from platt retail institute’s resource library · 2019-12-07 · brands, notes consumer reports...

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The Underestimated Potential of Store Brands by Alan L. Klein, Global Insights Consultant, The Marketing Agency

Bringing Research to Retail SM

S tore brands in the U.S. have surged during the continuing economic downturn as shoppers seek savings on everyday purchases. But will consumers return in force to familiar, national brands once the economy has recovered? Precedents from abroad portend a strong future for store brands, even as consumer budgets – and brand marketing budgets – return to normal. But it will take a sea change of brand development, positioning and marketing for retailers‘ own brands to achieve their fullest potential in the recovered economy.

Six factors for store brand success are identified. In addition, emerging out-of-home media can help accelerate shopper acceptance and loyalty to store brands, enabling U.S. retailers to jumpstart what was a lengthy, but successful process in the UK and Continental Europe.

What are store brands?

Private label – also called store brand products – encompasses all merchandise sold under a retail store's own label. That label can be the store's own name or a brand name created exclusively by the retailer for that store.

“Private label” to “store brands” to “brands”

While the leadership in building store brands with equities and values originates in Europe (as you are about to see), there are encouraging early signs in the U.S. including:

The “increased focus on building store equity is resulting in more sophisticated store brand efforts. ‘Private Label‘ one day will leave all of our vocabulary and Store Branding will become the term of the day," — Nielsen Chairman & CEO David Calhoun

“This category used to be referred to as private label, but we're not talking about labels; we're talking about brands and developing brands.” —FMI Chairman, Richard Jurgens, Chairman & CEO of Hy-Vee

Just beginning to build credibility

A recent survey of 1,500 consumers by IRI shows that 78 percent believe private label products are typically of a high quality ... among both high- and low-income consumers “and yet dollar share of private label is still below 25 percent.” —Thom Blischok, President, IRI Innovation & Consulting

“Once considered a lower-price, lower-quality substitute for name brands ... three-quarters of U.S. consumers say private label brands are good

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Store Brands (cont’d.)


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alternatives to name brands.” One-third of consumers are willing to pay more for private label brands, according to Nielsen.

Seventy percent of shoppers are highly satisfied with the quality of store brands, notes Consumer Reports in 2009, and 91 percent of shoppers will keep buying store brands after the recession ends as shown in a Private Label Manufacturers‘ Association 2009 study by GfK.

What’s in it for the retailer?

Well, for starters, there are better margins for the stores that offer their own brands. Given equal product quality and production costs, there are economies – retailers can save on advertising and marketing.

“The cost difference is usually large enough that retailers can offer customers lower prices while still making higher profit margins themselves.” —Wiki Invest 201

And according to Ellen Davis of the National Retail Federation, “Lots of people say they're looking more at generic- and private-label products ... that's not a bad thing for the retailer, because their profit margins can be higher in that area."

The Futures Company lends perspective

In their landmark “A Darwinian Gale,” The Futures Company perceives that “more vigilant consumers are not retreating from the marketplace. ... They will be much more circumspect with brands.”

“With consumers questioning old habits, old products and old brands as never before, consumers are more open than ever to meaningful innovation”

The point: It‘s not about price but value. “Being more cautious and circumspect makes it possible for new concepts to emerge ... and new store brands to be players.”

Now ... What have the Europeans been innovating?

Europe‘s lead over the U.S. in penetration of store brands is broad if not universal, with Spain, the U.K., and Germany having about one-third of sales in store brands, and with France and the Netherlands close behind. Among the major European markets, only Italy is less developed than the U.S. on store brand shares.

Note that these data are based on value, not units: In unit share, the percentages would be appreciably higher given that store brand pricing tends to be lower than national brands.


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Starting with the U.K. – image plus quality

Sainsbury’s is one of the largest supermarket chains in the UK and has been a pioneer in creating brands that make shoppers want to come to their stores. For example, Sainsbury‘s “Taste the difference line” is extensive. The name and packaging reinforce the concept that this is a great tasting, quality brand.

“Look out for the distinctive logo when you‘re next out shopping, it's worth spending a few moments to read the pack-labels to appreciate the care and passion that goes into making each and every one of our 1,300 taste the difference products.”

Tesco, now the largest grocery chain in the UK, built Tesco Finest into a billion pound ($1.5 billion) brand in six years, beginning in 1998 with several premium-priced ready meals.

Tesco Finest uses a lifestyle positioning based on quality plus value, to compete with national brands in categories from food and grocery to housewares. Sophisticated package design and strong point of sale information dispel any lingering stigma of earlier value-only store brands.

Waitrose is smaller than Sainsbury‘s and Tesco, but has built a reputation as a purveyor of superior quality foods. This “West Country Farm-house Cheddar” package exemplifies creation of a quality, artisanal image, driven by graphics and copy.

To the extreme – a 100 percent retailer brand supermarket chain

Crossing the channel, France's Leader Price has taken a further step in re-writing the book on how to succeed with store brands.

Leader Price distinguishes itself from other discounters by exclusively of-fering an extensive assortment of its own brands. With few exceptions (beer and wine), every one of over 2,800 food products – from dairy and coffee to pet foods and snack foods; from cookies and chocolate to cereals and prepared meals; frozen and shelf-stable –is a store brand.

Which came first?

Well, the egg seems to have come first, but at Leader Price, the quality

of the producing hens is leveraged to create parity with a prestigious national brand. In France, “Label Rouge” (Red Label) is associated with the most prime and most expensive poultry and meats. Yet Leader Price has managed to co-opt that label for its free-range chicken eggs.

