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Posted Date: 5/1/2003

New Strategies for Private Label Brand Leverage

By JAY D. LUSSAN and GABRIEL F. FRIED

There is an opportunity for apparel manufacturers and retailers to make a low-risk, high-return investment in acquiring consumer data and private label brand assets.

These assets are on the market because of the retail bankruptcies and closures of the past few years.

Retailers have long viewed private label branding as a means to two important ends: improving margin and improving customer loyalty. The loss of a retailer in the marketplace, until recently, has frequently also meant a loss of its private label brands and a lost opportunity to retain or quickly re-capture customers while their loyalty to the brands remains strong.

Yet the cloud of bankruptcy quickly disappears, and the strength of these brands can endure for many years.

Firms such as IPRecovery Inc. (www.iprecovery.com) have been working to create an orderly market for the exchange, sale, licensing, acquisition and redeployment of such brands in their respective sectors. They provide buyers with an opportunity to acquire at a significant discount a proven alternative to the expensive and risky investment of building their own brands.

The lack of a direct association between a private label brand and the retailer contributes to the lasting power and resilience of those brands with established brand equity. Because so much time and money has been invested in many of these brand assets, buyers are able to reduce risk, time and money by acquiring these discounted assets and returning them to the marketplace.

Moreover, savvy manufacturers are looking beyond the retailer toward an understanding of the individual consumer, and how the consumer's transition from a defunct retailer to another apparel source may yield new opportunity. That opportunity, the ability to associate individual customers with trademarked brands, has only been possible with the recent advent of sophisticated retail point-of-sale, data warehousing and data mining technologies.

The integration of sales data for branded products with information about end consumers provides quantifiable measures of brand equity. This data enables the new owners of a brand to step in and hit the ground running.

Additionally, information from distressed or defunct firms' sales and customer files can help manufacturers more effectively utilize co-op advertising dollars. For example, a manufacturer could use co-op advertising dollars to send the customers of a defunct retailer a mailing informing them that the manufacturer's products (i.e., merchandise under the newly acquired label) are available at a different, nearby retailer. These well-targeted campaigns yield better results than newspaper inserts and help drive new sales.

These opportunities to combat market sluggishness have only recently become available with the emergence of a nascent, orderly market for trademarks, and retail business intelligence and related proprietary content. Acquiring brands and customer data when it is deemed as surplus, either by way of a bankruptcy or other business change event, can be a cost effective, lower-risk method of recapturing market share, improving margin, improving volume and sustaining growth.

JAY D. LUSSAN and GABRIEL F. FRIED are president and vice president, respectively, of IPRecovery Inc. The authors can be reached at jlussan@iprecovery.com or gfried@iprecovery.com.

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