Even before the bottom dropped out of the U.S. economy back in December 2007, American consumers were turning to private label items. The reasons are pretty simple. Product quality has improved and everyday prices tend to be significantly lower than name brand equivalents. Chains such as Aldi and Trader Joe's, on steady growth paths for years, sell private labels almost to the exclusion of national brands.
So new research from Accenture, which shows that 39 percent of Americans have increased their purchases of store brands in recent years, doesn't come as huge surprise. It does serve as a reminder to national brands, however, that in today's world, it's differentiate or decline.
National brands find themselves in an uphill battle as so many purchasing decisions are driven by price. Among the consumer respondents to the Accenture survey, 87 percent said they would buy more national brands if the companies matched the store's private label pricing. Fifty-one percent said the price match would have to be permanent if they were going to stick with the name brand.
"Extreme competition between retailers and consumer goods companies can result in inefficiencies and waste for manufacturers and retailers, and undifferentiated products for the consumer," said Bob Berkey, from Accenture's Consumer Goods & Services practice, in a statement. "Consumer goods companies must develop a balanced strategy of collaboration with retailers in some areas and competition in others. This new dynamic — where competitors become partners — will require a considered focus from manufacturers."