Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
For years, retailers have touted their private label products as "national brand equivalent or better." But until recently, they've been a lot more "national brand equivalent" than "better." Oh sure, the Wegmans and Trader Joe's of the world have been beating the national brands at their own game for as long as anyone can remember. But the rest of the retailing community has been slow to jump on the bandwagon. Why such reluctance to stray from the national brand standard?
"Retailers were afraid shoppers wouldn't understand the [private label] product proposition if it didn't mirror the national brands," answers Michael Kelter, director of marketing in the consumer division at Nice-Pak. In the past, he explains, retailers didn't have the advertising budgets - or the marketing savvy - of large CPG companies to educate consumers about individual private label products. Nor did they have the category-specific expertise necessary to create store brand products with unique features that might appeal to consumers. But that was then.
"'Compare to' doesn't mean anything to consumers anymore," claimed Lori Katz, VP of Epsom Salt Plus. "It's just expected from store brands." If retailers want shoppers to choose their store over the one next door, "your private label products have got to be better than or different from the national brand because anyone can do me-too."
Indeed, savvy retailers are now using private labels more to differentiate themselves from the competition and make a statement about quality. And that whole low-price thing never really made much sense in the first place, said Larry Wilhelm, owner/president of Custom HBC. First of all, the price advantage disappeared as soon as the national brand went on sale. And in categories like hair care where there's already a strong collection of value-priced national brands, there's simply no room in the marketing mix for less expensive national brand equivalents.
Putting your name only on lower-priced alternatives to the national brands also sends a message that often contradicts what higher-end stores in particular want to say about themselves. "At best," said Steve Fay, EVP and sales team leader at Berner Foods, "you miss a substantial opportunity to communicate your marketing strategy to the customer. At worst, you confuse customers about what your store is all about... Store brands have gone from being used purely for their economic merit to helping market the total store image."
That's one reason Mr. Fay suggests retailers eliminate the premium private label tier currently used to house "unique" or "upscale" store brand products in favor of a single program that offers high quality at reasonable prices. Such an approach "maximizes shelf space, makes the set easier to shop and sends a clear message to consumers that their retailer stands for quality."
Discussion Question: To what degree are low prices still a requirement in driving private label sales? Do you think premium/value tiered pricing in private labels should be eliminated? Do you think a single program of high-quality/reasonable-priced products sends a clearer branding message to customers?