Can retailers get store brand growth back on track during the pandemic?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.
National brands in recent months have been outperforming private label brands for the first time in years, but new trial and online expansion are expected to be among the factors helping store brands regain momentum.
Simple availability or lack of store brands is believed to have played a big role in the seemingly temporary shift, says Spencer Baird, chief transformation officer for Inmar Intelligence. “Pre-COVID, overall days of supply or on-shelf quantities favored branded items. So I would assume that in many instances, the top store brand items ran into out-of-stock issues fairly quickly,” he said.
Store brand manufacturers, most of which supply different products for a range of retailers, couldn’t replenish as quickly as their national brand rivals.
Pre-COVID underlying-drivers of private label’s growth in recent years remain, including providing differentiation and better margins for grocers. Improved quality continues to attract more consumers and the premium tier remains a nascent opportunity for many grocers.
An unprecedented amount of private label trial is expected post COVID-19 based on consumers having become more agnostic about brands early in the pandemic. A slow economic recovery post-COVID could further encourage consumers to buy store brands.
One potential obstacle to continued growth is the rapid pandemic-driven shift to e-commerce as private brands have historically been underrepresented on digital platforms. Eighty-three percent of grocers surveyed by FMI expect to boost private label strategies for e-commerce in the coming year. For many, says Mark McKeown, client insights principal at IRI, that means developing their own platforms instead of using a third-party provider like Instacart.
“Retailers that build their own platforms definitely have a sustainable advantage,” he explains, citing the ability of chains like Kroger and Walmart to suggest private label products based on the customer’s shopping list and/or history.
Nicole Peranick, senior director of retail transformation at Daymon Worldwide, offers some additional suggestions for retailers looking to boost private label sales via e-commerce: creating dedicated areas on their websites, allowing private brands to top digital search, and driving engagement through integrated online content that showcases private brands as solutions.
DISCUSSION QUESTIONS: How will shopping behavior changes amid the pandemic affect the growth trajectory of store brands in the grocery space? In what ways does the online shift present a major opportunity for grocers to amplify their private brands?