Editor's Insight - Departments - Private Label Buyer

When the Price Is Not Right

A 61-year-old Ohio man reportedly became a bit more than crabby while shopping for crab cakes at his local Kroger store in January.

It seems the retailer had underpriced the crab cakes by mistake. Not satisfied with the store manager’s offer to honor the erroneous discount price for the first pound of crab cakes and charge the correct price for any additional poundage, the man allegedly became downright violent — head-butting the manager and spitting in/hitting his face. (The disgruntled shopper ultimately was arrested for assault and criminal damage.)

Store managers across the globe can be grateful that most shoppers do not exhibit such outrageous behavior in response to pricing missteps. After all, such errors happen all the time, right?

But the most significant pricing “errors,” it turns out, might be deliberate — at least on the private label side.

In a recent Nielsenwire post, Todd Hale, senior vice president of consumer and shopper insights at the Nielsen Co., reports that the gap between store brand and national brand prices widened during the past few years in several large grocery departments: non-foods, dairy, frozen foods and deli. These private label/national brand price gaps are as high as 74 percent (in the health and beauty department), despite celebrated quality improvements in private label goods.

Although bargain-basement-priced store brand goods helped to boost recent overall private label (unit) sales, they negatively impacted dollar sales in many categories, Hale reports. He also notes that an increase of just one penny in store brand prices translates to approximately $400 million in sales across all departments.

Hale sees significant opportunity for retailers to enhance sales in departments and categories flaunting “extreme” price gaps by right-sizing pricing on some of their own brands. He also stresses that “prices alone are not the key to shoppers’ hearts” — retailers can and should build strong shopper relationships through several other factors as well. In addition to pricing and value for money, Nielsen’s annual Shopper Trends study found that consumers place a high value on store accessibility, store format and a wide selection, quality products, efficiency and loyalty programs.

Think about it. Is a hefty gap between store brand and national brand prices negatively impacting dollar sales within your key categories? If so, it might be time to adjust any “erroneous” private label pricing.

And don’t worry: A small uptick in store brand pricing is not likely to incite a wave of shopper violence within your stores. In fact, most shoppers will scarcely notice, providing you also are taking the recommended steps outside of pricing to encourage shopper loyalty.