What is the role of private label in fashion?

Within the world of fashion, not every brand or retailer produces their own goods – instead they outsource production to private label manufacturers.

Private label products are created based on the specifications provided by retailers or brands. The finished goods are then marketed and sold under the brand’s or retailer’s name to create a unique identity and connection with customers.

Why would brands adopt private label practices?

While it might be somewhat confusing that brands rely on private label manufacturers, the practice is relatively common amongst established companies.

Peek and Cloppenburg, for example, have private labels like Joseph Janard and Montego. Similarly, brands like Ralph Lauren and Hugo Boss outsource their garment production under private label principles.

There are several benefits associated with private label, like higher margins. Retailers can strengthen customer loyalty through offering exclusive products under their own label, all while enabling more efficient development, production, and logistics processes.

Additionally, private labels can target specific customer niches or preferences and be offered at a lower price point, helping to attract cost-conscious consumers.

With that said, there are drawbacks to private label as it can lead to limited brand recognition when compared to well-established brands. The lower costs can, in some cases, lead to compromises in material quality and affect the final product.

Despite the higher margins typically associated with private label, the relative lower price can result in lower overall profits too. There is also significant competition within the market with many players vying for consumer attention.

In the end, whether a brand opts to use private label principles depends on its specific circumstances. Renowned brands like Ralph Lauren and Hugo Boss have found success in this model, so it is very much viable for companies.

What are the mechanics of private label production?

Private label production involves deep collaboration between the sellers and manufacturers, typically involving the following steps:

1. Design and specification: Retailers or brands provide design specifications and technical sketches to the manufacturer.
2. Merchandising and sourcing: The manufacturer sources the necessary fabrics and trims.
3. Pattern development: Patternmaking occurs to create the initial samples.
4. Sampling: Initial, fit, sales, and pre-production samples are developed to ensure the product meets quality standards.
5. Pre-ordering and ordering: Fabric and trimmings are ordered based on the final design.
6. Production: The manufacturer undertakes the production process, ensuring quality control throughout.
7. Transport and Delivery: Organising and managing the transport and delivery of the finished products to the retailer.

What types of private label are there?

Many people assume there is only one type of private label, but this isn’t correct. Generally speaking, private label production can be divided into two main categories.

Firstly, there is “own production,” which involves manufacturers using their own production facilities to create private label goods. In some cases, these manufacturers may subcontract part of the process. Examples of these businesses include privately owned and state-owned factories.

Secondly, there is “without own production,” which entails full subcontracting, where fashion sourcing organisations manage the entire process, often through multiple intermediary chains.

Outsourcing: The key to private label

If anything should be abundantly clear for brands considering private label, it’s that outsourcing is vital. Private label brands and retailers rely heavily on outsourcing to manage costs and leverage specialised production capabilities.

Inditex – Zara’s parent company – is one example of a business that extensively uses private label principles.

In 2020, it was reported that 50% of Zara’s items were manufactured in Spain, 26% in the rest of Europe, and 24% in Asia and Africa. This is important to note because it enables Zara to have an agile and lean supply chain that can quickly serve customers.

Typically, Zara purchases four to five fabrics per season and handles the garment design, cutting, and dyeing in-house. As a result, fabric manufacturers can rapidly deliver bulk quantities to Zara’s distribution centre via high-speed monorails that connect the DC to factories.

Zara’s supply chain is one of the most robust in the industry, prioritising flexibility and agility over low-cost labour. It is widely believed that ready-made clothes can be returned to Zara’s DC in as little as two weeks, showcasing how powerful private label can be when implemented correctly.

How does K3 support private label?

At K3, our solutions support the private label process in a multitude of ways, no matter whether you’re a brand or manufacturer.

For instance, with K3 Fashion you can break down purchase order quantities into raw material needs to pre-inform manufacturers of the materials needed for production, without needing to go into a production modus.

Likewise, our comprehensive Bill of Materials functionality makes it considerably easier to relay specifications to manufacturers, and our procurement functionality helps manage production progress for increased visibility.

We offer additional enhancements through prepacks, which are essentially full boxes of item variants that can be moved through the supply chain more efficiently. Prepacks can be predefined size breakdowns, assortments, or sets.

More broadly, our solution enables quality control at every stage of the production process – something that is not typical in traditional ERP environments.

If you’d like to learn more about how we can support you with private label, feel free to drop us a line today.