Table of Contents
Private label has revolutionized the way people shop. If in the past consumers would flock to known and trusted brands to seek quality. They now are turning to private labels not only for their more affordable pricing but because the consumer understands that private label quality often is the same as, if not even better than, that of the name-brand. This turn of events has forced brand-names to change their approach to the sale of consumer goods and brought about competition giving the consumer not only more choices of what to purchase, but at better competitive prices.
Private labels and brand-names have had to up their game in today’s ever growing and crowded market. The growing popularity of private label products has been occurring for years now, and it has changed the retailer-manufacturer power balance and the way we shop for consumer goods, and things will never be the same.
The Rise of Private Label
Private labels have been around for decades, usually offering lackluster, generic products of questionable quality for cheap. The shoppers who initially bought these products tended to be those who simply could not afford the better brand-names, and the big brand companies were not really threatened by these perceived low-quality imitation products. Over the years though, private label companies improved their products and especially their product packaging. They no longer relied on drab labels which hoped to lure low-income individuals. Private label companies began to produce attractive packaging that slowly but surely approached that of the brand-name companies. Private label products rose in quality and marketed themselves as such, so that when consumers switched to private label products due to national/global recessions, or times of personal financial distress, they did not automatically switch back to the brand-name when better financial times returned. With repeated waves of mini-recessions, consumers have become more frugal in their spending and have increasingly sought out more affordable alternatives, even when the economy shows improvement.
This process of consumer shift towards private label products accelerated during the recession of December 2007 to June 2009, when consumers across every demographic category, including those whose financial status was not significantly altered by the recession, made changes in their spending habits and demonstrated behaviors signifying a new economic sensitivity and awareness. These money-saving behaviors, such as seeking discounts, getting by with less and buying private label products, have become the new normal. It was during this recession that more and more consumers began to consider private label products not just as acceptable alternatives, but equals and in some cases even the betters of the brand-name products they had previously been accustomed to purchasing.
Store Brands- The Emerging Superpowers
Major mass retailers and supermarkets also jumped on the private label bandwagon and pushed their own store labels, seeking to maximize on consumer loyalty and shoppers’ desire to save money while still maintaining the quality of their purchased items.
Wal-Mart, Home Depot, Nordstrom, Walgreen, Best Buy, and Target, among many others, are all relentlessly innovating to create appealing brands to compete head-on with long- established national brands. Until this period, private label brands had lacked the equity and trust of their name-brand competitors. When consumers thought of certain products, like batteries for example, they thought of Duracell. It was a brand they knew and could rely on, but today the retail game has changed, and top private label brands of good quality now look and feel like the name-brands that used to be daily staples.
New Categories and Premium Private Label Brands
Private labels are continually expanding into new and diverse categories and their market-shares keep rising. In supermarkets, for example, private labels have advanced well beyond the traditional staples such as dairy products and canned goods to include diapers, personal care and beauty products, paper goods, beverages and candies. Private label sales have also increased in categories such as toys, electronics, clothing and alcohol. This expansion brings with it increased acceptance by consumers. The more quality private label products are available on the market, the more readily consumers are to switch over and purchase a private label item over a name-brand. This truly is a case of success breeds success.
Private label companies however, not only want to draw in new consumers, but these companies want the shoppers to feel good about what they are buying. They want to build the same trust that the name-brands previously had by creating premium brands that highlight the quality of the private label premium product. Though these products might not be cheaper than the competition, and in some cases might even be more expensive, premium products hold an appeal because consumers are more health and eco-conscious than ever before and private label companies have been quicker to adjust than brand-name companies.
Empowering the Retailers and Supermarkets
As some name-brands lose market shares to private label gains, a shift in power has occurred in retailers dealings with suppliers that then benefit consumers on several fronts. With the added competition and the rise in popularity of their store brands, retailers and supermarkets have caused some manufacturers to lower prices. The private label products have become a bargaining chip to get more from the manufacturers. To help
further promote their products, brand-name consumer goods companies have had to provide more funds to a retailer’s marketing campaign to pay for discounts, promotional offers or prime placement in supermarket circulars. Retailers are even getting better rebate offers from their suppliers, as incentive to help push sales of brand-name products. Retailers used to want to place name-brands front and center in order to draw the attention of shoppers, now they can leverage the supplier for this privilege.
A New Strategy- The Manufactures’ Response
Since consumers now regard store brands to be of equal quality to brand-name products, brand-name companies have been forced to either reduce prices and come up with new strategies to retain, and even win-back, consumers, or continue to lose market share. These major companies have been forced to invest money and become innovative- increasing advertising to help their brands. As consumers continue to switch to private labels though, manufactures face ever increasing pressures to do more than fancy advertising to support their flagging brands.
Consumers’ mainly money-saving switch to private label brands has encouraged these consumer product manufacturers to adopt even more aggressive market-share strategies such as lowering prices, accelerating product launches and increasing consumer engagement with the brand. This last strategy has proved to be an essential part of private label success, and though they were late in applying this, the brand-name product manufacturers have begun to catch on listening to customer feedback and adjusting their products accordingly. Developing in-depth customer feedback, then learning and adapting from such insights, has become an increasingly necessary part of meeting consumers’ desire for more broadly defined, and greater, value products. The consumers themselves have a greater attachment to the product because they feel they have a voice in getting what they want out of it. The more adaptable a product is to new trends, the higher the chance of it retaining its market share hold.
Consumers today have more convenient access to a wider array of product choices, and are more willing than ever to try new and different brands, causing name-brands to continue to lose their hold on the consumer. This has forced the name-brand companies to fight back with innovative new strategies that have been a boon to both retailers and consumers.
Along with a general rise in item quality, private label companies continue to introduce healthier and more eco-friendly products with more attractive packaging, all while generally being easier on consumers’ pockets. To strengthen the perception of improved quality, supermarkets and mass retailers have created multi-tiered store brands in various product categories that include premium products which, in some cases, cost more than their national brand competitors. This has given the consumer the feeling that they can stay within the store brands and still find the quality that they want. If name-brand companies want to keep their market share, they’ll have to continue to innovate and figure out new ways to appeal to today’s savvy consumer.