NEW YORK – Stronger retailer-manufacturer partnerships and greater investments in new product development and innovation are essential if store brands want to keep the big market share gains they achieved during the recession and lay the foundation for even more growth as the economy returns to normal.
That’s the prescription from a blue-ribbon industry panel in a new report, “Store Brands 2010: Post-Recession Strategies for Private Label,” by the Private Label Manufacturers Association. “To stave off the national brand challenge, store brands marketers-suppliers as well as retail chains-will need to double down on product development and innovation. National brands will be coming on strong with more investment to win back share lost to private label,” the report advises.
In the wake of the unprecedented private label growth, all key players in store brands are mindful that the business is at a crossroads. To take a well-informed look at the future, PLMA invited about a dozen highly-placed store brand executives to develop strategies that suppliers and their retail customers should pursue.
“Their conclusion was that there is both vast opportunity and peril for all store brand marketers,” said Brian Sharoff, PLMA President.
“Acknowledging that the tailwind provided by the economic downturn will eventually end, the group nevertheless outlined a set of ambitious industry challenges for the new era. They stressed that the euphoria surrounding recent growth needs to be leavened by an understanding of the evolving real world relationships among retail chains, national brand suppliers and private label manufacturers.”
Among the key findings offered by the panel:
- Private label suppliers and retailers need to get on the same page with respect to their partnerships. Retailers are still reluctant to forge long term commitments with suppliers who are tired of bidding out a contract only to see it soon disappear. Retailers should be willing to share the cost of innovation with suppliers and even with non-competing chains.
- Transparency on both sides must be the new mantra for the private label supplier-retailer relationship. Suppliers would do well to let retailers behind the curtain more with respect to their operations. Retailers need to appreciate that they are not only buying quality goods but also intellectual horsepower.
- Private label manufacturers should ask chains for more innovation in marketing and a fairer share of activity in merchandising dollars. Chains’ sharing of data with suppliers is also essential to private label growth.
- Store brand suppliers will be required to make many hard decisions. They should learn to say, “Thank you, but no,” to certain would-be clients and to scorecard all potential customers to determine a right-size fit.
Over the past 20 years, PLMA has conducted industry roundtables that have focused on a variety of trends and developments. Subjects have ranged from organics to urban retailing; from the avalanche of consumer data to store brands’ effect on retailers’ return on investment; from the veracity of product claims to the transformation of retail chains from simply merchants to full-fledged marketers.
The 2010 Roundtable was the first in the series to be comprised exclusively of store brand manufacturers. It included four former PLMA board chairpersons and senior executives who represented top echelon private label manufacturing companies in the U.S. Several are firms that market both private label and national brands.