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Private Label’s Place in the Shelf-Space Shuffle
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Private Label’s Place in the Shelf-Space Shuffle

While a narrowing divide in product quality and packaging perceptions are contributing factors in the rise of store-brand products, private-label growth is partially driven by what’s available on store shelves; that is, it’s an offer-driven market. Globally, nearly six in 10 (59%) respondents agree they would buy more private label if more products were available. It is a misconception, however, that increasing the breadth of assortment will automatically drive sales. To succeed, retailers must pursue the right selection, not just a bigger selection. Consequently, they should make necessary delisting decisions with great care.

A common misconception is that adding a lower-cost private label product on the shelf will cannibalize sales of name-brands within the category evenly. Sales figures disprove this belief, as the category leader is not typically challenged by private-label cannibalization; rather, the No. 2 and 3 brands often face the greatest threat to sales. For example, on average, 40% of sales in the U.K. come from the category leader, 41% come from private label and 19% come from all other brands. In the U.S., where the retail market is more fragmented, 31% of sales come from the leader, 17% come from private label and 52% come from all others. When considering expanding private-label offerings, retailers must manage their shelf space carefully, or risk driving shoppers to the competition.

So what’s the optimal number of private-label brands to offer? It depends on the market and the category. In the U.S. and Europe, consumers are more accepting of private label products than in other parts of the world: only one-third of North American (33%) and European (35%) respondents believe retailers have too many private-label brands on their shelves. In developing markets, where there are significantly fewer private-label brands and consumers are more apt to want more brand names on the shelves. Despite the brand-to-private-label ratio in developing markets, more consumers feel there are too many private-label brands on retailer shelves (50% in Asia Pacific, 60% in Africa/Middle East and 54% in Latin America). Correspondingly, more than half of respondents in developing markets also think retailers have eliminated too many name brand products, driving them to shop in multiple stores.

To determine an optimal assortment strategy, retailers need a keen understanding of market dynamics and consumer consumption patterns. While the right assortment varies by market, one factor is critical across the board: Consumers want to comparison shop. Nearly three-fourths (73%) of global respondents prefer to see name-brand and private-label items next to each other on the store shelf so they can easily review prices.

The report also discusses:

  • Which product categories are best suited for private-label and brand-name offerings.
  • What are regional attitudes and sentiments surrounding private label products?
  • How to optimize private-label retail strategies in both developed and developing markets.

For more detail and insight, download Nielsen’s Global Private Label Report.

About the Nielsen Global Survey

The findings in this survey are based on respondents with online access across 60 countries. While an online survey methodology allows for tremendous scale and global reach, it provides a perspective only on the habits of existing Internet users, not total populations. In developing markets where online penetration has not reached majority potential, audiences may be younger and more affluent than the general population of that country. Additionally, survey responses are based on claimed behavior, rather than actual metered data.