What is Private Label Branded Apparel?

The skinny: Private label may not mean what you think it does. Buying private label means that you buy stock products from other companies who will sew your label into the product. Usually you can get certain options and colors but you don’t provide anything but a purchase order and payment. You can’t specify fit changes or expect much in the way of customization.

If you say you are a private label, this means that you manufacture stock items for other companies, using your patterns and sew other companies’ labels into it.
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A question posed from another non-apparel specific list:

We are seeking active wear apparel for [redacted] sports made from [redacted] fabrics. We are looking to private label and need a variety but minimums to create the lines. Can anyone provide assistance or any leads.

The meaning of private label has become diluted or rather expanded. Thinking a bit, I think I’ve narrowed it down according to who is signing the check for the order. There are three kinds of private label.

  1. Corporations and Organizations
  2. Retailers -internal product development
  3. Retailers: external product development

Lastly, I’ll explain why one needn’t be a major player to provide private label goods. There’s no reason a DE can’t get in on it too. Even small stores like the idea. If you’ve been delivering consistently -and they’ve been paying consistently- this can work out well for both of you.


Corporations and Organizations
This first type of private label is the most transparent and common to the average person. There’s tons of companies that sell jackets, polos and slacks, often called corporate attire. They have large catalogs from which customers -usually a corporation or organization- select from in stock colors and fabrications. These would be “blanks”. The customer has the option of having the catalog also embroider or screen print their logos or company name. These catalog firms also sell to embroiderers and screen printers who sell the blanks in the course of helping usually smaller customers (like amateur sports teams) with customized shirts. While catalogs always stress customization, it’s not really. For the most part, they are reproducing items they already make in colors and fabrications to suit. Not that that is a bad thing.

Now, if an individual or entity wants a truly custom product of their own creation, then they are a manufacturer themselves and need to go through the rigors such that you all do. Few are served by going to a catalog house such as that described above unless it is a huge corporation like UPS or McDonald’s who want uniforms. Such products are similar to items these catalogs already produce.

Retail: Internal product development
Many retail stores have private label programs that they use to merchandise amongst the products they buy from manufacturers to increase their margins. In affect, the retailer is the designer and manufacturer. There are varying relationships and stores of any size will do this (many boutiques create styles for their stores to mix with what they buy). Like you, whether they produce the items under their own auspices or hire it all out, they are the manufacturer. Some retailers have pattern makers and sample sewers on staff, while others hire that out. The retailer will have a private label division that handles all of the production management. Zara is an example of private label with internal product development. However, they differ in that they don’t sell other brands in their stores. Another example of a vertically integrated store is the Gap.

Lastly, it is rare that a retailer will be exclusively internally or externally based with their private label sourcing; it’s usually a combination. Just as you are unable to produce the entire gamut of sewn product items spanning categories as children’s, outerwear, swim suits, shoes, maternity etc, neither have stores the resources to produce all of these product categories in house.

Retail: external product development
In this case, the retailer will contract with a company that they already buy from for an exclusive deal on certain styles. Typically, they like a given body style but it’s not typically a blank (of which millions are made); it’s more seasonal. When previewing a line for purchase, the store may ask for additional styles in custom colors or fabrications just for them. This can be a good deal for both parties; the store may possibly get the goods at a lower price and the manufacturer has a guaranteed sale. Still, margins aren’t the only reason a store may want private label; it’s a matter of exclusivity. The store thinks the style will be a strong seller and merely wants a color or fabrication that no one else will have.

Usually a store doesn’t get as much of a price break as you’d think because the manufacturer incurs a few costs above and beyond the costs incurred with their usual line creation. These costs amount to administrative sample management, sourcing goods for the store’s exclusive use, sample creation and shipping samples for approval. If costs are lower, it’s usually because the store wanted a less expensive fabric or simplified sewing and design process. Also, costs may be less because a private label deal is a house account sale. A manufacturer’s sales rep won’t be collecting a commission on a house account.

