It can be a smart way to set yourself apart

It can be a smart way to set yourself apart from other stores and national brands, and it also puts more profit to your bottom line. Having lost ground to the mass merchandisers while gaining a reputation for homogeneity in their channel, department stores are leading the charge in developing private label programs. May Merchandising, for example, has spearheaded "Vision 20," an internal program designed to increase its private label to 20 percent of its overall merchandise. But beware: Private label can backfire. Without an appropriate mix of national and private brands, you may lose core customers, or if your private label brand does not find favor with its target audience, you may be left with an overabundance of inventory. Take Saks Department Store Group (DSG), which has been a leader in developing private label apparel, and which posted a 2004 third quarter comp decline of 2.6 percent, marking the second consecutive quarter of severe declines. As of press time, investment firm Merrill Lynch predicted that DSG would face continued markdowns and gross margin deterioration in the fourth quarter and possibly into 2005 as it is "forced to mark down private label apparel."