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Key Idea: Increase Profit Margins With Private Labels

Navarro Pharmacy stocks approximately 3,000 items with their own brand. In many cases, the private label brand is the #1 seller in the product line.

Key Question:

A: 

Navarro Pharmacy stocks approximately 3,000 items with their own brand. In many cases, the private label brand is the #1 seller in the product line. These products produce higher margins for Navarro Pharmacy than the nationally recognized brands.

Q:
Why do private label products produce higher margins?

A:
Private label products are generic products labeled with your company's name. Generic products are less expensive than the nationally recognized brands because the manufacturer has not invested in the advertising and public relations efforts necessary to achieve that level of recognition.

Consequently, the manufacturer of a generic product can price his product lower than a well known competitor and still make a profit. The retailer can then pass this cost savings on to the consumer, making the generic product an attractive alternative to the price-conscious customer.

Q: So if a retailer buys a generic product, puts his label on it, and sells it as the least expensive alternative, that will be the store's #1 seller?

A:  The decision to buy is affected greatly by the price. But price is not the only consideration. Consumers have to trust that the product will do what it is intended to do. Navarro Pharmacy capitalizes on its customer loyalty in providing private label products; they know their customers have faith in them and believe Navarro will not put their label on a low quality product. And the company treasures their customers' trust, and is careful to evaluate products thoroughly before attaching the imprimatur of its private label.

How does a company know when private labeling is a good alternative? You heard Louis say that they couldn't private label products until they had 7 stores. Manufacturers require substantial order quantities before they can private label a product cost effectively for a retailer. For companies who can achieve the necessary volume, private labeling can be a win-win-win for the manufacturer, the company, and the customer. 

Think about it

Can you use this idea even though you're operation may not be as large as Navarro Pharmacy?

Clip from: Navarro Discount Pharmacies

Miami: In this city, a destination for new Spanish-speaking Americans, finding somebody who understands you, knows and feels your pain, is a seismic relief. With a profound empathy, this family's business is committed to service and to solving very big problems for their customers.

With an abiding willingness-to-serve, this family's business is one of the most profitable per square foot of any retail store in the USA. When we taped this story there were 12 locations generating $160 million in annual sales and jobs for nearly 600.

So many new medicines are announced every day, it is almost impossible for anyone to keep up. But, those new Americans with a limited command of English, and our elders who are taking multiple medicines, have special challenges.

This family has always been committed to serving their customers. Eighteen-hour days, seven-days-a-week -- whatever it took to get the job done and keep their customers in good health -- these people have done it.
In the process, they have created a first-class business.

Opened in the United States in 1961, the two sons became pharmacists; and today, with 600+ employees, they have become the most productive pharmacy per square foot in the USA and they are a force for good that is helping to reshape Miami as a world-class community.

A classic family business, three generations of compassionate people are involved at every level of the operations.

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Navarro Discount Pharmacies

Jose Navarro, CEO

5959 NW 37th Ave
Miami, FL 33142
305-633-3000

Visit our web site: http://www.navarropharmacies.com

Office: 305-633-3000

Business Classification:
Retail, Pharmacy

Year Founded: 1961

Increase Profit Margins With Private Labels

HATTIE: All right. Talk to me. How many products are you putting your own labels on?

LUIS: I believe right now we have about 3,000 products.
LUIS: You've got to have a certain amount of sales. These manufacturers don't want to put your... They don't want to spend money on the labels, on the package unless you can buy a certain amount of product. So I think we were where we had, like, probably seven stores, it was when we were able to get started with the store product label...

HATTIE: So you get more margin on this.

LUIS: Right.

HATTIE: So, of course, that's the motivation.

LUIS: Right. That's what we try to sell. And we've been able to--since all these generic and private label products are now so popular, you get so many companies that are doing the manufacturing that the quality has really changed from the quality that it was back in the '70s.

HATTIE: Has it gone up or down?

LUIS: Better.

HATTIE: The quality's up?

LUIS: A lot better. A lot better.

HATTIE: So you're really proud of this product.

LUIS: Oh, yeah. Yeah. And in every category, most--I would say 80 percent of the categories that you look at--and you look at the movement of the products--our private label has become, like, the number one seller in most of the categories.

HATTIE: Really?

LUIS: Yeah. And then the national brands will go below that. 

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