HOW THE RISE OF PRIVATE LABEL IS AFFECTING BRANDS IN A BIG WAY
Although once associated with utilitarian design and a ‘no frills’ shopping experience, private brands have been driving a market transformation in recent years. Their success has created a shift in a market once dominated by big brands. To better understand the impact, let’s look at where these shifts are occurring within retail and consumer shopping experiences.
The Reallocation of Resources
Increasing demand within the private label space has allowed retailers to reinvest and focus on growing their private label portfolio. Part of this shift has included the development of internal teams focused on leading private label strategies for retailers, while others are investing in strategic partnerships with outside brand strategy partners to help supplement their core merchant team.
As retailers such as Amazon, Walgreens, and Target have seen, a clear strategy behind the private label product mix is key to sustainable growth. Each strategy must be rooted in the retailer identity in order to resonate with consumers; many of which are overall more likely to be retailer loyal than brand loyal. For example, the retailer identity of Target is largely associated with affordability, quality and accessible style, and although their brands have unique offerings within the Target master strategy, the core similarity remains the key attributes that capture the essence of their consumers’ needs.
Consumer Demands Are Evolving
Driven largely by the influence of millennials, shoppers are becoming more brand agnostic than ever before. They make purchase decisions based on both the perceived quality of products as well as the price, while expecting brands to deliver on both. This bodes well for private label brands looking to capture the attention of these sought-after shoppers. In order to resonate with millennial consumers, retailers will need to continue investing in their private label brands and find ways to keep the value proposition in line with consumer needs.
Product Engagement Levels Rising
Private label brands are increasingly focused on product innovation and procurement to better meet the evolving needs of today’s consumers. We are seeing a shift in the product mix that is being offered and the creation of brands tailored to consumer trends. In a traditional sense, private label has been focused on providing basic, commodity driven items. Today, retailers are developing portfolios to meet consumer needs more broadly – focusing on health driven offerings, convenience packaging and eco-conscious products that appeal especially to millennial consumers. Ensuring product mixes capture these growth categories, as well as the basics, allows the retailer to check boxes most relevant to the consumer and better deliver on their needs. Target is one retailer that has expanded portfolio offerings in recent years to capture home décor, clothing and grocery products within tailored brands reflective of consumer need states. Simply Balanced, Target’s organic grocery brand, specifically appeals to shoppers looking for affordable healthy options and is just one brand within the broader portfolio with focused offerings.
Merchandising Matters More Than Ever
Although lead-ins, stand-alone displays and disruptive in-store signage continue to be dominated by big brands, we’re seeing an increased focus on private label merchandising strategies. Target is perhaps the best example of turning expected in-store experiences on their head by creating compelling experiences that surprise and delight their guests every trip. The retailer now features their home products as a destination that is inspired by creating in-home cues and comforts for their guests to peruse and shop, while using exclusive brand partnerships to drive loyalty and engagement. Additionally, retailers are starting to reserve coveted end cap displays to feature their own brands over the national brand equivalent. This represents a huge strategy shift, driven by strong consumer demand for private label offerings and the compelling value equations they offer.
As in-store merchandising strategies continue to evolve with the rise of private label, we are seeing a greater presence of store brands on retailer websites – with some private label brands having unique web pages of their own. Having an online presence allows brands to demonstrate their personalities and connect with the millennial shopper—a group that does a significant amount of online shopping. As retailers invest in marketing for private label brands, they are helping remind consumers about the smart choices they can make so that they remain in consideration (or even top of mind) at shelf.
Why It Matters
Simply put, the potential for private label to play a larger role in the consumer mindset and impact their purchasing decisions is yet to be fully realized. Though we’ve seen growth, investments and paradigm shifts in this category in recent years, there is still greater potential for private label brands to drive loyalty for retailers and to resonate with consumers who are looking for authenticity, quality and affordability.