Private label merchandising: how retailers build own brand ranges

What share of sales do retailers allocate to private label?

Private label reached a value share of 40 per cent across the EU-11 in 2025, according to McKinsey. In the UK, private label share by volume had risen to 52 per cent over the past 12 months, Circana reported in April 2026. In the United States, private label accounted for 21.7 per cent of dollars spent and 23.9 per cent of units sold across retail categories in early 2025.

Share varies by channel and geography. The club segment in the United States,Costco, Sam's Club and BJ's,reached 47 per cent share penetration, accounting for nearly half of all private label growth in 2025. Mass retailers like Walmart saw private brand dollar share grow to 26 per cent, up 0.4 percentage points from the prior year. Tesco held a market share of 28.5 per cent in Great Britain at the start of 2025, and 70 per cent of products on Tesco shelves are private label.

Retailers that double down on private labels had a two to three times greater probability of gaining market share than all other grocers in their countries over the past six years, McKinsey found.

How do own brands improve margin?

Retailers can increase gross profit margins by 25 to 30 per cent per product relative to selling national brands, according to industry data. Private label margins for grocery retailers typically exceed 40 per cent, compared to 25 to 35 per cent for national brands sold through the same shelves.

The margin advantage stems from structural control. The margin gap between private label and brands in 2025 exists because retailers control costs upstream. Retailers specify recipes, adjust pack materials and grammage, switch production geography and simplify SKU complexity to manage commodity exposure, all levers unavailable to brand manufacturers negotiating at arm's length.

In apparel, private label fashion brands secure margins as high as 65 per cent, compared to 25 to 35 per cent for third-party sellers. The median gross margin across eight public apparel companies stood at 55.3 per cent in fiscal 2025 and 2026, but own brand ranges within multi-brand retailers sit at the higher end of that distribution.

What tiering strategies do retailers use?

Retailers deploy tiered own brand portfolios to address multiple price points and occasions. Retailers like Carrefour, Target, Tesco and Walmart provide well-segmented lines from value to super-premium.

Tesco's budget-friendly private label range now includes Creamfields, Eastman's Stockwell & Co and Ms Molly's, with each private label brand featuring its own logo, branding and packaging designs unique to the category, mimicking the branded lines they compete with. Tesco Finest still leads the premium private label line for the retailer.

To complement its long-standing Great Value brand, Walmart launched its premium, better-for-you line Bettergoods in 2024, which has since amassed about half a billion dollars in sales as of October 2025. At Target, Good & Gather (grocery), Cat & Jack (kids' apparel), Threshold (home) and All in Motion (activewear) each generate over one billion dollars in annual sales.

Private label growth is increasingly driven by the diversity of assortment offered, including budget, premium, free-from, organic and local. In the United Kingdom, for example, premium private labels represented the fastest-growing private label tier in the past year, expanding by around 9 per cent annually.

How do grocers source private label production?

Grocery retailers source own brand through contract manufacturers that accept private label orders, often for multiple categories. Manufacturers that describe themselves as OEM (Original Equipment Manufacturer) or private label are set up to produce products to customer specifications rather than selling their own branded products.

Retailers typically manage the specification, formulation and packaging design in-house, then tender production to a panel of approved suppliers. Around 97 per cent of grocers expect to increase investment in private label innovation during the next two to three years, with nearly half or more of their private label merchandising, product design and trend identification activities managed by internal teams, McKinsey reported in June 2026.

Private label suppliers often face longer contracts,three to five years versus one to two,and stricter compliance requirements than suppliers of branded goods. The retailer owns the brand equity and customer relationship, giving it negotiating leverage.

How do fashion retailers approach own brand sourcing?

Fashion retailers choose between vertical integration and outsourced contract manufacturing. Roughly 50 to 60 per cent of Zara production happens in Spain, Portugal, Morocco and Turkey,within close range of headquarters. Zara can create a new design, produce a sample, manufacture a test batch and ship it to stores in as few as 15 days.

H&M fully outsources production to over 800 suppliers in low-cost countries, but maintains control through 20 production offices that monitor quality, timeliness and quantities. The retailer does not own factories but exercises close oversight through resident staff at supplier sites.

Marks & Spencer predominantly sells own-brand, or private-label, food products, but also offers a small proportion of third-party branded items,usually household names such as Lucozade, Ribena and Pepsi Max drinks, as well as Lurpak butter. The grocer operates a model in which almost the entire range carries the M&S name, manufactured by third parties to M&S specification.

How do retailers balance speed, cost and control?

Proximity manufacturing trades unit cost for speed and flexibility. Zara's near-shore production strategy prioritizes proximity over unit cost. Factories in Spain, Portugal, Turkey and Morocco cost more per garment than factories in Southeast Asia, but allow weekly or twice-weekly deliveries and mid-season design changes.

Trade disputes and unpredictable tariffs are changing how private label supply chains operate. The wide-ranging tariffs of 2025, in which most imports were slapped with a 10 per cent base rate and some Chinese products face duties as high as 125 per cent, have transformed domestic sourcing from a strategic choice to a financial one.

By 2026, retailers are getting much closer to their suppliers and, in some cases, even taking things in-house to get that all-important control and nimbleness. Some chains are acquiring production capacity for key categories or entering long-term partnerships that give them preferential treatment and the chance to innovate together.

Private labels are leading in product innovation, accounting for up to 70 per cent of all new launches and varieties in the food category in Europe, McKinsey reported. That innovation leadership reflects the shift from private label as a defensive margin play to a proactive merchandising strategy that drives footfall and loyalty.

Researched and drafted with AI support, reviewed and released by the editorial team.

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