Private Label Buyer

The ABCs of Reaching Gen X and Gen Y with Private Label

April 13, 2011

Younger consumers are poised to lead the economic recovery. Retailers need to adapt their private label plans and approaches to appeal to them. To do that, first learn their shopping habits and their wants.
When people hear about generations and demographics, it seems that the Baby Boomer generation usually gets quite a bit of attention. They were, at one time, the nation’s largest, wealthiest and most influential demographic group. However, a new generation has taken over.

Generation Y or “Millenials” as they also are called, today represent the largest U.S. population segment – more than 76 million strong. Add the 51 million members of Generation X into the mix and you have a large and powerful new customer segment to hone in on for private label sales.

 “They are looking to try products that are new and different and branding isn’t as critical to them as it was to their parents,” says Richard George, professor of food marketing at Saint Joseph’s University, Philadelphia, Pa. “I think this should have the private label folks saying hallelujah.”

Gen X overall tend to be more brand loyal than Gen Y. Xers are more set in their ways and focused on familiarity and product quality rather than value, says Aisling Balfe, retail analyst with London-based PlanetRetail.

However, this doesn’t mean they can’t be lured by a well-planned private label program, she adds.
“I think it’s completely dependent on the product category, though, if a campaign offers a complete overhaul of an existing range, product innovation and/or something completely new to the consumer, it is likely that they could be lured.”

Some retailers, such as Target, already are connecting with these up and comers, by positioning their private label offerings as fun and trendy.

 “Target stores have managed to maintain a hip, trendy image with a strong value message with whimsical advertising; strong, almost pop art in-store merchandising and a roster of high profile designers for everything from housewares (Michael Graves) to bedding (Todd Oldham) to women’s fashion (Mossimo) to cosmetics (Sonia Kashuk). And, with the interest in at-home meals, Target recently announced a new partnership with TV cook show host Giada De Laurentiis for a store brand line of specialty food items and cookware.”

Because these younger generations tend to enjoy cooking meals at home, retailers can use that to their advantage, says George. “A great idea would be to hold a cooking class for these younger shoppers and have all of the meals prepared using store brand products.”

Gen X and Gen Y consumers also are the most likely to use shopping lists for most trips, so retailers should think about providing them with electronic shopping lists with their private label products on such lists, he says.

Other key ways to sell your private label food and non-food products to these markets is to:
• Appeal to their lack of brand loyalty
• Offer targeted offers via social media
• Engage them with things such as music and in-store entertainment
• Display private label products on enticing endcaps or front-of-store bins
• Hold cooking classes and have all of the meals prepared using store brand products.
For Gen X, time is a precious commodity, so retailers should reduce deadline pressure by offering meal planning and deals, and little indulgences like lattes to make shopping less onerous, according to a study Mining the U.S. Generation Gaps, from market research firm The Nielsen Co. Child care activity centers or computer kiosks keep kids engaged while parents shop. In-store cooking or craft classes offer family fun and a reason to increase trip count.

To reach Gen Y, consider upgrading piped-in music to current hits, the same study says. Coffee stations with battery chargers and in-store Wi-Fi let them kick back and review Internet or mobile coupons and shopping lists. Convert their need for immediate gratification into impulse buy sales with enticing end caps and front-of-store bins.

Trading-down behaviors related to the choice of retailer, product or brand will lose some traction in the recovery, but private label brands (especially in fast moving consumer goods categories) will remain a significant factor due to their high-quality at lower prices.

“While Gen X-ers are smaller in number, they are a huge opportunity in today’s economy,” says Tom Bernthal, CEO of Kelton Research. “Gen X-ers remember the consumption culture of yesterday and long for it back. They are the ones that have latent desires to spend. Gen Y-ers, for the most part, are just now coming into the financial situation where they have disposable income. They don’t have strong memories of how people spent in the pre-recession days.” 

This presents a plethora of store brand marketing opportunities for retailers who take a thoughtful approach to reaching these younger generations.

Gen X and Gen Y use deal-seeking behaviors such as taking advantage of sales, using coupons and comparison shopping and will continue to do so in the future.

While Gen X and Gen Y claimed the highest coupon redemption rates and were among the most likely to use shopping lists for most trips, they also admitted to making the most unplanned purchases on their shopping excursions, according to the Nielsen study.

