Retailer’s own labels are becoming stronger than classic brands … more intimate, more contextual and more experiential

December 28, 2016

“Private labels” (store brands) are a retailer’s own branded versions of popular products, used to be seen as cheap and generic, sometimes as low-priced imitators of classic brands.

That old mindset has changed. Supermarkets now offer their own gourmet food ranges as good as restaurants, or even better when you can assemble them at home. They can bring together “solutions” from multiples categories under the same brand. They can offer services, such as purchase advice or after-sales support, complimentary services and more. And just like Netflix is able to use its deep knowledge of people and their behaviours to personalise its movies and suggestions, so retailers can leverage loyalty card data and instore tracking to offer more relevant and personal solutions.

Compare this to classic brands – like Kellogg’s or Heinz – they never get to meet their consumers, or have data on their individual behaviours. They cannot create branded in-store environments that allow human engagement, or extend beyond their branded packaging. Yes they have brands of heritage and expertise, available n multiple places, and supported by blockbuster advertising. However the difference in quality is little, and many brand owners even make the private label alternatives too.

“Private labels” have become more effective than classic brands – and with a little nurturing have the opportunity to innovate and grow in ways that their previously esteemed rivals cannot. They can also be much more profitable, flexible and value-creating for their owners, the retailers.

So what are some advantages of private label?

  • They can focus more on the needs of the target consumer, leveraging the intelligence of the store to understand consumer behaviours and preferences.
  • They enable direct contact with manufacturers and suppliers, reducing the distance “field to fork”, and improving transparency and traceability.
  • They promote the retailer brand in tangible and innovative ways, enhancing the relevance, the value and reputation of the retailer.
  • The ability to avoid or climate competition means there is less focus on price battles, and also price matching by consumers across stores.
  • There is more control and flexibility, to get new ideas to market faster, to adapt pricing to changing situations, and learn quickly from consumer response.
  • They can be complimented by additional products, for example in adjacent categories, or services that enhance the consumer’s experience.
  • The overall cost is cheaper, less intermediaries and commissions, economies of scale and as a result potentially higher margins.

Insights and ideas:

Amazon: Amazon’s Big Private Label Push, and Why Name Brands Matter Less Nowadays

Amazon is significantly expanding its usage of private labels. According to the Wall Street Journal Amazon will soon be promoting and selling brands like Happy Belly (nuts, trail mix, tea), Presto! (household goods), and Mama Bear (baby items). Meanwhile, the company already has been stealthily selling at least seven in-house apparel brands that many customers probably have no idea are clothes made exclusively for the site.

Belk’s: What’s a ‘private label brand’ and what’s that mean? We take a look at Belk’s

The Charlotte-based department store has 22 private label brands … For major department store retailers like Belk, private label brands are critical: They fill in market gaps left open by national brands. (Are Southern women craving brightly colored T-shirts with preppy anchor logos at a modest price? Belk will make them, if no one else is.) Retail analysts say companies like Belk keep more of the sales dollars from private label brands because national-brand middlemen are eliminated, and stores can choose how and when to mark down items.

Kroger and some other grocery retailers are seeing a growing share of sales come from these private-label products, and shoppers should expect to keep seeing new items and private brands pop up on store shelves. Private-label sales took off in the penny-pinching Great Recession, but today the private-label products you see will increasingly be high-end, with gourmet ingredients, or will be found on the store perimeter, where health-conscious shoppers are hunting for fresh produce and meat.
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