There’s a shift going on in the retail world. Where once manufacturers competed against one another for consumer loyalty, today they face sharp competition from retailers, the very places that stock their brands.
To give an example, there was a time when rivals such as Pepsi and Coca Cola viewed each other as their main competition, but today on the supermarket shelf the big two often stand beside a brand of soda bearing the retailer’s own label.
In the region we can see the phenomenon in supermarkets such as Monoprix or Spinneys, where consumers can find the retailer’s private label next to similar global brands.
In Europe generic label brands have won high profile recognition, but in the Middle East, retailers often adopt a more low-key approach to their store brands. This can make it hard for consumers to recognize the product’s origin and attributes, compounded further by weak marketing and communications.
At its origins, the private or own-label trend stemmed from the retailer’s desire to offer consumers a cheaper alternative to well-known brands. It wasn’t long, however, before the major brands took notice of the new competition and fought back by lowering their prices. As the gap narrowed, consumers soon reverted back to choosing their original, favorite brands.
For retailers this forced a rethink of the private label strategy. Instead they began to look for areas of dissatisfaction, spotting gaps that major brands were not filling.
Retailers are perfectly placed to understand their consumers’ needs, based on the fact that they interact with them daily and can actively monitor their purchasing habits. As retailers sought to close market gaps, they moved away from offering cheaper alternatives to delivering quality products at a similar price to major brands — and sometimes even higher.
This represented a more customer-centric strategy on the part of the retailers, while at the same time providing them with a hook to lure customers through their doors; while manufacturers’ brands are available everywhere, private label brands are tied exclusively to one retailer, thus giving customers a reason to shop in a certain place over another.
Although ‘own brands’ in many cases are helping retailers capture a greater market share than the high profile manufacturers, the initiative still requires several factors to achieve success. First, the retailer needs to have good knowledge of brand portfolio management to enable them to manage their brand alongside the other international brands stocked in store.
Secondly, strategic branding takes a retailer out of his purely retail role into the world of manufacturing, which necessitates an understanding of the manufacturing process, of how to deal directly with manufacturers and an awareness of issues such as supply management and quality control.
From a consumer point of view, the retailer has to create a product that offers added value. Simply sourcing a cheaper product with low quality will have a limited run of success; consumers will soon realize the product is not up to standards and return to their preferred brands. In essence, the retailer needs to think about how to develop a long-lasting consumer relationship through building value into the product at all levels, so that it can stand alone and compete in its relevant category.
The possible pitfalls are many, but can be avoided with the right advice and support that a strategic branding consultancy can provide. It is here that a retailer can receive advice on whether there is a gap in the market which needs filling, which category to enter, how to position the brand and how to construct it. The consultant can advise on a product’s name, logo, packaging and how to connect the private label with its potential target market.
While a private label initiative can reap rewards for retailers, it should be clear that this is not a quick fix solution if a store is doing less than well. However, a retailer that enjoys a good consumer relationship can find that with the right strategic branding advice, launching a private label can increase its brand equity, drive profits and create a new era of a stronger and more direct customer relationship.