The development of private label programs have been on the rise for some time now and in more mature markets, these programs have been effectively integrated into a retailer’s category management strategies. Consumers’ penchant to shop around, be more promiscuous in their brand choices and where they devote their loyalty, and the emphasis on value which have all been heightened by the pandemic, has created the perfect conditions for accelerated growth in private label adoption. According to a study conducted by McKinsey, as many as 75% of U.S. shoppers have altered their brand preferences during the pandemic. Private label offerings have always been about price point but coupled with strong quality propositions and product innovation, strongly developed programs have been effective in building differentiation and driving destination to the store, creating an opportunity to build loyalty.
Private labels need to be coveted as brands; as such, they need to be considered, invested, nurtured and built as a strategic asset of the business, and not as a tactical response as an in-fill, lower cost and quality alternative to contend with the national brand in the respective categories of product.
Among some of the most successful private brand programs are Trader Joe’s who continues to tap into thousands of private-branded products, and Target with its Good & Gather brand of 650 items, and growing to a billion-dollar contender in less than a year. Costco’s Kirkland Signature is another example of a successful private brand whose sales have been consistently strong. Our own work with the PICS private brand developed for Price Chopper/Market 32 has seen similar success with increases in sales and growth in market penetration that well exceed established benchmarks. Performance tracking indicates that the PICS brand has become a destination driver for the banner.
Amongst others, these brand offerings differ significantly from one another, proving that private brand strategy specifically tied to the overall banner strategy plays a big role in their success. Furthermore, brand strategy for private label brands requires a systematic category mindset that considers communication strategy and unique value propositions that speak to consumers by addressing different need states. From this understanding, tiering strategies for each category in which a retailer plans to play in can be effectively defined.
An understanding of segment needs, value propositions, and brand permissions informs the development of a strategy that provides clarity and focus to the recommended solutions that will have both short-term impact and long-term sustainability. A well thought out go-to-market strategy and action plan is central to an effective brand activation.
Much of the success of private brands is also based on what happens in store and across a retailer’s omni-channel ecosystem, in terms of how it lives and is propositioned as a full solution, rather than just a package that sits on a shelf. An effective sales strategy requires bringing forth an integrated solution with fully thought-through, partnership-minded, marketing and merchandising strategies. These need to work in concert with the physical store and their respective online and in-store activation programs to maximize effectiveness.
Whether as a price fighter, EDLP player, banner differentiator, or as a specialty brand representing trend-right innovations, each program needs to be bespoke in its construction to deliver the right private brand program worth investing in. As the pandemic continues to promote brand experimentation, trial, and in growing cases, brand switching behaviours, now is the time to showcase a compelling private brand offering that drives destination and entrenches loyalty.