The Most Important Question Private Brands Aren’t Asking Themselves
Store brands have experienced significant growth over the past few years. They’ve done a great job outpacing national-brand growth. That’s been pretty easy to do when you consider that more than two-thirds (69%) of Americans are flat-out concerned about rising everyday costs.
What’s driving this incredible, crucial growth? Namely, that consumers are proactively — even without consciously thinking about it — searching for value wherever they can find it.
This is especially true at the grocery shelf. The economy’s been tough the world over, and the supply chain is still reeling from the impact of COVID, which — and we’ve all seen this —also affects product availability.
This means that consumers have had to be flexible, for more than one reason, when reaching for everything from paper towels to cereal.
But here’s the simple — and equally crucial — truth. When the economy struggles, store brands don’t just ride the waves, they thrive. As always, consumers vote with their dollars, and these dollars don’t lie.
Today’s economic realities are fueling the growth of nationally loved value retailers, from ALDI and Lidl to Walmart and Dollar General. The economy is also forcing many traditional retailers to jump on the generic-brand or value-brand bandwagon. Take Amazon, which just rolled out a new lineup of “no-frills” groceries called Amazon Saver, while Target unveiled its own value line, Deal Worthy. Then there’s Kroger’s equivalent, Smart Way, which is currently its fastest-growing brand.
It’s refreshing to see retailers look inward to their store brands to help solve major problems. Kudos to those who are studying market trends, understanding consumer needs, attacking competitive pressures head-on and creating solutions with branding.
In this particular case, however, we need to explore whether the effort is sustainable. Yes, consumers are flocking to these brands and products because they have to, but what happens once the economy has strengthened and that’s no longer the case? Will they still want to? Probably not. What this means is that although private-label products are continuing to fly off the shelves, the reasoning will soon change.
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It’s an honest reminder of why retailers must heavily invest in understanding their consumers and treat private label as a strategic tool that can be used two ways — to build long-term equity, but also a means toward solving short-term problems. The time is now to fill unmet needs, capture attention and lay the groundwork to ultimately retain these consumers once things improve.
But how do you do that? How do you transition consumers from buying store brands because they have to, to buying them in future times because they want to.
Change Consumers' Reason to Believe
Start building emotional connections to the brand, and not the price. Economic conditions will, at some point, improve. As we’ve seen in the past, customers could revert to their old habits of choosing established brands. That means you need to put in the work now to focus on shifting your brand’s image in their minds.
That involves focusing on how your brand shows up at every touchpoint. Is your packaging relevant? Does it tell a thorough — and compelling — story? Have you merchandised it sufficiently?
That’s the billion-dollar question that no one’s asking — and they should be. Brands that have managed consistent private label growth have one thing in common: a deep understanding of their customers. Products should therefore be marketed with the same care and creativity as national brands, using strong branding, storytelling and social media presence to elevate their profiles. They must be positioned as playing a specific role in a customer’s specific need — that’s why, in today’s tough economy, a product’s opening price point can be its strongest brand benefit.
For example, Target offers more than 45 private brands, each with its own distinct branding and profile on the company website to make them feel as premium and desirable to key consumer targets as national brands do. It’s an entire ecosystem, all designed to appeal to different customer needs and preferences, without even mentioning the store’s own brand or logo. Further, Target often emphasizes the brands’ exclusivity to its stores, highlighting its strategy shift from being product-led to brand-led — key in today’s competitive retail environment.
Meanwhile, other retailers use a tiered branding system to denote quality levels of private label products. For instance, cheaper products at opening price points use muted branding, as they don’t want customers to overestimate their quality — they exist purely for the price, and they don’t second-guess it. The next tier, which is the national-brand equivalent, uses a more elevated, eye-catching visual and verbal look to take on leading brands. Finally, the premium tier tends to be black and gold, using terms like “select” and “signature.” There’s no right or wrong way for a private label manufacturer to brand their products – they simply need to understand their customers and develop meaningful products to meet their needs.
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Emphasize Innovation to Create Differentiation and Loyalty
Brands like ALDI and Trader Joe’s have already shown how private labels can not only become mainstream, but even replace national brands altogether. These successful companies continually innovate, creating new products and refining existing ones to meet evolving customer expectations and draw customers in, just like national brands – in fact, in some cases, better than the national brands do. This focus on meeting or exceeding expectations creates emotional bonds with the audience, boosting not just private label loyalty, but storewide loyalty, too. Most consumers don’t even consider Trader Joe’s products “private label” – they’re just items they love.
ALDI, like Trader Joe’s, is 80% private label and consistently develops products that rival national brands in quality, but in a more mainstream way. By investing in product development, ALDI has succeeded in stealing a sizable U.S. market share and reducing private label stigma, despite offering a limited assortment and lackluster in-store service. Brands with deep enough pockets could go a step further, investing in innovative private-label products that become leaders in their own right, such as Trader Joe’s Everything But the Bagel seasoning.
Remember: To Beat the Name Brands, You’ve Got to Behave Like One
This is especially true now, because the retail landscape is more fragmented than ever. Drug stores are now trying to become convenience stores, while club stores, like Sam’s Club, BJ’s and Costco, are investing in prepared foods, and c-stores are heavily investing in fresh food. Channels are blurring, and online shopping and delivery services are reducing foot traffic in physical stores.
Ultimately, there’s no single, correct way to position a private label. You simply need to put in place strong processes for brand building, product development, innovation, team structure and marketing. The central theme of all successful private label strategies is that they use brands that fit the needs of their audience – how you formulate yours will depend on how you want to go to market.
All of this effort might feel unnecessary if your private labels are currently enjoying growth; however, the tough truth is that this growth is partly being fueled by other forces. It can be your total control, however, if you switch consumers’ mindsets from buying your private label because they have to, to buying it because it’s they want to.
The future of private label success lies in shifting the customer’s mindset by competing with national brands on innovation, branding and emotional engagement. In a world where retail is constantly evolving, the companies that treat private labels as marketing tools for growth, rather than cost-cutting options, will come out on top.
