Becoming a Best-of-Breed Store Brands Retailer
ROSEMONT, Ill. -- It’s only natural for retailers to want to win as many converts to their own brands as possible, but focusing only on bringing in the new while neglecting the current private label fan base could be a mistake, according to Todd Hale, senior vice president of consumer and shopper insights at Nielsen.
In a presentation at the recent Store Brands Decisions Innovation & Marketing Summit in Rosemont, Hale said there’s nothing wrong with working to acquire new store-brand purchasers since retailers understand that, for many reasons, they will lose customers — including ones who purchase own-brand products — over time. However, if a retailer puts all of its store-brand sales efforts into converting new shoppers over to private brands and neglects to court its top-spending store-brand purchasers, it could be doing more harm than good.
According to Hale, the top-spending purchasers of private label products account for 43 percent of own-brand sales and make up one-fifth of the shoppers who purchase private brands.
The negative consequences of losing one of these shoppers would outweigh any positives associated with gaining new store-brand shoppers. Therefore, retailers need to make sure they know and understand these shoppers’ wants and needs.
Top-spending purchasers of private label products also spend three times more per year than lighter store-brand buyers do and make about twice as many shopping trips per year — spending $7 more per trip. Top purchasers are less “deal prone” than lighter purchasers, too.
And even though U.S. purchasers of store brands — both top-spending and lighter buyers — spend most of their budget on national brand products, more than one-quarter of dollar sales for top-spending private label purchasers is devoted to store brands, Hale said. This equals a 10-point-share swing over all other store brand purchasers, who dedicate 16 percent of dollar sales to private brands.
Not a huge surprise: Large families with children over-index in terms of being top-spending purchasers of store-brand products. These households are driven by a need for value, given the number of mouths that must be fed, along with the number of bodies that need to be cleaned and cared for.
Small and no-kid households, though, are also important top-spenders, Hale explained, especially in the dairy department and the deli where few high-indexing demographic groups can be found.
Of all age groups, two are especially critical to convert over to the store brands side: female household heads between the ages of 35 and 44, and female household heads between the ages of 45 and 54. These two groups are most likely to fall into the top-spending store brands segment, said Hale, noting that most “best of breed” store brand retailers are well-positioned to win among these two groups.
The top 10 "best of breed” retailers when it comes to private brands include ALDI, Costco, Wegmans, Save-A-Lot, H-E-B, Dollar General and Hannaford, according to Hale.
He made it clear that there is no “magic number” of private brands that qualifies a retailer as “best in breed.” Costco, for example, relies only on its Kirkland Signature brand, while Save-A-Lot has more than 70 own brands. Too much choice could confuse shoppers, Hale pointed out.
Store Brands is a sister publication to Convenience Store News.