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According to Bryan Roberts, Planet Retail's global research director, the criteria that define a "winning" retailer shifted during the recession. Instead of looking at top-line growth, market share gains, same-store sales growth, mergers and acquisitions, globalization and other common prerecession measures of success, he explained, retailers should focus simply on maximizing profits by putting the needs of consumers first.
"Retailing is a simple business that's been overcomplicated," he remarked, citing the creation of sprawling retail empires rather than leaner, more specialized organizations better suited to current economic times. "I think 2010 will be all about getting back to basics and putting shoppers at the center of the business," he added.
Since the economy went south, shopper-centric strategies have revolved mostly around value pricing, particularly on the private label side, said Natalie Berg, Planet Retail's grocery retail director.
"We saw a significant investment by large retailers around value private label lines, which proved to be very successful in terms of preventing shoppers from defecting to hard discounters at the beginning of the recession."
In fact, she told PL Buyer, such investments “really helped stem the growth of ALDI and Lidl in
But given improvements in the quality of value-tier private label offerings, rock-bottom pricing is simply not sustainable, Berg continued, adding that she expects a reduction in the amount of shelf space dedicated to value lines over the next 12 months.
"Given the lower price point from which many of these products trade," she explained, "it would be far more beneficial for retailers to promote their premium private label lines once consumer spending regains pace."
In fact, Berg remarked, an argument could be made in favor of a two-tiered strategy that offers both value and premium private label products but no national brand equivalents - currently the foundation of most retailers' store brand programs.
"Standard lines used to serve as the national brand equivalent in terms of quality, but at a lower price point, while value lines used to be the poor-quality generic alternative," she explained. "However, retailers such as Tesco and Walmart have massively improved the quality of their value lines. As a result, we have seen some self-cannibalization as shoppers trade down from standard to value, which makes us question, 'Do we really need a standard line?'"
While Americans' affinity for national brands, combined with the regional nature of the
"In the years leading up to this recession,
Retailer attempts to "get rid of the tail" (i.e., SKU rationalization) are also expected to improve private label's fortunes in the
For more information, please visit http://www.planetretail.net. -- Denise Leathers