It’s important not to forget that they’re looking for ways to save and value matters to them, says Todd Hale, senior vice president, consumer & shopping insights, Nielsen. “Despite this, they do still enjoy shopping and like to have fun and are also more likely to impulse buy,” he says. “So, retailers located in neighborhoods with younger populations should think more liberally about how to display products that might appeal to this particular crowd. They should think about what to place in front of store from a checkout perspective to get them to buy that one last item as they’re checking out.”

Brand loyalty also tends to be lower for these younger generations. In a recent survey of 865 Gen X and Gen Y consumers by Boston-based marketing firm AMP Agency, just 3 percent of respondents said they’re loyal to a particular brand. The survey included baby products, consumer electronics, food and beverage, health and beauty and fashion categories.

Private brands clearly have demonstrated that they can connect with consumers of all age groups, says Hale. “It’s now a matter of figuring out what products appeal to these younger shoppers and balancing your category assortment appropriately. Certain categories such as baby food and carbonated beverages tend to be more skewed towards younger consumers, because they are more likely to have young children. I think retailers just need to match their assortment to their shopper base and take advantage of opportunities around certain PL categories that might be more appealing to this particular age group.

Gen X and Gen Y shoppers favor supercenters and mass merchandisers over more traditional formats like grocery or drug stores, according to the Nielsen study. When younger shoppers do check-in to a format, they make a big impression at checkout. Gen X and Gen Y both spend just more than $50 on average per shopping trip, the study reports.

While they might lean more toward shopping at supercenters and mass merchandisers, that doesn’t mean they can’t be swayed into shopping other retail channels. Convenience store chains, such as 7-Eleven, target younger generations by offering products such as private label wines.

“These younger generations are definitely more open to shopping at places such as convenience stores and drug stores,” says George. “They shop wherever the desire for food and convenience collide.”
Drugstores are another fast growing retail channel and are quickly turning into basically giant convenience stores, says PlanetRetail’s Balfe. “Walgreens now stocks a significant range of private label food alongside its normal range and it’s also developed a range of PL health and wellness products. Health and beauty products and OTC drugs are key channels and ones that have previously been under-penetrated by PL. As the Gen X and Gen Y population starts to grow older, there will be an increased demand for these products and more PL products will give consumers more choice.”

Before the advent of the Internet and before social media existed, brands and retailers talked at consumers through one-way conversations, according to a blog post on the Schupp Company Web site, a St. Louis, Mo.-based advertising agency. “Private labels were (and still are) behind the scenes with very little consumer interaction,” states the post. “Retailers were telling private label manufacturers what type of products to provide based on the sales of national brands within their stores. Now, with the birth of social media, brands and retailers are now engaged in two-way conversations with their consumers and consumers now have the power to tell retailers what they want from a product, shopping experience and, in some cases, how they want to consume marketing.”

More than 80 percent of Gen X-ers are online checking out Facebook, MySpace and Twitter, shopping and price-checking online and texting or emailing friends, adds the Nielsen study.

Retailers should deliver quick hit information and offers using new media for fast results. Gen Y-ers tend to be very visually-oriented and will tweet and text about special deals real-time from the store aisles, where to meet up, and anything cool that catches their eye on site. If retailers are lucky, they’ll hit a quirky Millennial sweet spot, and they’ll YouTube or Hulu a video of a helpful employee or unusual in-store promotion.

“Target has done a really great job of connecting with shoppers in very creative visual ways,” says Hale. “Hy-Vee also does a great job using social media sites like Facebook. Some of the major drug chains all have some very intriguing Web sites and even the dollar store chains like Family Dollar and Dollar General do a great job at reaching these younger shoppers. Consumers can visit their Web sites and watch videos of meals being prepared.”

Gen X and Gen Y consumers also are among the largest users of natural and organic foods and so tend to favor retailers such as Whole Foods and Trader Joe’s that offer a wider variety of options in that category.

When asked how the economic downturn had impacted meal time, more than 40 percent of respondents to the Nielsen study mentioned consuming fewer carry-out or home-delivered meals or increasing the use of private label foods. One-third or more of those surveyed now incorporate more basic ingredients in meals and buy the produce that is in season, fresher and less expensive.

Consistently across the generations, people turned to cookbooks, the Internet and television for recipe ideas and less-expensive in-home entertainment and budget-conserving options, the Nielsen study states. Gen X favored cooking programs, while Gen Y was the most wired into the Internet.

Private label brands have a huge opportunity to cater to younger generations, experts agree, by appealing to their lack of brand loyalty and engaging them with things such as social media and in-store music. Retailers have to adapt their plans and approaches to appeal to this new generation of consumers, if they want to grow sales in this promising new demographic territory.  PLB