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- RESEARCH & AWARDS
For many years, private label resided in “me-too” land. In this realm of sameness, the greatest compliment a product could receive was that it looked and tasted or performed much like the “real thing” - the national brand item it was designed to emulate.
Although you’ll still find a slew of national-brand-equivalent products on retailers’ shelves, today’s store brands are implementing a major reroute of their road to success. And that new route is leading retailers into an exciting new territory - private label programs that set them apart from the national brands and retail competitors, in areas ranging from strategy and product development to packaging and marketing.
The ride might be an exhilarating one for retailers, but it represents a potentially scary journey for some national brands.
“The national brands are not the sole leaders anymore,” stresses Scott MacLennan, director of store brands for Enfield, Conn.-based Specialized Technology Resources (STR). “The new race is really private label retailer vs. private label retailer. As long as retailers can deliver sustained box-to-box store brand quality, there is no stopping the charge.”
In fact, retailers might be even better situated for product and program differentiation than the national brands are.
“National brands, depending on what their brand stands for, can be more restricted with what they can experiment with,” MacLennan says. “Retailers can more easily try something new and creative instead of making the traditional flavors and/or styles.”
Ponder the ProductsOf course, differentiation is more than just a trend. For private label programs across the supermarket, drugstore and mass merchandiser channels, it also is an increasingly important margin-boosting strategy.
“It is imperative for retailers to differentiate in order to create a unique shopping experience as retail store options and repetitious products abound,” notes John Burt, senior national account manager – Target for Fort Worth, Texas-based Marketing Management Inc. (MMI). “Having winning costs on basket-building essentials such as milk, eggs [and] bread is still a key competitive element to drive shopper frequency, but it is a singular approach - as is creating a single national-brand-equivalent strategy for your private label program.”
Burt advises retailers to create a premium “differentiation” tier within their private label programs. Products within such a tier encourage destination-minded shopping behavior on the part of consumers.
Retailers could gain consumer loyalty with premium private label products such as salsa, pizza and ice cream, he adds, as well as with products boasting a social marketing element such as fair trade or advocating sustainability. Other tactics that build excitement into the assortment, Burt says - and subsequently encourage more frequent shopping trips - include unique flavor profiles or flavor profiles that mimic restaurant trends; meal solution demos, displays and recipes that simplify the shopping experience; localized assortments that provide seasonal relevance with private brands; and easy-to-read (and well-researched) nutritional claims and health benefits for better-for-you items.
Because private brands represent the “unique assets” of a specific retailer, each retailer has an opportunity to create an individual shopping experience through those assets, notes Scott Lucas, executive director for Interbrand, Cincinnati.
“By creating brands that engage and delight their shoppers in a differentiated manner, retailers can do much more than drive sales,” he says. “They can drive loyalty to their store and the shopping experience they create.”
Such a strategy also can help retailers win in a retail environment that’s fraught with greater competition than ever battling for fewer consumer dollars, Lucas says, especially considering that most of the leading retailers carry a very similar subset of national brands.
But products need not depart too dramatically from what’s already out there to qualify as unique.
“We see a lot of retailers using ‘disruptive technology - that is, creating a unique attribute or feature in their store brand items that gets consumers excited,” MacLennan says. “This is a very exciting time for store brands, and it won’t be long before the national brands feel the need to imitate the store brands in order to keep up.”
No matter how they attempt to differentiate, retailers still need to ensure key price points - good, better and best - are covered, stresses Ralph Blessing, executive vice president of GfK Strategic Innovation, New York.
“Many consumers are still using price as a key proxy,” he says. “Private brands can sometimes fill in key price points or help a retailer defend a category.”
But consumers really do not want or need more SKUs, Blessing emphasizes. Retailers could instead differentiate within existing categories by offering unique items (as Target does under its Archer Farms brand), targeting various demographics such as Hispanics, kids or Millennials, or going after “attitude” groups such as “green” consumers. “Retailer brands that are well differentiated can often cover more categories and provide cross-category solutions easier than national brands, which tend to focus on one category,” he adds. “Another growing trend is with a portfolio of private brands that can each have a distinct target, price tier, etc., versus relying on one brand. This is especially common in clothing or in Europe.”
Wear It WellA major driver of store brand differentiation is shifting consumer expectations - especially when it comes to private label packaging, reports Russ Napolitano, vice president of business development for Wallace Church Inc., New York. Once consumers get a peek at creatively dressed-up offerings from Target’s Archer Farms brand or Publix’ rebranded lineup, for example, they expect a higher level of design, one that “captures the retailer’s experience.” The package sets the expectations for the quality of the product on the inside, Napolitano adds.