Meanwhile, U.S. retailers are beginning the upgrade

Today in America, some retailers have taken a serious initiative (and are making a serious investment) in developing store brands that can compete with the best of the nationally advertised brands. “Well designed offerings like Safeway’s ‘O Organics’ and ‘Eating Right’ lines, and Walmart’s ‘Parents



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Choice’ are often viewed by consumers as brands,” according to branding specialist Mike Ferry.

As with the U.K. brands, Safeway‘s “O Organics” products create a strong brand image driven by graphics and copy. Note the romantic, persuasive product and ingredient descriptions, paid off with appealing photography. Why would a shopper feel they are getting second best with a pizza “made in Italy from Italian Ingredients,” and “stone baked in a wood-fired oven”?

At Safeway, “store brands” are becoming real “brands” instead of commodities.

The line is blurring

As a consequence of these increasing retailer initiatives in the U.S., the line between private label and national brands is blurring. “Many private label offerings, like Target’s ‘Archer Farms,’ Safeway’s ‘O Organics’ and SuperValu’s ‘Wild Harvest’ are now viewed on the same level as brand name products.” —2010 IRI Report

Target has struck a balance between nutrition and affordability with its new Archer Farms simply balanced private-label line.

Beware the traditional approaches to store brands

Retailers must recognize that there are important differences between the new well-conceived and creatively packaged store brands, and the traditional versions. What is inside this can of Safeway private label cranberry sauce may equal Ocean Spray but does the uninspired package say “not as good”?

Lets not forget Trader Joe’s

The example of France‘s Leader Price with virtually 100 percent store brands is evoked when looking at America‘s Trader Joe’s. Its own label is in the majority – by some estimates over 70 percent of everything sold at “TJ’s” is store-branded.

The summary advantages: profitability plus loyalty

The examples of Leader Price and Trader Joe‟s may be extreme and few U.S. retailers would consider abandoning national brands. But the examples from the U.K. and Europe, and the “early adopters” in the U.S. set important examples for retailers. By convincing shoppers that their store brands are “as good as” or “even better than” national brands, these retailers are able to charge lower prices yet earn attractive margins.

Equally significant, a successful store brand program has the potential to build shopper loyalty.

Store brands: the six factors of success

There are six key factors that appear to underpin store brand successes and may inform store brand planning for retailers in all categories: The first three focus on the shopper; the next three focus on the store. All are communicated in-store through package design, signage and in advertising.

Among shoppers:

1. Confidence in the overall integrity of the chain and that the management is committed to serving the community with high-quality products while giving all producers a chance to compete.



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2. Perception that the store brands are at least the same quality as the more ex-pensive national brands; the shopper is not settling for second best.

3. Belief that lower prices are the result of astute purchasing policies and reduced overhead and never a function of inferior quality.

Within stores:

4. An extensive range of quality products that covers a broad range of shopper needs, so the store becomes the destination for general shopping, not just for commodities.

5. Packaging that reinforces the imagery of the products, which may be unique and original or inspired by familiar national brands (but without being direct copies).

6. Consistently lower prices vs. national brands – not just on sales or promotions, creating the impression of “everyday low price” and superior price value.

In other words

A successful store brand program is based on shopper perception, driven by product quality and communicated and reinforced by imagery – both graphic and copy.

We are cautioned to understand that packaging and imagery, while essential elements of the store brand marketing mix, cannot do it alone. The brands must not just look good; they have to be good.

Technologies for jumpstarting awareness and acceptance of new store brands

It took years – decades – for retailers in the U.K., France and other countries to build strong store brands – using traditional in-store signage, brochures and booklets, plus inclusion of the store brands in traditional advertising.

But now, there is potential to jumpstart shopper awareness and engagement with new store brands by leveraging the point-of-sale reach and persuasiveness of emerging in-store media technologies. These media may enable chains to compress time.

Video programming is now available in stores. For example, the Wal-Mart Smart Network includes video screens placed in endcap product displays, in departments, and at store entries.

Supermarket chains, including Albertsons, Shaw‘s, Pathmark and Jewel Osco have video networks with customized programming in selected depar tmen ts and a t checkouts.

Electronics departments a r e “ p r e - w i r e d ” f o r insertion of store brand advertising.

For example, a male-targeted store brand is advertised during sports programming in electronics.



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Mobile media to advertise and promote store brands

Smartphone mobile marketing is opening a world of opportunities to reach, engage and motivate shoppers in-store. And smartphones have the unique ability to both advertise (to create awareness and interest) and promote (to provide a response mechanism to stimulate a sale). Examples include: barcode scanning for product info, checkout e-coupons, and Bluetooth intercepts to alert shoppers to store brand new products.

Mobile ads can display package images and promotions. Shoppers also can enter product categories and be directed to store brands.

Where to start

While a visit to the U.K. to walk the aisles of Sainsbury‘s, Tesco, Waitrose and Marks & Spenser would be most enlightening, a closer-to-home trip to Safeway (or its Pavilions or Vons divisions), or Trader Joe‘s or Target can be instructive.

For the emerging media, seeing the Walmart Smart Network in action may be the best way to understand the potential of in-store media.

Alan L. Klein is Global Insights Consultant at The Marketing Agency, where he s p e c i a l i z e s i n r a p i d , responsive research to help advertising, retailing and media professionals think conceptually.


from platt retail institute’s resource library · 2019-12-07 · brands, notes consumer reports...

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