As brands lost share to private labels, the pandemic gave it renewed growth Business News

Lisa Bahmann-Rocher, New Business Development and Presales, Trace One

As brands have lost market share to private labels over the past decade, the pandemic has given it an unprecedented growth spurt

Retailers and suppliers have been hit by unexpected supply chain shortages due to the pandemic. Buyers were stocking household and shelf-life items, causing major unforeseen out-of-stock situations.

While we cannot predict that private label sales will continue to rise, it is imperative that retailers maintain the momentum by leveraging short-term shoppers’ shifting behavior to retain longer-term shoppers.

Now is the time to learn what works, what needs to be improved and where the gaps can be filled. We recommend that retailers carefully review both internally and externally their current private label strategy.

Retailers can perform an internal audit or diagnostic to assess their private label strategy and program in the following areas: marketing, merchandising, quality, price, innovation and assortment.

Marketing

Regardless of a generic, category specific or quality level specific branding strategy, does your customer understand the positioning or the value proposition? Have you developed a highly recognizable visual and corporate identity and are you following a consistent messaging strategy? Are your guidelines clearly communicated throughout your organization? An attractive visual identity and strategic brand architecture contribute to the success of your private brand program.

Was your private label communication clear and based on consumer needs? If so, was the brand’s communication consistent in its message? Are there any private label guidelines implemented so that everyone in your organization is aware of them, from the company to the store?

Private label products packaged in recyclable packaging or edible packaging should also be considered. Business app provider CGS conducted a survey in November 2018 that found that 68% of US internet users believed product durability was an important factor in making a purchase. What sustainable packaging initiatives have you implemented or are you planning to implement for your private label packaging?

Merchandising

Where private label products are placed on a shelf plays a critical role in sales. The ideal product placement for private labels versus national brand is right up to the market leader’s eye level, making it easy for buyers to compare the two choices. However, it is not always possible to position yourself at eye level, especially if there are several variations to compare to the leading brand. If this is the case, the products could be separated vertically and placed next to the leading variant of the relevant market.

If you’re unsure of the best product placement, image recognition technology combined with point-of-sale data has been shown to indicate the optimal shelf placement and number of faces. Secondary placement, gondola ends and cross-merchandising will also provide additional opportunities for private label awareness and sales revenue.

Quality

According to an IRI Private Label study, more than 70 percent of American consumers believe private label products are as good as national brands. The importance of consistently delivering high quality private label products cannot be understated. Private label products are more scrutinized than national brands, as national brands are traditionally more trustworthy.

Do you know how the quality of the best private label supplier compares to the big national brands in this category? Does your QA organization regularly test your products and competitive products?

Price

When retailers develop a private label pricing strategy, the price of the benchmark or national brand benchmark should be considered. When a private label product does not have a comparable brand benchmark in premium quality or value levels, retailers can use multiple factors to determine pricing.

Once the prices are determined, price differences should be regularly monitored and national brand promotions taken into account, which will also lead to a reduction in price differences. It is recommended to establish price differential guidelines to allow for promotions and competitor pricing. Studies have shown that an increase in private label price differentials leads to increased private label sales and vice versa for decreases in price differentials.

Innovation

Private label is at the forefront of innovation as retailers have the freedom to work with suppliers to develop new categories and concepts and launch faster than national brands. Innovative private labels provide the opportunity to differentiate and redefine consumer brand expectations, ensuring increased customer loyalty and driving higher profitability.

As the share of private label penetration continues to increase and consumers continue to trust the quality and performance of private labels, retailers can initiate a steady stream of innovative products …