Kimberlee Marsh and Bharat Rupani, division vice presidents, North America private brand development, Daymon Worldwide, say successful private brands should be an extension of a retailer’s banner brand by being true to the overarching brand promise to core consumers.
Give us a brief update on the U.S. landscape for private brands. What do retailers need to keep in mind when planning private brand programs?
Bharat Rupani: Since the 2007 recession hit the U.S., private brand share has increased by 2%. Despite recent signs of economic improvement, private brand share is not receding to pre-recession levels. This suggests a fundamental shift taking place in the mindsets and shopping behaviors of consumers in relationship to private brands. There is much more acceptance, trust and positive quality perceptions around private brands, which is one of the reasons we have seen an explosion of multi-tier brands in many retailers’ private brand portfolios.
Kimberlee Marsh: Whether it is a value chain or an upscale chain, retailers have to ensure the quality and pricing of their private brands are aligned with banner positioning. With all the channel blurring competition, it is imperative for private brands to offer differentiation or product benefits consumers cannot find anywhere else. The challenge is to understand each banner proposition well enough to make private brands stand for that banner in a way that sets it apart from competition, and attracts loyalty and sales.
How can retailers successfully leverage their private brand programs?
Marsh: Ultimately you have to know and talk to your consumer better than anyone else in your business so you can develop programs and products that appeal to them and offer differentiation to secure loyalty for the long haul.
Rupani: From an organizational standpoint, we see far more success from retailers with fully-dedicated private brand teams that apply strategic focus to customer targets, brand portfolio, new product development and brand communication than we do with retailers who merely supplement their efforts with traditional merchandising teams. Buying products and developing and marketing brands require different skills and mindsets.
What are the latest private brand industry-wide trends?
Rupani: We have seen new launches around wellness, expansion of premium brand offerings and re-launches of value brands. We are also seeing more private brand-dedicated engagement efforts online and via social media.
Nielsen data indicates an increase in private brand dollar share for categories in perishables (especially meat and produce) and general merchandise (especially seasonal), as well as diet aids, air fresheners, deodorizers, gum and pet care.
Marsh: Daymon’s Global Business Development team recently conducted a study to analyze key category drivers, including the categories that experience the most fluctuation. We discovered that some private brand categories are actually up because of national brand fumbles in not matching innovation. We also learned that those retailers dedicating quality merchandising support to their private brand continue to grow sales and share versus national brands. Fresh continues to grow across all channels as retailers find ways to differentiate in this area.
What is the right mix of national brands and private brands for most retailers?
Marsh: It truly depends on each retailer’s individual strategy. Most of our retailer customers have private brand percentages around the mid-teens to 20’s, and are looking for more. In many cases, we are seeing mid-tier national brands losing market share, indicating that consumers are supporting either the No. 1 national brand in a category or the private brand.
There are differing opinions on best price-points for private brands. Some say 10%-25% below national brands, others say tiers. Thoughts?
Rupani: Pricing is a very complex yet important exercise. Some retailers use advanced analytics based on loyalty card data in combination with detailed competitor price checks to make the right price/promo decisions for each category, and each national brand and private brand SKU.
When talking about mainstream private brands, most retailers should offer a price range of 10% to 25% lower than the national brand, depending on category and price thresholds.
Depending on whether or not you use price shielding, that range will be smaller or larger.
For other private brand tiers, pricing gets more complicated because the role of a premium or value brand differs from one retailer to another and there will not always be a national brand reference point.