SHOULD PRIVATE LABELS MATTER TO YOUR BUSINESS STRATEGY?

Retail
Team

Over the past decade, private labels have experienced a renaissance. Store brands are no longer viewed as “generic” or only for the budget-conscious. Companies like Target, Aldi, and Trader Joe’s have helped drive this shift in consumer opinion with the launch of their successful private label brands. For many retailers, private brands are now a key part of their assortment strategy. “Whether it is sustainability, quality or price, private brands offer retailers an opportunity” to set themselves apart from the competition.

Because private labels are inherently exclusive, they offer a powerful opportunity for retailers to attract loyal and returning customers. For example, Target has launched several incredibly successful private labels. Archer Farms, the retailer’s first private label, was launched in 1995. Now, the retailer offers 58 private brands including Made By Design, Project 62, and Threshold. These private labels have been a fantastic tool to build customer loyalty and steady repeat purchases. According to CEO Brian Cornell, the Target private label Good and Gather alone “has generated over $1 billion in sales” since it was created in 2019. On a company earnings call in late 2020, Cornell said the brand helped contribute to a 30% growth in Target’s private label food and beverage sales.

Companies that build strong private labels have seen tremendous success. Trader Joe’s business strategy fully embraces private labels. Roughly 85% of products in Trader Joe’s stores are private brands. Over the past decade, the small healthy grocery chain has seen consistent growth. In 2021, the chain generated $13.2 billion in total sales.

The COVID-19 pandemic has helped propel the success of private brands even further. According to a survey conducted by McKinsey & Co, 40% of consumers report they have tried new product brands since the pandemic began in March 2020. Consumers are switching brands in record numbers because global supply chain issues and inflationary pressure have dramatically changed the availability and price-point of many national brands.

These influential trends have pushed consumers to try new items and products. Top retail executives report “that they have…seen heightened demand for private-label goods.” Retailers should take advantage of this shift in buying behavior and leverage their private brands in their business strategy.

LEARN MORE ABOUT THE POWER OF PRIVATE LABELS FROM OUR DIRECTOR OF ACCOUNTS AND OPERATIONS, ALISA WERNER:

WHAT ARE SOME COMMON MISCONCEPTIONS CUSTOMERS HAVE ABOUT PRIVATE LABELS?

A common misconception customers have about private label products is that the quality of the product is inferior to national brands because they typically are priced lower than national brands in the market. When in most cases, the quality is extremely comparable, if not better, than what national brands offer.

WHAT ARE THE MAJOR STRENGTHS AND WEAKNESSES OF PRIVATE LABELS COMPARED WITH NATIONAL BRANDS?

A strength of private label product is that they are able to directly address customers’ needs and create exclusive products to help meet those needs and are less informed by the direction of a big national brand where larger influences are at play. A weakness is that they don’t have the brand equity that national brands do, so acquiring new customers may present a challenge if the market contains customers that are brand loyal.

WHAT ARE THE KEY STEPS NEEDED TO SUCCESSFULLY LAUNCH A PRIVATE BRAND?

Lots of consumer and product research! Understanding where the opportunity is within the market before entering the space and being able to differentiate your brand/product from the competition.  And ultimately, ensuring the product meets the expectations of the customer. There’s nothing worse than bad reviews on a product, that can kill a brand’s reputation!

HOW SHOULD RETAILERS LEVERAGE MERCHANDISING TO MAKE THEIR PRIVATE LABELS STAND OUT?

Merchandising is always important and key to helping a customer make a purchase decision.  Product adjacencies and on shelf or POP (point of purchase) marketing displays help sell the product to customers by explaining the features and benefits.

WHAT MAKES A PRIVATE LABEL SUCCESSFUL?

Continued innovation and trend-right product for the target customer  – not a direct copycat of other brands.

Need help with retail strategy? Click here to schedule your free consultation today.

Over the past decade, private labels have experienced a renaissance. Store brands are no longer viewed as “generic” or only for the budget-conscious. Companies like Target, Aldi, and Trader Joe’s have helped drive this shift in consumer opinion with the launch of their successful private label brands. For many retailers, private brands are now a key part of their assortment strategy. “Whether it is sustainability, quality or price, private brands offer retailers an opportunity” to set themselves apart from the competition.

Because private labels are inherently exclusive, they offer a powerful opportunity for retailers to attract loyal and returning customers. For example, Target has launched several incredibly successful private labels. Archer Farms, the retailer’s first private label, was launched in 1995. Now, the retailer offers 58 private brands including Made By Design, Project 62, and Threshold. These private labels have been a fantastic tool to build customer loyalty and steady repeat purchases. According to CEO Brian Cornell, the Target private label Good and Gather alone “has generated over $1 billion in sales” since it was created in 2019. On a company earnings call in late 2020, Cornell said the brand helped contribute to a 30% growth in Target’s private label food and beverage sales.

Companies that build strong private labels have seen tremendous success. Trader Joe’s business strategy fully embraces private labels. Roughly 85% of products in Trader Joe’s stores are private brands. Over the past decade, the small healthy grocery chain has seen consistent growth. In 2021, the chain generated $13.2 billion in total sales.

The COVID-19 pandemic has helped propel the success of private brands even further. According to a survey conducted by McKinsey & Co, 40% of consumers report they have tried new product brands since the pandemic began in March 2020. Consumers are switching brands in record numbers because global supply chain issues and inflationary pressure have dramatically changed the availability and price-point of many national brands.

These influential trends have pushed consumers to try new items and products. Top retail executives report “that they have…seen heightened demand for private-label goods.” Retailers should take advantage of this shift in buying behavior and leverage their private brands in their business strategy.

LEARN MORE ABOUT THE POWER OF PRIVATE LABELS FROM OUR DIRECTOR OF ACCOUNTS AND OPERATIONS, ALISA WERNER:

WHAT ARE SOME COMMON MISCONCEPTIONS CUSTOMERS HAVE ABOUT PRIVATE LABELS?

A common misconception customers have about private label products is that the quality of the product is inferior to national brands because they typically are priced lower than national brands in the market. When in most cases, the quality is extremely comparable, if not better, than what national brands offer.

WHAT ARE THE MAJOR STRENGTHS AND WEAKNESSES OF PRIVATE LABELS COMPARED WITH NATIONAL BRANDS?

A strength of private label product is that they are able to directly address customers’ needs and create exclusive products to help meet those needs and are less informed by the direction of a big national brand where larger influences are at play. A weakness is that they don’t have the brand equity that national brands do, so acquiring new customers may present a challenge if the market contains customers that are brand loyal.

WHAT ARE THE KEY STEPS NEEDED TO SUCCESSFULLY LAUNCH A PRIVATE BRAND?

Lots of consumer and product research! Understanding where the opportunity is within the market before entering the space and being able to differentiate your brand/product from the competition.  And ultimately, ensuring the product meets the expectations of the customer. There’s nothing worse than bad reviews on a product, that can kill a brand’s reputation!

HOW SHOULD RETAILERS LEVERAGE MERCHANDISING TO MAKE THEIR PRIVATE LABELS STAND OUT?

Merchandising is always important and key to helping a customer make a purchase decision.  Product adjacencies and on shelf or POP (point of purchase) marketing displays help sell the product to customers by explaining the features and benefits.

WHAT MAKES A PRIVATE LABEL SUCCESSFUL?

Continued innovation and trend-right product for the target customer  – not a direct copycat of other brands.

Need help with retail strategy? Click here to schedule your free consultation today.

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Retail
Team