PL Buyer: Private Label Merchandising Support Back In the Spotlight
Through a special arrangement, what follows is a summary of a current article from Private Label Buyer, presented here for discussion.
One positive outcome of the recession: renewed emphasis on private label merchandising that drives home the all-important value message.
A new Times & Trends report from Chicago-based Information Resources Inc. (IRI) indicates that, after falling for several years in the wake of clean-store policies, merchandising activity is once again on the rise, and declines in grocery displays are slowing as retailers seek new ways to communicate value to increasingly price-conscious consumers. In fact, IRI reports, 54 percent of consumer packaged goods (CPG) categories captured 30 percent to 49 percent of their sales over the 52-weeks ending March 29 with the help of merchandising support -- a four-point increase over the previous year.
However, the report continues, merchandising activity around private label products remains lower, on average, than that in support of national brands. According to IRI, store brand merchandising trails national brand merchandising in 58 percent of categories the company tracks across food, drug and mass merchandise outlets.
Why the discrepancy? Part of the problem lies in retailers' reluctance to give up trade monies offered by national brands in exchange for prime shelf and display space. But according to John Wilkins, vice president of client and retail strategy for the Atlanta-based strategic design firm Miller Zell, many chains also lack the merchandising know-how of large national brand manufacturers. These manufacturers often use sophisticated shopper insights to design relevant, pointed merchandising programs.
"I also think private label manufacturers and retailers have really been more focused on improving product quality and packaging than on merchandising," he added. "But they've done such a great job ... that that's become the cost of entry. So now, for retailers to really push private label forward, they're going to have to pull other levers. And the one immediately adjacent to quality and packaging is merchandising."
Jon Hauptman, a partner at Willard Bishop retail consultancy, says retailers are beginning to see a lot of reasons beyond just sales and turns to keep private label on the shelf. Store brands help to strengthen the store's price image, "which is a key reason shoppers choose one store over another," he said.
Putting that realization into practice, however, has been a bit of a challenge.
"I often see misalignment between strategy and execution," explained Craig Espelien, vice president and managing director for retail brands at Plano, Texas-based Crossmark. "For example, the president of the company wants to build private label sales, but the category manager is still being rewarded for bringing in trade dollars rather than growing store brand sales, so there's no reason to change their behavior."
And then there's the question of money.
"There's a belief that 'We can't merchandise private label because there's no budget for it,'" said Mike Snell, a former retail exec who is now vice president of sales at Dover, N.J.-based Blanc Industries. "But there is. ... Smart retailers expect and understand that they need to invest in private label merchandising and build it into the price."
Discussion Questions: Why is in-store merchandising support around private label products lower on average than national brands at supermarkets? Is now the right time for grocers to become more aggressive in merchandising store labels? If so, how should merchandising around private as well as national brands be rethought?