The Private Label Trap: Why Retailers Must Think Beyond Margins
Retail is full of cautionary tales, but there’s one I see play out time and again. It starts with a curated boutique or store—carefully designed to be a treasure trove of discovery, filled with thoughtfully chosen brands that customers trust for their creativity and storytelling. The business grows, the foot traffic increases, and then someone asks: “Why are we letting these other brands take the lion’s share of the profits? Why not create our own products? Private label will boost our margins.”
On paper, it’s hard to argue with the math. Higher margins are appealing and important. But here’s the reality: most private label programs don’t deliver. And worse, they often undermine the very business they were meant to enhance. Why? Because the pursuit of profit at the expense of creativity and trust is retail’s most predictable—and avoidable—mistake.
Let’s talk about why this happens, why it keeps happening, and what retailers can do differently to introduce private label into their mix.
Why Private Labels Underwhelm
The allure of private label lies in the numbers. Retailers look at the cost of branded product and think, “We can do this ourselves for less.” But private label is not just about making a cheaper version of what already exists. The second you start replicating branded product without understanding its creativity, story, or value to the customer, you’re already off course. It’s important to note that this dynamic applies most to boutique and premium retailers, where storytelling, curation, and customer trust are central to the business model.
What private label fails to acknowledge—time and again—is that customers are not just buying things. They’re buying the why. The reason they come to your store in the first place isn’t because they believe you have all the answers. It’s because they trust you to curate a range of brands and products that reflect taste, discovery, and, most importantly, authenticity. When private label enters the picture as a watered-down alternative, it sends a subtle but unmistakable signal to the customer: “This is no longer special.”
Even when private label lines are well-designed, they are rarely approached with the same rigor and creativity as true brands. Private label often lacks a clear vision, emotional storytelling, or the elements that forge a deep connection with customers. Without a strong identity or purpose, these products end up feeling generic—commodities rather than pieces of a thoughtfully curated story.
And here’s the kicker: when customers begin to question the integrity of the product offering, it doesn’t just affect the private label. It casts a shadow over the entire business. If the in-house product feels uninspired or opportunistic, it can raise questions about the store’s overall standards and its approach to curating other brands. The ripple effect is real—and often devastating.
A Better Approach to Private Label
The solution isn’t to abandon the idea of higher margins but to reframe how you achieve them. Here are three ways to approach private label the right way—through creativity, partnerships, and respect for your core values:
1 - Elevated Basics, Not Knockoffs Private label succeeds when it fills a gap rather than trying to replace what’s already working. Think elevated basics that complement the creativity of branded product without competing with it. These are the foundational pieces that add value to the customer experience without overshadowing the designer brands that make your business unique. Elevated basics can also reinforce your identity as a thoughtful curator, allowing customers to trust you for both timeless essentials and creative discovery. The key is to make your basics relevant to your unique audience and space. When executed well, these pieces can be both aspirational and a margin driver, offering something that feels aligned with your store’s ethos while meeting practical customer needs.
Consider Barneys’ Co-Op line, which infused private label with a clear identity and purpose: offering elevated basics that complemented its high-end designer mix. The line didn’t attempt to compete with the creativity of established brands but instead filled a gap, reinforcing the store’s ethos and offering customers something distinct without overshadowing other products. This approach built trust and strengthened the store’s reputation for quality.
2 - Collaborative Capsule Collections Partnering with complementary brands is one of the most effective ways to elevate private label. These collaborations not only produce exclusive, limited-edition products but also tell a compelling story about creativity and innovation.
Kith has mastered this approach, collaborating with icons like Nike, Coca-Cola, and Versace to create collections that merge identities while staying true to its streetwear-meets-luxury ethos. These partnerships drive excitement, build loyalty, and reinforce Kith’s role as a cultural tastemaker.
For curated retailers, even smaller-scale collaborations can deliver the same impact. Partnering with niche designers or well-known brands allows you to expand creative influence while maintaining the diversity and storytelling your customers expect.
3 - Respect the Mix The magic of curation lies in its diversity. Private label should enhance the mix, not overshadow it. Keep it within 20–40% of your offering, and ensure it serves as a complement rather than a replacement. A thoughtful balance between private label, collaborative capsules, and branded product maintains the authenticity your customers trust.
Steven Alan was once celebrated as a pioneer of curated retail. His private brand was well-executed and reflected a strong aesthetic, but the mistake came when it began to dominate over 80% of the store's offering. This shift removed the diverse mix of independent brands that created the magic of curation, where customers could explore and personalize their style within a thoughtfully curated environment. When the choice was removed, so was the magic of discovery and personal expression, ultimately impacting the store’s identity.
An Alternative: Brand Incubation
Private label isn’t the only path to achieving higher margins. For retailers with operational scale, an underutilized yet impactful model is brand incubation. This approach merges the retailer’s expertise in operations with the creativity of emerging brands, creating partnerships that drive growth, innovation, and profitability.
Brand incubation allows retailers to support independent designers struggling to scale due to limited resources. By providing access to logistics, production expertise, and economies of scale, retailers can help these brands thrive while securing exclusivity and fresh storytelling that aligns with the store’s curated identity.
It’s important to acknowledge that this model isn’t suited to all retailers. Smaller stores without significant operational resources may find it challenging to implement. However, for those that have reached a certain level of scale, brand incubation offers a sustainable way to maintain profitability without compromising the curation and discovery customers expect.
Through thoughtful partnerships, retailers can develop exclusive product lines that feel authentic and create a community of discovery, positioning themselves as tastemakers and champions of creativity. This not only fosters customer loyalty but also reinforces the store’s role as a destination for new and exciting design.
The Bottom Line
Curated multi-brand retailers must never lose sight of what makes them unique: offering a broad selection of thoughtfully chosen brands. Customers come for discovery and diversity. The moment breadth and authenticity are compromised, they will look elsewhere. Protecting what makes the store special—creativity, collaboration, and the balance of essentials and discovery—is the surest way to inspire loyalty, trust, and long-term growth. Only when a private label line achieves a level of measurable success outside of the retailer's four walls should the business then consider transitioning into the traditional brand model. Even then, maintaining a certain level of curation and discovery remains essential to keep the retailer looking fresh and enticing the curiosity of customers.
