If you missed it: there was an excellent article in the March 20th MarketingProfs newsletter dubbed Premium Store Brands: The Hottest Trend in Retailing. The authors, Nirmalya Kumar and Jan-Benedict E.M. Steenkamp, hit the nail on the head in this article: retailers have developed, branded and positioned private label brands so effectively, that this has become a primary tool in their efforts to differentiate themselves from stiff retail competition.
By elevating the perception of quality –and even positioning some of these brands as premium — retailers have been able to take significant market share for themselves with private house brands. They’ve also been able to increase precious profit dollars in the process.
Not only that: they’re now giving the very national brand companies that manufacture the private label brands that are positioned side by side in retail environments. There’s stiff competition at every level: competing directly for public brand awareness, sales volume and profit dollars.
Private labels now account for 15% of all retail sales with the greatest share — 19% — coming from the food retail segment. And ACNielsen reports that between 1997 and 2005, private label brand sales rose 64%, compared to a 30% increase for national brands.
Retailers in all consumer product segments will continue to develop more private label brands due to the tremendous growth and profit potential this holds out for them.
Interestingly, retailers were once product-centric, content to merchandise a mix of nationally branded product lines. However with the rise of awareness in creating a unique customer experience, and much-increased competition, retailers have shifted to becoming customer-centric. Thus, private label offerings are being branded as part of the total shopping experience within retail environments.
The added bonuses of establishing unique positioning and increased profitability have only whetted the retail appetite for more private label brand development. Given this, the trend is going to accelerate even more.
Food chains like Whole Foods, Trader Joe’s and Wegman’s have pointed the way by making private label lines an integral part of their retailing strategies.
Even though grocery chains like A&P and Kroger have offered private label brands to consumers for decades, these offerings appeared dull and lifeless, cheaper but perhaps shoddier in quality to the consumer, or at least suspect. With uninspired packaging, these products tended to languish on bottom shelf sets.
On the other hand, retailers like Whole Foods have made private label happen. They’ve differentiated several private label lines; some are more economical and price-point oriented and some are gourmet and upscale for more sophisticated culinary tastes. Specialty retailers’ private labels embody the brand values they have come to represent. These retailers have created an entire experience for their customers: all-natural, holistic, environmentally conscious, healthy and nutritious. Thus, their private label offerings possess these same values in the consumer’s eyes.
Compare this to the product-centric positioning of national brands: quality, selection, occasional strong promotional pricing, and trust. The latter element is a very strong one. When national brands have been in existence for a while, consumer trust is based on years of experience and consistently good results with those brands. Yet, national brands have come to recognize that they too, must create a positive brand experience for the customer.
The upshot: competition is a good thing. When national brands and private label brands vie for consumer dollars, they both have to remain keen. All brands had better be faithful to their core values, and perceived as great values by the consumer, regardless of price points. National brands and private brands can coexist and prompt each other to do better and better. And that’s a win-win for the consumer.
What kinds of experiences have you had with retail brands? Have you been prompted to purchase on price, quality perception, or the weight of the retail brand? Have you been satisfied when purchasing retail brands? Please share. . .we’d love to hear from you.