From 1997 to 2005, the sales of private label brands grew at double the rate of national brands, according to a 2008 report by the global business advisory firm AlixPartners. Private label products are on average about 30 percent lower in price than national brands, according to Packaging Digest. Store label merchandise, however, is slowly moving away from being considered solely as a cost savings to consumers over national brands. Once viewed as second-class alternatives, they are now bridging this gap by delivering quality comparable with national brands.
Private labels offer retailers control over product factors such as pricing, size, package design, production and distribution. Retailers can develop and implement innovative ideas to gain market share over national brands. This includes the ability to make quick adjustments to products based on customer’s changing preferences. „The food industry is seeing a heated battle for market share,“ says David Garfield, managing director and head of AlixPartners‘ Consumer Product Practice. According to an AlixPartners 2011 report, this battle will continue as consumers choose value over brand loyalty.
Successful private label brands will be able to create better sales opportunities for retailers. The customization of store brand labels — such as to logos and tag lines — can personalize a customer’s shopping experience that can lead to higher customer loyalty. As an example, Supervalu’s Wild Harvest organic food line offers its customers healthy food options at low prices with sophisticated package design that rivals that of more exclusive national brands.
Unlike national brand labels, retailers with store labels can shape the shopper’s in-store experience. This might translate into marketing advantages gained from in-store placement of private label products and signage. For example, retailers can use horizontal shelf displays techniques, such as brand blocking, and end-cap display fixtures to make private labels stand out from national labels.
While value is not the only factor consumers consider when choosing private label brands, it still remains an important one. „The need for affordable packaged goods solutions is high, and private label products are going a long way toward answering that need,“ Thom Blischok, Consulting and Innovation president at Information Resources Inc., told Packaging Digest. The most significant advantage of store brand labels during economic downturns is that price gains importance as consumers increasingly turn to money-saving strategies like increasing private label brands to manage budgets.