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November 18, 2010
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Know Your Customer, Know Yourself

As shoppers have become more value-conscious, many retailers have gotten much more serious about improving their private brand offerings, Mary Rachide, Family Dollar’s divisional vice president of private brands, tells PL Buyer Managing Editor Lynn Celmer. The discount retailer has undertaken significant efforts to better understand its customers and reposition its private brand program to stay on top of the game.

PL Buyer: Can you tell me what’s happening at Family Dollar with your private brand initiative?

Mary Rachide: Our private brand initiative, and I’ll continually call it brands, because we’ve made the decision internally to really treat our brands as brands and not just labels and to put that kind of brand management infrastructure and discipline in place. 

We’ve done an absolute ton. I’ve been with the company now for about 20 months, so we’re kind of early in the journey in moving from the label to the brand. But we’ve done a lot in the past 18 months. 
We’ve launched or refreshed over 10 brands across consumables, home and apparel which has impacted about 1,000 SKUs. And as a result of these efforts so far, our private brand sales have increased from about 19 percent of our sales in fiscal 2009 to 22 percent of sales in fiscal 2010, so a pretty significant movement in a short period of time. 

I think that in addition to the branding that we’ve been doing that is very visible as you walk through our stores and see the packages on the shelf, inside the package we’ve been bringing a much more rigorous focus on quality than ever before. We’re being more consistent about it and also using that consistency of quality that’s inside the box to message on the box our 100 percent satisfaction guaranteed or your money back. 

That’s new for us, to have the confidence to really shout that message.

A big part of what we’re doing with private brand is also in partnership with our global sourcing area; it’s been a very big investment for us. We’ve been expanding the size of that team so that we can expand the scope of product opportunities that they’re able to bring for us. What we believe is that as we create the right compelling brand messages, that it gives us the opportunity to source products from all over the world at compelling values for our shoppers.

PL Buyer: Can you tell me more about the expansion of the FamilyGourmet private brand?

Rachide: We’ve been working on this for a good while now, but the objective there is to bring both better quality and better branding and packaging to our food area. We started at a place where we had a brand called FamilyPantry and did a lot of consumer research on FamilyPantry and decided that what would best suit our shoppers, would be to do a complete refresh both of the product and the packaging and we felt to best get credit for that and give our shoppers a new reason to try that we also needed to rebrand. 
So just changing the product and the packaging probably wasn’t enough but we really wanted to signal a step change in our food business.

PL Buyer: Can you tell me about some of the innovative things Family Dollar has done with its other private brands?

Rachide: One very exciting thing that just launched last week [September] in stores was a chainwide cookie sales contest. What we’re doing with this contest is we sent out coupons to our store associates so that they could actually try the cookies themselves and then we’re actually incenting them to sell the cookies; we provided an endcap dedicated to the program with in-store signage both at the register and in line with the food department and also provided incentives for the store managers and for their teams to drive sales of the cookies. 

When we did the test of a local market of 48 stores, it had absolutely incredible results and while we had contemplated waiting to launch the contest chainwide in January or February 2011, the success was so compelling that as an organization we decided to shuffle priorities and make it happen as soon as we could. 

We believe that the advantage of this is getting our store associates to try the cookies so that they had experience with the brand and believed in it. Because we believe that the cookies are excellent. And if we could get them to try them and get them to love them and have them as our in-store brand ambassadors to some extent and to actually tell our other shoppers and tell their friends and families how great they are both from a flavor perspective, as well as an incredible value. 

We’re excited to do a lot more innovative things like that in the future. So far, that’s the one that’s hit the stores.

PL Buyer: How have you seen private brand change since the recession?

Rachide: As shoppers have become more value-conscious, many retailers have gotten much more serious about improving their private brand offerings. We’re certainly one of those retailers. 

At Family Dollar we’ve been focused on bringing consistency to our brands which means we’ve been really focused on raising the bar on quality and exploring branding that is going to best resonate with our shopper and her needs. The focus is all about bringing our shopper better value for her money so that she feels smart buying from us and wants to come back again and again.

PL Buyer: What are some of the trends that you’re seeing in private brands?

Rachide: What we’re seeing, and I think all retailers in general are seeing, is trial. We’re seeing that shoppers are often willing to give things a chance that they might not have been willing to try in the past. 
So it’s up to us to deliver the quality of product that satisfies them and makes them come back and buy it again. 

We talked a lot at the Private Brand Movement conference in September in Chicago about trends in packaging as well. Certainly we’ve seen a trend in the marketplace towards white packaging and we asked our shopper about that; we showed her concepts of white packaging and really assessed whether that trend fit for our environment and what our shopper was looking to us for and she said no. 

She said that that is not what she wanted. She asked us to give her warm, vibrant color and great shots of the food inside the package and that’s a case where it took some real courage for us to do something different than the market and the market trend, but we decided that our shopper opinion needed to direct our branding and packaging strategy, because we can’t show her value unless we’re meeting her needs and expectations.

PL Buyer: What would you say are some of the most critical factors that a retailer needs to consider when developing a private brand?

Rachide: Number one is who is your customer and what does she want from you? Everything that you do has to be focused around who she is and what she wants and how you can provide value to her. I’d say the second thing is being very focused on creating the capability to consistently deliver on the brand promise that you’re making. So the quality has to deliver. 

PL Buyer: As a retailer, is innovation something that you’re looking at all the time?

Rachide: Certainly it is. I think it varies by category how important innovation is. In our home and apparel fashion businesses, we’re certainly evolving and innovating styles and designs on a very, very regular basis, but even in our consumables business, we’re constantly looking at how we can improve our products and provide more value to the shopper. Be that with new and innovative ingredients, technologies, delivery systems, we’re very interested in being able to bring those to 
the market.

PL Buyer: Does the average shopper make his or her decisions on buying private brands primarily in the store?

Rachide: I have heard some theories on this but our thinking here is proprietary.

PL Buyer: Is it just price that shoppers are looking for from private label, or is there more to it?

Rachide: No, there is certainly more to it. Price is just one factor in the value equation. For our shopper, the value equation is having the right price, having the right quality, being located in a convenient place where it’s easy for her to get in and out and find what she’s looking for and it’s also making sure that the product is packaged in a way that appeals to her and makes her feel good about the purchase that she’s made. Value is all of those things and certainly price alone is just one factor in the equation.

PL Buyer: How important is packaging to a private brand?

Rachide: I think it’s very important. The packaging is how you explain to the customer what her expectation should be of the product.

PL Buyer: What changes do you predict for private brands as this year goes on?

Rachide: Certainly you’re going to see retailers continuing to launch new brands and evolve their internal organizations and for us at Family Dollar there is certainly going to be continued focus, energy and resources behind our private brand program. 

You should expect to see a lot more from us in the consumables area and in apparel specifically over the coming year. We believe that even when the economy begins to improve, which seems fairly unlikely in the near term given the jobless rate, strong private brand programs, our private brand program, we believe can help provide a competitive differentiation. 

PL Buyer: Why are private brands so important?

Rachide: First of all, it’s driving better value to our customers. And making sure that we’re meeting her needs for value and the needs she has to solve her and her families problems. We’re looking to provide value solutions that we bring to her. And our private brand are also important to us because they do give us the competitive differentiation, a means to drive profitable business growth, and a way to enable long term sourcing flexibility. To continue not just in the short term, but in the long term to continue to drive value for our customers. PLB

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