It used to be that private-label products were for consumers on a tight budget. However, a global shift has occurred in which consumer sentiment about store brands is overwhelmingly positive. To leverage that relatively newfound respect in the marketplace, there are very specific things that U.S. retailers can do to help store brands compete with their more recognized name brand counterparts.
Private-label sales and shares are strongest in commodity-driven, high-purchase categories and those where consumers recognize little differentiation, such as paper products and medications such as headache pain relievers. Private-label products do not do well in conditions where there is a:
Conversely, name brands have a tougher time competing with store brands in categories that showcase the following attributes:
Formula for Success for Both Private Label and Name Brands
Private labels are here to stay, and a key piece of the puzzle for their growth and success is the assortment challenge. It is a misconception, however, that increasing the breadth of assortment will automatically drive sales. Retailers must pursue the right selection, not just a bigger selection. Consequently, retailers should take necessary delisting decisions with great care. In the U.S., where the retail market is fragmented, 31% of sales come from the category leader, 17% from private label and 52% from all others. Retailers must manage their shelf space carefully. Removing too many high-penetration, high frequency or strong niche brands from store shelves can drive shoppers to the competition.
To determine an optimal assortment strategy, a keen understanding of market dynamics and consumer consumption patterns is necessary. While the right assortment varies by market conditions, one factor is critical for all consumers: Consumers want to comparison shop. Over three-fourths (78%) of U.S. respondents prefer to see name-brand and private-label items next to each other on the store shelf so they can easily review prices.
Additionally, manufacturers must adopt a collaborative mindset and help retailers win across the store with both private label and name brands. Consider joint promotion opportunities. For example, If one group of consumers prefers a name brand in a category while another prefers private label, a retailer could promote them both in the same week. Additionally, manufacturers could create integrated shelf sets to help retailers lay out their store shelves. They could also discuss shelf placement options with retailers in categories where they don’t already have a private-label presence.
This article originally appeared on www.storebrands.info.