First, what do we mean by the private label? Private labels are products that are labeled and sold by a retailer but manufactured by a third party. Example – Sainsbury’s sells Heinz Beans but also sells Sainsbury’s Basics Beans. In the past, private-label brands were considered commodities bought based on price alone. But that has changed. Who among us hasn’t sought out Trader Joe’s cauliflower gnocchi or Target’s All-in-Motion clothing? Price still matters. But private label brands are now focusing on value, purpose, and quality, aligning their strategies with national brands. Over the past year, in particular, the state of private labels has evolved as rapidly as the retail landscape as a whole. There are now greater opportunities for brands and private-label products.
Collectively, private labels in the United States have a higher share than the strongest national brand in 77 of 250 supermarket product categories. And they are joint second or third in 100 of those categories. Private labels were once considered a “cheap” alternative to well-known name brands, but due to inflation, this pandemic has helped usher in a new era of private labels for both omnichannel and pure-play retailers, posing a formidable threat to brands. People prefer private labeling because they are cheaper than branded products.
What Are Private Label Products?
A private label product is a product that a retailer produces by a third party but sells under its brand name. The seller checks everything about the product or products. This includes product specifications, packaging methods, and everything else.
The private-label products are then delivered to the retailer for sale. As far as consumers are concerned, these are the company’s “own brand” products. For example, a collaboration software vendor might launch a line of private-label conference calling hardware. These products would be manufactured by another company. However, they would be sold under the brand name of the original company.
The success of private label brands:
The experience of the seller and the private label they offer are interconnected. Introducing high-performing private labels increases loyalty and drives more visitors to retailers both in-store and online. According to eMarketer, shoppers choose retailers based on the store brands they offer, and 66% said they generally expect their favorite retailers to carry quality private labels.
Private label brands have also become popular with new consumers during the pandemic when their usual brands were unavailable due to supply chain issues. According to one survey, 40% of consumers have tried new products or brands during the COVID-19 crisis, and of those, 40% plan to continue buying those new brands. This shopping behavior could further expand the private label sector. Our data revealed similar trends. In a survey of Influencer members in July, over 90% said they currently buy store brands. Another third prefers to buy store brands over national brands.
Following are some points for the success of private label brands;
- Strategize Like a White Brand:
To realize the full potential of private label brands, retailers must position them as true consumer brands. You can do this by utilizing a variety of marketing strategies designed to drive trial, awareness, and brand loyalty. Think of social media as your virtual tailgate, with the ability to stop shoppers in their tracks and inspire new shopping behaviors. Even if it involves running paid ads on social media, one of the most authentic and trusted ways to increase awareness is to encourage customers to share details about your products on social media. From packaging and design to advertising and social media strategies, private-label products should resonate with consumers and feel authentic. Invest in strategies like search, SEO optimization, sampling, and UGC optimization. Leveraging a 360-degree approach that balances physical and digital marketing that includes emerging third-party intermediaries will ensure your brands are actively engaging consumers along the changing journey to purchase.
Shoppers discover, browse and buy on social media, with more than a third using buy buttons and clicking on shoppable stories and posts. Social media chatter about brands also translates into conversions, especially when consumers pay as much attention to your company’s values as the products you offer. More than ever, retailers and brands are being judged on environmental, social, and governance metrics. According to Accenture, 55% of UK consumers base their purchasing decisions on a company’s transparency, ethical values, or authenticity. Leading retailers use cost-effective channels to communicate the story behind their store brands, such as how ingredients are sourced or where products are made.
- Deliver Value, Not Just Price:
Another point for the success of private label brands is that private label manufacturer should focus on value, not just only on price. Retailers need to focus more on quality, value, and engagement motivation to see a competitive advantage for private label products. Our data shows that value is the number one consideration for shoppers, followed by price. With more people at home and shopping online, shoppers are spending more on new products.
- Prioritize Innovation:
Elevating your private label programs is more important than ever. But when it comes to new product development, look beyond your competition and become a leader in innovation. Create and execute new private label product strategies based on what your customer wants and needs, identified through in-depth research. Most retailers know that the first step to becoming a product category leader is to beat other brands in the market with innovative products. According to a report, best-in-class retailers dedicate 43% of their private label programs to value-added lifestyles, compared to the industry average of just 16%. Going this route allows private-label brands to stay on trend and push beyond industry norms.
- Forethought Private Labeling Strategy:
E-commerce should no longer be an afterthought – it should be foresight. Private label products need to maximize their presence outside of brick-and-mortar. Product search and discovery overwhelmingly begin online, so success depends on overhauling your funnel for the digital world of retail.
The pandemic and stay-at-home orders have accelerated online shopping. This momentum boosts private-label online sales, which are on a steady growth trajectory. In 2019, private label online sales reached $1.7 billion, an 87% year-over-year increase, according to CPG Matters. The upward trend is expected to continue even after the end of the pandemic. Then use user-generated content to optimize product searches for private labels and online discoverability.
The growing importance of so-called Private Label products to leading retailers is unquestionable. Based on recent reports, these products continue to generate more growth than traditional national brands among major chains in nearly every category.
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