In nearly all cases, the store’s label will go in the garment but this isn’t always true. Rather, if a designer is a big name, they may design a line specifically for a retail store. Several designers have done that for Target. Again, there are varying relationships. The designer may be under contract and the store arranges for production or the designer’s company can also produce the line too.

Private label and you
There is no reason why a DE couldn’t offer private label to customers who request it -assuming you’d be the one to also manufacture it -unless you just don’t want the hassle. There are some parameters though.

  • Get the money first: If you’re buying goods exclusive to the store’s request, they must agree to specific quantities and a down payment (at least 50%) is in order. If the order isn’t sufficient to cover purchasing minimums, well, you can’t do it. I would also recommend collecting at delivery like you would for any other customer.
  • Custom design for a store: This is where it can get tricky. Who owns the design? Who owns the pattern? Technically, if you charge them for the pattern, they own it. So, you may not want to charge them for it if you think you’ll want to re use it once the period of exclusivity ends. Exclusivity is another thing, determiine a set time period. It goes without saying that it’d be very naughty of you to reuse the pattern for yourself or another store before that period expires.
  • Price: Again, they may not be entitled to the price break they imagine. If they’ve selected lower cost goods than you normally use, then fine. You should lop off a bit for it being a house account. If a sales rep got you the deal, you have to give them something otherwise they won’t get you any more. I wouldn’t know what the rate of commission would be but owing to the particular nature of the arrangement, it’s not likely that the rep will service those particular styles the way they do others. The potential of private label accounts is something you should discuss with a rep when you interview or hire one.

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13 comments

  1. kaaren hoback says:

    “Get the money first: If you’re buying goods exclusive to the store’s request, they must agree to specific quantities and a down payment (at least 50%) is in order”…

    My home was in upstate New York not far from the small City of Cortland, well known as a center for bra/lingerie and corset development since the early 1850’s.

    This is the story of the only remaining large factory with 5 huge brick buildings that employed nearly 500 people. A major player (I will not name or purchase anything from) demanded they purchase raw materials that had logos woven into waistband elastics, copyright designs in the Powernet and so on. They had a signed contract and received a down payment amounting to approximately 25% of the raw materials, had already finished the accepted and signed off pattern work ,and were about to start production when they got a special delivery from the home office of said major player telling them they were moving the entire operation to the PR China. The big brand had possession of the patterns and forwarded them to China.

    The story ends sadly as the firm could never recover the balance of the costs they expended on raw materials, or pattern work, retooling their machines and could not use any of it for another client. The employees were all pink slipped, the buildings turned into a small business incubator, and what inventory they had that did not belong to the Big Brand was sold roll-by-roll, box by box at well below costs. They could not sell even one inch of elastic and even had to pay for storage until the lawsuit settled when it was finally sent to the city dump with the local sheriff’s office riding escort.

    Yes- they had a valid signed contract. The lawsuit was repeatedly stalled through the court system for over 7 years, when they finally got a small settlement that still did not cover their original expenses. Be very careful!!! a contract is not always a guarantee.

    Kaaren

  2. J C Sprowls says:

    @Kaaren

    Oh my. You know, I hate hearing stories of shops that “lost their contract” and were subsequently forced to liquidate. It’s sad and unnecessary.

    What’s worse, though, is that the majority of such cases are brought on by pride. In corporate lingo, we refer to it as “strategic distress”.

    I know. I’m unpopular. I’m used to it. Just hear me out, please.

    There are certainly extenuating circumstances we’re not privy to. However, demise was not a necessary outcome. Had this company recognized that this deal had potential to put the company at risk, then it would have been prudent to consult a turnaround specialist early on.

    For the cost of a consultation fee, a turnaround specialist could have counseled this company and negotiated a stronger deal before the lawyers wrote the contracts. Of course, this necessitates early diagnosis which requires a mentality that no cow is sacred

    {Hey… isn’t this a lean principle?}

    When compared to the demise of the company, a TS’s consultation fee would have been much less expensive. And, therefore, a prudent investment. Plus, there are other benefits a TS brings. S/he could have pursued funding if it were necessary and then managed the company through the project to safety. If funding were not needed, the TS could have been retained as ad hoc counsel without changing the existing management structure.

