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Nonfood Options Expanding In Private Label

September 26, 2012
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As retailers look to expand their categories and tiers in nonfood private label products, they will seek their customers’ help to figure out which way to move forward, Planet Retail Senior Retail Analyst Isabel Cavill told a webinar audience Wednesday morning.

Cavill said that nonfood private label options provided differentiation for hypermarkets – grocers who were expanding their stores beyond the realm of food items – but that there are rules for developing nonfood programs that can be different than private label food ranges.

“Not all tiering categories can be applied to all ranges,” Cavill said, adding that some areas such as health and beauty would have difficulty selling value or economy tiers, while others such as apparel might not lend themselves to premium or superpremium tiers. “Retailers are testing new products to get  new shoppers to their stores. But retailers increasingly will follow the consumer. You will see more consumer involvement in the development process.”

One of the reasons for the move for many grocers, particularly in Europe, to move to hypermarkets is because of technology, she said. As items are more readily available through online platforms, accessible by in-store kiosks, big-box retailers find themselves with more space in store and less product to fill it with.

“Large format stores are being forced to find solutions for extra space,” Cavill said in the presentation. “Private label has the opportunity to play a more central role in nonfood.”

Rather than seeing big-box stores looking to close and reopen in smaller formats, as is being tested in some urban U.S. areas by companies such as Target and Walmart, Cavill said stores might get more creative with the new space available.

“I think it’s a little of both. Retailers do still have big stores, and they are a great opportunity to buy products and expand merchandising opportunities,” Cavill said. “At the same time, if I’m buying groceries I’m not going to get to the kiosk for an impulse purchase. But certainly there’s a lot of nonfood products that can be part of this.”

Trace One Senior Vice President Nick Martin said that margin was the key driver in nonfood private label expansion, and that the business benefits of nonfood could not be ignored. He cited recent statistics showing the continuing growth of private label penetration in the market to say the balance had shifted to private label over national brands for the first time in history.

“(Now you) have to be sure the right people and processes are in place,” he said. “Technology is there to drive innovation, but if you don’t have the right people … it’s really about innovation across the entire chain.”

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