Guest Commentary
by Ted Mininni
January 14, 2010
The New 'National' Brands
Once perceived by customers as cheaper alternatives to national brands, private labels not only have come into their own, but also are giving manufacturers’ brands more competition than ever. Over the past year, store brand sales have increased by 10 percent versus 2 percent for national brands. According to The Nielsen Co., store brands comprise just over 10 percent of most retailers’ total product mix, but account for more than 20 percent of sales, while achieving a turn rate that is better than two-to-one. But what happens after the recession?
Research from Information Resources Inc. shows that even as the economy improves, many consumers who have adopted more frugal spending habits are likely to keep those habits.
Retailers should think about leveraging their brands to deliver quality at a premium level, innovative product features and segmented offerings that are most relevant to the customers in their markets. The opportunity to create customer experiences that enable the retailer to differentiate itself from its competitors should not be missed.
Invariably, to succeed, the right product mix at the right prices is essential. The impetus is on retailers to brand, position, select, outsource and package their private label product mix better than ever. An investment in research to define shelf opportunities, as well as consumers’ needs, wants and desires, can pay big dividends.
Just as manufacturers are cutting down on the number of SKUs they offer in 2010 by about 15 percent (as a direct result of retailers’ decisions to cut nationally branded assortments), so, too, should retailers be honing their own brands.
Although large-volume categories such as cereal, pasta, pasta sauce and snacks represent great sales and growth opportunities for store brands, too many choices actually turn consumers off. In a Nielsen study, consumers said they expect to find more selection under national brands than under store brands. So logically, it makes sense to analyze existing categories and pare down assortments to those items customers actually are buying.
Retailers can conduct experiments in selected stores and cut trending varieties into the product mix in specific categories. This process keeps assortments fresh, while maintaining best-sellers. By soliciting customer input, marketers can experiment with ground-breaking new private label products and clearly differentiate their brands in the process.
Store brands should become the focus of retailers’ marketing efforts going forward. Advertising, center-store merchandising and end caps all should work to support store brands.
Because many consumers make their purchase decisions at the point of sale, retailers must consider packaging the most important element in private label marketing. Packaging should tell the brand story. Honesty, transparency and simple, direct messaging are the most important marketing strategy with consumers — especially now. Building trust is essential.
What better time could there be for retailers to turn their private label brands into the new “national” brands for their customers?
Ted Mininni is president of Design Force Inc., a brand design consultancy to consumer product companies with Enjoyment Brands (www.designforceinc.com). Contact him at 856-810-2277.
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