Beyond the NBE Mindset

On a recent trip to Florida, I was in my hotel room, listening to a local newscast. The newscast featured a two-minute spot on store brands and the economy. The commentator mentioned that the quality of store brands often is equivalent to that of the national brands — or, in some cases, even better.
My first instinct was: “Wow, this is news?”
But the commentator was right on, because the majority of private label programs focus their efforts in exactly this direction. Retailers often “insist on” national brand equivalent (NBE) in product specs and then price items below the national brands, which is way ahead of where we were 10 years ago. But they are way behind the real leaders, who have gone miles past parity and into unique products and differentiation.
So let’s see where NBE gets you.
Let’s say you have paper towels or canned soup that matches the national brand, but you price the product lower. Well … so what? Everybody else has that, too. It’s not a far leap from those “innovative” and “daring” ads that boast “lowest prices” or “save big here.” Although low pricing alone was a significant differentiating factor many years ago, in today’s market, it’s not. In fact, that approach has become commoditized and is no longer worth much in terms of staking claims against your competition.
Today, shoppers know better. Few need to hear this on a TV newscast. 
So let’s talk about differentiation. Trader Joe’s, Safeway, Whole Foods and Aldi (among others) have built successful franchises largely on the power of their house brands, which promote loyalty. Of course, none of the four has achieved its success solely on the power of its house brands. The equation for success is vastly more complex than that, although private label is a key ingredient.
Of the four, Trader Joe’s comes closest to having built itself on the power of its store brands, although the company also caters to a very specific consumer for whom every meal is an exciting event. 
Trader Joe’s has learned much about its customers and has tailored its private label offerings to meet their unique needs. That’s the challenge and the opportunity that exists for every private label buyer and merchandiser today — finding out what their shoppers want and giving those products to them under a private label NO ONE else has.
Obviously, having profitable NBE items is critical.  But the reality of the market is that the  future ultimately will belong to those retailers that are daring enough — and farsighted enough — to understand the following: 
NBE will get your program parity with the national brands, but the real excitement and differentiation can be achieved only through programs that are beyond NBE.

Steven Lichtenstein is a group publisher with BNP Media and is publisher of PL Buyer. Contact him at lichtensteins@bnpmedia.com.