“How you dress yourself is a bigger factor than even merchandising or promotion,” he says.
Lucas agrees that packaging plays a critical part in a private label program’s road to differentiation.
“We like to tell our clients that 80 percent of a consumer’s interaction occurs through the package itself,” he says. “When you consider that you already have your shopper experience in the store, retailers have an amazing opportunity to connect, communicate and engage their shoppers in a way other brands simply can’t.”
Napolitano notes that consumers have a “perceptual hierarchy” under which they notice color first, then shape (the physical structure or the brand architecture). Colors and shapes that stray a bit from the national brand’s will capture shoppers’ attention.
Speaking of color, retailers could benefit by providing packaging color cues for various types of products or product lines, Burt notes, such as healthful and organic items.
Graphics, too, need to “pop off the shelf,” Blessing notes, while functionality also is critical.
“Packaging today needs to be both highly functional and have design elements that reinforce the brand position,” he says. “Apple iPod [and] iPhone do it best. Consumers don’t want to compromise on either form or function.”
Packaging also should create a nice “block” look when it’s shelved together, Blessing adds, and must work well when stacked (which often requires packaging to be turned sideways).
He recommends putting the brand and flavor on multiple sides, and notes that the packaging also must be to be easy to read, especially for older consumers or Hispanics.
“Consider dual-language copy, and put critical information in larger fonts and easy-to-read colors,” Blessing advises.
Retailers also should consider the environment whenever possible, he says, using recycled or recyclable materials and avoiding over-packaging. Environmental concerns grow in importance with the size of the package, but any eco-friendly tweaks must not mess with functionality.
Spin itDespite all the excitement, a product- and packaging-focused differentiation strategy might not be appropriate for all retailers in all channels. For example, a dollar store might continue to do just fine selling only on price.
But for a great number of retailers, such a strategy will be important in the years to come - at least in specific categories. Moreover, some retailers will be able to pull it off without messing with formulation or completely re-inventing packaging.
Before they engage in a major product and packaging rework, Bruce Kern, president and CEO of Jacksonville, Fla.-based Logix3, advises retailers to first take a hard look at the costs - and the potential return. If that picture is less than rosy, then he recommends differentiating through marketing instead.
Kern points to Costco and its Kirkland Signature brand as a great example of differentiation-oriented marketing. The retailer is known not only for its many product demos, but also for its strategic cross-merchandising, frequent communication and more. As a result, the Kirkland Signature brand has become a key reason many consumers shop at Costco.
Retailers also could put a new spin on what they already have by reaching out to companies that specialize in niche marketing or devising creative product pairings. Kern mentions one retailer that combined its existing pickle items - dill, sweet and chips - into a handy three-pack assortment not offered by the national brands. Sales skyrocketed with the move. Another retailer paired up its 30-pack of diapers with its own prepackaged wipes.
Of course, marketing will be equally important for retailers that opt for true product and packaging differentiation. According to Lucas, retailers truly are learning to use the traditional marketing vehicles that once were the domain of the national brands.
“Look at how Walmart has built the Canopy brand with its relaxed living and on-trend styling so quickly over the last few years,” he says. “At every touchpoint, the brand has been managed in a consistent and emotionally engaging manner, from advertising online to unique packaging and an in-store experience. Most national brands would kill to be able to have such a consistent and compelling launch of a new brand.”
What’s more, Lucas says, the Canopy brand has helped Walmart further bring to life the “live better” promise of its retail brand.
“Frankly, the key is brand - not private, retailer, national,” he adds. “The best ideas are just that, brands.”
With a deeper private label assortment, a retailer can - and should - aim to create a “halo effect” for the store brand across all categories, Burt says.
“Reach out with your assortment with price cuts, increased presence in the circular, demos, online features, dedicated private brand mailers, IRCs, direct mail/receipt marketing and prominent displays,” he suggests.
MacLennan adds that the time to act is now.
“The retailers that take advantage of the current economic climate and the unprecedented openness by consumers to buy store brands will be the ultimate winners,” he says. “This kind of opportunity does not happen every day. Retailers can use quality, price and innovation to build loyal customers who will shop across aisles and across the store for store brands that rival and exceed the national brand [in quality]. PLB
Sidebar: Need Differentiation Assistance?
Enfield, Conn.-based Specialized Technology Resources Inc. (STR) helps ensure the safety, quality and social responsibility of its client’s products at every stage of the supply chain, from drawing board to point of sale. The company’s facilities and testing laboratories feature state-of-the-art equipment, and its audits and inspections are unbiased and independent. Moreover, STR’s scientists, engineers, technicians and inspectors understand the realities and complexities of global business. For more information, call 860-749-8371 or visit the company’s Web site at www.strquality.com.