    The crux of what I’m trying to get at is that demise is never a necessary outcome. We need recognize that there is a world of options at our disposal if we can get past our pride and just ask the right people for help.

  3. My grandparents are in Cortland! In the 1940s they chose that city to settle in out of all of the US for several reasons, chief among them the economic stability of the town: it had work and revenue from the manufacturing, agriculture, education and health sectors.

    Census statistics from 2000 report 24.7% of the population living in poverty (compared to 11.3% for the US overall).

    The manufacturing sector has been taking it pretty hard since the 1970’s, though apparently it’s starting to pick up again.

  4. Kathleen says:

    However, demise was not a necessary outcome. Had this company recognized that this deal had potential to put the company at risk, then it would have been prudent to consult a turnaround specialist early on.

    I agree this wasn’t an unavoidable outcome. They should have gotten 50% of the total contract’s value, not 25% of the cost of inputs.

    I hate to say this but this is a rather naive position for this contractor to be in. This illustrates in part, why suppliers and contractors DO NOT CARE how big you are, if anything, it can put you in a position to hurt them worse. Believe me, I hear plenty of complaints about big companies too, I just don’t print them because it’s germane to this site. Companies that should know better, get starry-eyed by a big brand name. What we haven’t heard is how many companies *Biggest* Name Lingerie retailer went to before this company, who turned them down cold.

    {Hey… isn’t this a lean principle?}

    Yes it is, absolutely. Lean practitioners don’t grind discounts out of vendors through heavy handed demands, they need them. Their strategy is to help suppliers get leaner so their costs and subsequent prices will decrease.

  5. Mike C says:

    We get asked about private label from time to time. Its not something we’re really interested in doing. Anything we’d do on private label could probably be farmed out of country if volumes ever got to the point where they were interesting.

    We do get quite a bit of interest in co-branding though. Companies will buy our garments and then logo the exterior with embroidery or screen-printing. We’ve always done a little business with that. I expect it will reach 5-10% of our total for 2008, though the majority of that is from one customer.

  6. Kiran Bindra says:

    The lure of a big name company many times entices the manufacturer to agree to all the terms demanded by the company. In our experience, the manufacturer has to have a really good hold on contracts and a strong person in charge for negotiations. Once the private label seekers see the benefits of working with a no-hassle company, they will happily agree to 30-50% deposit on a production order.

    My advise would be to do a sample run for a private label project (definitely get paid for the samples – industry standard is 2x the production cost). Let them review the working procedures, the levels of communication, understanding and interpretation of requirements, delivery times and budget on the samples provided by your operation. This exercise not only builds confidence in your client on your manufacturing but also gives you an indication on how well they know what they want (designs, fabrics, patterns, etc), how clear and definitive their requirements are (avoid companies that change their mind every week)and finally if they pay their sampling bills on time – cha-ching!

    In this industry, given the risks and changing variables in the global equation, the contracts and the deposits have to be strictly in place for the company mentioned in the post, as well as an operation as ours to stay in business in the US for years and decades to come!

    Quoting Kathleen – “Get the money first: If you’re buying goods exclusive to the store’s request, they must agree to specific quantities and a down payment (at least 50%) is in order”…

  7. Kathleen says:

    I know we’ve discussed it at length on the forum but I can’t remember in what thread or section. Try poking around in there. We haven’t seen you in there for awhile anyway :).

  8. Kristi Hayes says:

    “Tis because I am a lurker. ;) Talk of garment construction is very interesting to me, but it quickly spins out of my range of what I can usefully contribute to. I spent quite a while reading through threads referencing “private label” and didn’t find pricing discussion, but I need to be more creative with the search feature, I guess. Thanks!

  9. Kathleen says:

    I need to be more creative with the search feature

    I suggest being proactive by posting the question. Ask and you shall receive.

  10. Amet says:

    Thats sacrosant: get the money first – give them a good price instead, but make sure you are covered – thats how we try doing it everytime. Granted, we have lost some business on account of this, but we’re still in business right?

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