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Story by Jon Mikelonis

Introduction
Has the uncertain economy got you taking a closer look at low priced options when shopping at large retailers like Summit Racing Equipment? Have you ever contemplated the true source of the low price options that carry the Summit Racing Equipment brand? In this article we'll explore a subject that leaves name brand manufacturers and the most successful retailer in the industry, tight-lipped. In the marketing world, the subject we'll be discussing is known as "private labeling". If you don't know what private labeling is, you should. After all, if you shop at Summit Racing Equipment, their private labeling strategy can have a positive or negative impact on you depending on your willingness to research and inquire prior to your purchase.

 
Costco's Kirkland Signatures private label brand knows no boundaries. Here you can see Costco covers the spectrum of non-durable household goods, making sure the Kirkland brand is represented in all their high volume product categories.
 

Why Private Label?
If you've been to Costco, you might be familiar with their prolific house brand, "Kirkland Signatures". Don't have Costco in your area? Then follow along and think of the Sam's Club brand "Member's Mark". Both are private label brands developed by each big box retailer with a common intent.

At Costco, Kirkland Signatures is the one brand in the store that appears to have their fingers in everything from tea bags to toilet paper to tuna fish to trash bags. It's not that Kirkland Signatures specializes in all products that start with the letter "T", it's just Coscto's way of wrapping their packaging around anything they wish to compete with on the shelves of their own store. In other words, if you are a producer of durable or non-durable household goods that has earned a position on Costco shelf-space, you also gain the bizarre privilege of competing head-to-head with Costco themselves via their house label, Kirkland. In other words, for many name brand manufacturers (NBMs) and producers, a large private labeling retailer like Costco becomes not only their largest account but also their most fierce rival.

When a large retailer like Costco or Sam's Club competes directly with its
suppliers, the retailer profits from the sale of their own items and the heavy competition imposed by the retailer forces the supplier to lower their wholesale price in order to stay relevant. There is another advantage for the retailer who private labels. A large retailer like Costco, Sam's Club, or even Summit Racing Equipment has got a wide database of product sales data on their side when it comes to choosing which products or product categories to private label. Therefore, while there may appear to be no immediate logic to the Kirkland Signatures product line from the point-of-view of the consumer, there is logic applied from the retailer's side. Costco is certainly going to pick-off top sellers and gradually move their way down the "Total Sales by SKU" column when deciding what to slap a Kirkland Signatures wrapper onto.

 
At Summit Racing Equipment, often times their private label products are supplied by name brand manufacturers (NBM's), like Holley. Other than using a raw mounting bracket in place of the Holley chromed bracket, Summit's private labeled fuel pressure regulator (SUM-G3131-1) is identical to the Holley fuel pressure regulator (HLY 12-803) down to the "Holley" brand name embossed into the housing. The Summit version retails for $24.95 where the Holley version retails for $27.95. Is this a "win-win-win" situation for the NBM, the retailer, and you?
 

Name Brands Under
Private Label

The relationship between a name brand manufacturer (NBM) and an aggressive private labeling retailer becomes a little odd for all parties when the retailer fills a private labeled package with a name brand product, a practice performed by Summit Racing Equipment. There are many identical products available to you at Summit under their private label brand and under the name brand. That's right, on many occasions, just the packaging alone is different. See the Holley vs. Summit example to the right.

Unlike the scenario where the retailer competes with a NBM using a product made by a "brandless" manufacturer, in some cases, the retailer fills their box with a name brand product and offers it at a marginally lower retail price. When the consumer chooses the name brand product packed into a private label box over the name brand product packed into its native 4-color box, Summit Racing Equipment just realized a much higher margin on that sale. Why? Because Summit and the NBM certainly agreed on a discounted wholesale price for the raw name brand product, sans for example, a pretty K&N Air Filters retail box.

Unfortunately, for the consumer, it's almost impossible to determine
pre-purchase which Summit Racing Equipment private label products have been filled with name brand products and which have been filled with, well in some cases... subpar product. You see, unless you speak with a Summit sales rep who knows and is willing to discretely inform you during a phone or in-person order, you can only wait for a private label product to show up to potentially determine the "real" source. Summit sales reps are not trained or directed to volunteer the source of their private label products. Inquire however, and you just might get a straight answer.

As mentioned, it's only logical for retailers like Summit to pick-off high volume "low-tech" product categories when applying their private labeling strategy. After all, retailers are not manufacturers, so they'll need to depend on someone else to actually produce the products they choose to private label. Furthermore, it's best for a retailer not to get involved in a product category that requires in-depth post-purchase installation support or products that require diligent quality control during their manufacture. This is why some of Summit's first private label products were universal air cleaner housings, valve covers, and gaskets. However, Summit has recently moved on to private labeling more technically complicated products, like 6A-style CD ignition boxes, as innovation on these items stalls while demand remains strong.

To illustrate the points raised above and to help you become a more aware private label shopper, let's cover a couple cases uncovered
during in-person purchases made at a Summit Racing Equipment retail location.

K&N, K&N, and the Knock Off
By far a standard in the performance aftermarket, the 14" x 3" reusable air filter element is a huge seller that has seen little evolution since its introduction. Sandwiched between two simple metal stampings under the hoods of hot rods and musclecars all across the country, this consumable product offers great returns for a retailer wishing to cash-in on thousands of repeat sales yearly. Enter Summit Racing Equipment.




Summit brings private labeling to a new level by competing directly with the name brand manufacturer K&N Engineering Inc., using what the industry considers a "knockoff" product. Summit Racing Equipment part number "SUM-239143" is a low quality Taiwanese imitation offered at a 35% discount over the high quality K&N original. The likely impact of Summit's "knockoff" on K&N's sales makes Summit a fierce rival in the marketplace. However, being the low price alternative isn't enough for the retailer. Summit is wise enough to know a large percentage of automotive enthusiasts will shy away from ultra-low prices and overseas manufactured product by questioning quality. So, to make sure they're also competitive at the top of the quality spectrum, Summit offers part number SUM-F1308 in conjunction with K&N, a K&N filter stuffed into a brown package that retails for $4.00 less than the same filter loaded in a K&N box.


Pictured side-by-side is K&N's original reusable air filter element (KNN-E-1650) and Summit private labeled knockoff (SUM-239143).
 
Certainly not a proper "under the hood" endurance test of quality, but with minimal effort the sealing surface of the Summit knockoff filter can be easily separated from the pleats.
     

The same stress test performed on the K&N original only results in a sore thumb.
 
It should be noted in the case of private labeled premium reusable air filters, neither Summit Racing Equipment nor K&N attempt to hide their relationship, but they also don't volunteer it. Here's a shot showing a K&N decal right inside the private label box for SUM-F1308.

(MSD, Mallory, or Both?)

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In This Article...
Over the past decade, private labeled products have moved from low price low quality alternatives to premium retail brands. In some cases, retailers like Summit Racing Equipment are even using premium name brand manufacturers to fill their private label boxes, as well as continuing to use their usual overseas sources. This article discusses the private labeling retail strategy and unveils some provocative examples at Summit Racing Equipment. After reading, you be able to make educated private labeled product purchasing decisions when shopping at the performance aftermarket's most successful retailers.

What is Private Labeling?
Private labeling occurs when middlemen, usually large retailers, develop their own brand to compete against name brands.


Since producers and manufacturers have large advertising expenditures built into their cost, a private labeler is able to offer competitive goods at a lower cost. The retailer's product is then sold at a lower price and or at a better profit margin. Private labelers have more control over pricing and are able to advantageously display their own brands for maximum impact.

 


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