Given the recent economic slowdown in developed markets, the ‘value-conscious’ shopper is more visible across store aisles than every before. No doubt, this trend will continue even as economies stagger out of the recession and rehabilitate. This environment will see a fair share of shoppers retain their ‘value mindset’ with an increased preference to shop at stores that have everyday low prices (EDLP) and exhibit a tendency to be uncharacteristically frugal. Retailers too will adjust to this environment by exploring newer formats like shop within shops and smaller formats that cater to this shopper.
Findings from a 2010 Nielsen global online survey of more than 27,000 respondents across 53 countries show that the private label phenomenon is here to stay. In fact, while more than half of online consumers surveyed said they purchased more private label brands during the economic downturn, fully 91 percent said they will continue to do so when the economy improves.
Global Progress is Continual
On a global scale, the impact of the economic environment on private label has played a more marginal role. Looking at a comparison across markets, there is a slow, but steady continuation of private label progress, which is actually the result of more retailers deploying private label products in a growing number of categories, a phenomenon that’s continued for more than two decades.
The victims of this transformation are the small and medium brands that get de-listed in favor of private label. Generally, the leading brands in the category are not suffering and private label isn’t fatal for healthy brand leaders. Consider this: In Europe where private label is most developed, store brands still only capture an average 35 percent market share. In the U.S., private label’s market share is still under 20 percent.
As retailers continue to become more adept at using national advertising to build store brands, growth will surely continue. The advertising of retailer banners has grown over time and this has a positive impact on the brands that these retailers carry. The evolution of private label products has also resulted in these brands operating above the lowest price band. Increased store visibility through facings and a proliferation of SKUs has resulted in greater familiarity and awareness of these brands among shoppers.
National manufacturers will realize that the best way to guard their brands’ turf will be to treat private label as legitimate competition and reactionary price reduction measures will only provide a temporary reprieve. Clearly, national brands still command a greater proportion of their categories at an overall level and private label usually takes the place of ‘challenger’ to a vibrant and dynamic market for shoppers.
Private label brands are in a position to compete on value and quality—key attributes that today’s consumers seek. The opportunity for retailers is to use private label to differentiate themselves and lead the way with innovation to help build and sustain the image of the entire franchise.
- For more detailed country-by-country review, download the complete report: The Rise of the Value-Conscious Shopper – A Nielsen Global Private Label Report