This page teaches how to price a private-label style against a comparable branded style sold in the same shop, for a retail buyer, a sourcing agent representing the retailer's own interests with the factory, or a brand-side contact who supplies both kinds of business. Earlier lessons in this course price a single style on its own cost and its own margin target. This lesson adds a second style to the comparison: a branded alternative the customer can choose instead, sitting on the same shop floor.
A retailer that prices its own private-label style purely from its own cost and margin target, without checking where that price lands next to the comparable branded style beside it, can end up either giving away margin it did not need to give away, pricing the private-label style far below the branded style when it did not have to, or pricing it so close to the branded style that customers see no reason to choose the private-label option at all.
You need: the pricing formula from Lesson 5.1 and the private-label margin figures already established for Fairway Stores' own private-label T-shirt. Track 19, Course 6, Lesson 1 (What private label changes) is useful preparation, though not required.
By the end of this lesson you can:
Not covered here: setting an initial price from a margin target (Lesson 1), the trade-off between price, volume and total profit (Lesson 2), and building a complete pricing and profitability worksheet across every stage (Lesson 4).
| Term | Meaning |
|---|---|
| Comparable branded style | A branded product sold in the same shop, similar enough in construction and quality that a customer could reasonably choose between it and a private-label alternative. |
| Price gap | The difference in shop price between a private-label style and a comparable branded style sold alongside it. |
| Margin | Profit divided by the selling price, shown as a percentage of what a company sells for. |
| Private label | A retailer commissions a factory to make a product to its own specification, sold under the retailer's own store brand. |
| Commission | A payment to an agent, normally a percentage of the order value, agreed in advance in the agency agreement. |
Pricing a private-label style purely from its own cost and margin target answers "what price hits my target margin," but it does not answer "does this price actually give the customer a reason to choose it." The price gap between a private-label style and a comparable branded style sold in the same shop is what a customer actually sees and compares; a private-label price set without checking that gap can accidentally erase the private-label style's own advantage, or leave margin on the table the retailer did not need to give up.
| What can differ | The shapes you meet | Why it matters |
|---|---|---|
| Export vs. domestic comparison | An export retailer such as Fairway Stores compares its own private-label style against an imported branded style sold in the same export shop; a domestic retailer compares against a branded style available locally | The comparable branded price a retailer checks against is whichever branded style its own actual customer can actually choose instead, which differs by market |
| One-off private-label development vs. reordered hybrid style | A first, one-off private-label development is priced once against the branded comparison available at that time; a proven style, reordered as a hybrid MTS-style pattern, needs its price gap re-checked periodically as the branded style's own price can move between reorders | A price gap that was sensible at launch can drift if the branded comparison price changes and the private-label price is never revisited |
| An agent brokering both sides | A sourcing agent such as Meridian Sourcing, paid a commission on the order value, may represent the retailer's interest in agreeing a factory price without necessarily reporting the price gap against a branded alternative it is not compensated to check | A retailer that relies only on its agent's own factory-side reporting can miss the customer-facing price-gap check that lesson's rule requires, since it is a separate question from the factory price the agent negotiates |
| A private-label style priced too close to the branded style | The private-label price sits within a few percent of the branded price, giving the customer little visible reason to choose the private-label option | A price gap that is too small can leave a private-label style underselling despite a strong margin, since the customer sees no real saving |
| Product families | The same price-gap check applies whether the styles compared are apparel, socks and hosiery, knit-to-garment, terry and towels, or home textiles and bedding | A retailer new to this comparison often starts with a single, well-known branded comparison, then extends the same check to other product families later |
Fairway Stores sells its own private-label T-shirt, priced at USD 14.80 from Lesson 5.1's own margin-target calculation, in the same shop as a comparable branded T-shirt, the kind Fairway Stores used to resell wholesale, priced at USD 19.90. Meridian Sourcing, the agent who helped agree the factory terms for the private-label development with Delta Garments and who earns a 5% commission on the order value, is asked by Fairway Stores' own buyer to confirm the price gap between the two styles makes commercial sense before the private-label style goes on sale.
Fairway Stores needs to know both the dollar price gap and each style's own margin, since a price gap that looks large in dollars can still leave the private-label style under-margined if it is checked incorrectly, and a price gap that looks small can still be a deliberate, sensible choice if the margins support it.
