“The only thing constant in retail is change,” said every retail veteran everywhere. With the ever-changing landscape, retailers continue to evolve their strategies. While you’ll seldom find common tactics across competitors as they strive to differentiate, one strategy across most retail chains today is growth in private-label brands.
Why would a retailer grow private-label brands?
Private-label brands are a viable answer to rising competitive threats. New competitors emerge, existing brands add line extensions and new categories to survive, and existing retailers face consolidation of store count base. More change comes for retailers as purchasing power shifts across generations, purchase channels expand, and consumer spending patterns redistribute across experience, services and product. With all that fluctuating demand, retailers of all types are looking for ways to drive customer loyalty, differentiate from competition and generate margin.
All that leads to retailers leveraging private-label brands to compete. While there are costs involved, this strategy can help a retailer offer exclusive products, own their differentiated innovation, drive consumer loyalty and provide value. Not insignificantly, growth in private brands can also drive bottom line, which under growing financial pressure, is also critical for retailers.
Are private-label brands death to the national brands?
Not all name brands are out, and very few large-scale retailers have moved to a private-brand-only assortment. National brands need to keep sight of the real goal for retailers: To convert consumers with an optimized assortment mix to drive top and bottom line results. Consumers are the ones choosing what products sell, regardless of what the retailer or branded supplier wants the consumer to do. As long as a brand name matters to the consumer, the brand will matter to a retailer. So, the challenge exists for national brands to drive consumers to purchase—and to communicate the demand and value of the brand to retailers.
How can a national brand stay on shelf?
- Build great products. This is the most basic reason for a product to stay on shelf. It all starts here, and great product starts with a clear understanding of your consumers and their needs. Consumer insights are critical. Access as much information as you can to understand your consumer’s needs, shopping patterns and competitive choices. Then, be honest with yourself. Does your product qualify as great?
- Have a strong new product pipeline. Being hyper-focused on your consumer behavior will lead to meaningful innovation. Retailers are looking for partners that have an innovation pipeline or plans to update and innovate their product. We all know that product development pipelines are longer than anyone would like them to be. If a brand doesn’t actively pursue how to meet future consumer needs, then the retailer will—either with a private label or with another brand.
- Make your brand worth more. A consumer’s choice between private-label and name brands often comes down to perceived brand value. Is your brand positioned to command a higher price than a private-label alternative? National brands must present a value proposition that’s clear and differentiating. Of course, that means quality, but name brands can stand for much more. Consumers will be brand loyal if they connect on levels beyond the product. What does the brand stand for? How does purchasing your brand make consumers feel good about their decision beyond just quality and price. National name brands can build these connections in ways that private-label alternatives just won’t invest in. When you sell-in your products to retail buyers, these somewhat-intangible attributes are an important part of the story and can be backed up by tangible information including AAU data.
- Drive demand for your brand. Retailers are focused on driving demand to their store or site, which leaves less and less room for retailers to drive demand for specific brands or products, and even less room to help national name brands to grow. To stay relevant to retailers, brands need to drive demand for their product. This doesn’t always need to come with a multimillion-dollar marketing budget. It should, however, be intentional, targeted communication with the consumer and communicating that’s in a media relevant to the category. If consumers demand your product, so will retailers. Consumers vote on what sells and what doesn’t every day. National brands can influence consumers through relevant marketing, packaging, clear brand positioning, etc. to pick their product versus a private-label option.
- Provide extra value to your retail partner. Make it hard for the retailer to live without you. The number of suppliers and brands competing for shelf space is massive. In addition to having great products that your consumers demand, stand out from the crowd by providing additional value. Buyers are tasked with selecting product assortments to meet current and future needs of the consumer—often making selections that won’t hit shelves for 9 to 18 months, depending on category lead times. Even the buyers with the best “gut” instincts need data and insight to guide their assortment selections and strategy. This is a great opportunity for brands to provide value to retailers with business insights, analytics and consumer behavior information.
Tips to drive value:
- Know your category and consumer better than your buyer. Use that knowledge and supporting data to educate them on how to craft a successful strategy, select an optimized assortment and compete.
- Ensure your insights and recommendations are based on a broad perspective versus solely on your product, therefore driving genuine partnership in the business.
- Run your business with a category-growth mindset. If keeping shelf space is important to you, don’t set it and forget it. Actively dig through business results and bring actionable, insight-based recommendations.
Buyers and merchandising teams have multiple priorities which don’t always include your product. Having strong brand partners that can provide consumer insights and drive the category towards growth is super valuable as the retail team manages the business. And it will make it harder for the buyer to run the business without you.
While retail must continue to evolve to meet the changing needs, the one thing that has been true all along is that the consumer decides what sells and how money is spent. With great product and a strong brand that has a resilient connection to your consumers, your products will get their vote. And if your product gets the consumer vote, and you add value as a partner, retailers will need you and your product on the shelf. And if they need your brand, there’s less room for private-label alternatives on the shelf.