 2006 sales.

  • According to the “Facing the Forces of Change” study published earlier this year by the National Association of Wholesaler-Distributors (NAW), Washington, D.C., retail private-label consumer grocery products have a 16 percent share of U.S. sales and on average are priced 28 percent lower than national-brand competitors. Adam Fein, president, Pembroke Consulting, Philadelphia, and author of the NAW study, said in that report 43 percent of wholesalers currently market their own private-label products. The number is significantly lower in the electrical wholesaling industry.