The worked numberThe worked number shows a favourable outcome for Fairway Stores: the private-label style is priced USD 5.10 below the comparable branded style, a visible saving for the customer, while still earning a higher margin, 75% against the branded style's own 60%, because the private-label style's own cost is far lower than the branded style's own wholesale buying cost. This is the outcome private label is meant to produce, but it only shows up clearly once the two styles are compared side by side, not when each is checked against its own cost alone.
A common mistake is treating a private-label style's own strong margin, such as 75% in this case, as proof the pricing decision is finished, without ever checking where that price actually lands next to the comparable branded style on the same shop floor. A private-label style can hit an excellent margin target and still be priced too close to a comparable branded style to give the customer any real reason to choose it, or priced so far below it that the retailer gives up margin it did not need to give up. Meridian Sourcing's own role, agreeing the factory price, does not by itself check this customer-facing comparison; it is a separate question the retailer's own buyer has to ask directly.
A private-label style's own margin does not by itself say whether the price is right; the price also has to be checked against the comparable branded style sold next to it in the same shop. On Fairway Stores' own T-shirt, pricing the private-label style at USD 14.80 against the comparable branded style's own USD 19.90 gives the customer a visible USD 5.10 saving, while the private-label style still earns a higher margin, 75% against 60%, because its own cost is much lower. Checking margin alone would have missed whether that price gap actually makes commercial sense.
A colleague proposes raising the private-label T-shirt's own shop price from USD 14.80 to USD 18.90, arguing the private-label style is popular enough to support a higher price and still undercut the comparable branded style, which remains at USD 19.90. The facts in front of the buyer:
The note from the buyer's own file:
Should the buyer approve the USD 18.90 price on the strength of the improved margin alone? Decide before you open the decision.
No. The buyer should not approve the price on the strength of the improved margin alone; the narrowed price gap needs checking first.
Two facts decide this. First, this lesson's own rule states that a private-label price must be checked against the comparable branded style's own price, not judged by margin alone; a stronger margin does not confirm the USD 1.00 gap still gives customers a visible reason to choose private label. Second, this lesson's own trap warns exactly against treating a strong margin as proof the pricing decision is finished; no customer research has confirmed whether USD 1.00 is still enough of a gap, which is the actual question this decision turns on.
Rejecting the higher margin outright would also be wrong; USD 18.90 might be a perfectly good price. The point is that the decision cannot be made on the margin number alone, since the margin improving is not the same fact as the price gap still working for the customer.
The USD 61,500 gain above assumes every piece still sells at the higher price, an assumption this lesson's own decision does not confirm. If narrowing the gap to USD 1.00 turns even a modest share of customers toward the branded style instead, the resulting lost profit can offset much of the margin gain, which is why the price-gap check must happen before the higher price is approved, not after sales figures reveal the answer.
Use the T20-C05 Pricing and profitability worksheet. For Fairway Stores' own private-label T-shirt, enter both styles, the private-label style and the comparable branded style, with each one's own cost and shop price; the sheet calculates each style's own margin, the dollar price gap, and flags a gap this lesson's own method calls too narrow to check against customer research before it is approved.
[Download the Pricing and profitability worksheet](../../templates/T20-C05-pricing-and-profitability-worksheet.xlsx)
1. Why should a private-label price be checked against a comparable branded style's own price, not set from cost and margin target alone?
2. Fairway Stores' private-label T-shirt sells at USD 14.80 with a 75% margin; the comparable branded style sells at USD 19.90 with a 60% margin. What is the price gap?
3. A sourcing agent has agreed a strong factory price for a new private-label style, giving it an excellent margin. What has the agent's own work not yet confirmed?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Comparable branded style | موديل العلامة التجارية المماثل | Style de marque comparable | Karşılaştırılabilir markalı stil | A branded product sold in the same shop, similar enough in construction and quality that a customer could reasonably choose between it and a private-label alternative. |
| Price gap | فجوة السعر | Écart de prix | Fiyat farkı | The difference in shop price between a private-label style and a comparable branded style sold alongside it. |
| Margin | الهامش | Marge | Marj | Profit divided by the selling price, shown as a percentage of what a company sells for. |
| Private label | العلامة الخاصة | Marque de distributeur | Özel marka | A retailer commissions a factory to make a product to its own specification, sold under the retailer's own store brand. |
| Commission | عمولة | Commission | Komisyon | A payment to an agent, normally a percentage of the order value, agreed in advance in the agency agreement. |
You now know how to price a private-label style deliberately against a comparable branded style. The next lesson brings every pricing and profitability check from this course together into one complete worksheet, covering an entire style's own pricing decision from cost to shelf. Back to the course map