The rise of private-label brands in the retail industry has been a significant and ongoing trend over the past couple of decades. Private-label brands, also known as store brands, house brands, or own brands, are products that are developed and sold exclusively by a particular retailer under their own brand name.
In this article, we are going to focus on private-label brands and how retailers can market and boost sales for these products.
But why are private-label brands experiencing a rise in popularity?
Here are some key factors contributing to the growth of private-label brands in the retail industry:
Economic Factors: Private-label brands often provide cost-conscious consumers with more affordable alternatives to national or international brands. During economic downturns or periods of economic uncertainty, consumers tend to be more price-sensitive, making private-label products an attractive option.
Improved Quality: Retailers have invested heavily in improving the quality of their private-label products. In many cases, private-label brands now offer comparable or even superior quality to national brands. This shift in quality perception has contributed to their popularity.
Consumer Perception: There has been a shift in consumer perception regarding private-label brands. Previously, these products were often seen as generic or of lower quality. However, as retailers have invested in branding, packaging, and marketing, consumers have become more willing to try private-label products.
Retailer Control: Retailers have greater control over private-label products, from product development and sourcing to pricing and marketing. This control allows them to tailor products to the preferences and needs of their target audience, leading to increased customer satisfaction.
Understanding Private Label Brands
Advantages of private label brands
1. Increased Profit Margins
Higher Margins: Retailers enjoy significantly higher profit margins with private-label brands compared to national or branded products. Since they have control over the entire supply chain, from manufacturing to distribution, they can cut out middlemen and reduce costs.
Pricing Flexibility: Retailers can set their own prices for private-label products, allowing them to adapt to market conditions, consumer preferences, and competitive pressures. This flexibility enables them to maximize profitability.
Reduced Price Wars: Private-label brands can act as a buffer against price wars with competitors since retailers can adjust pricing strategies to maintain profitability without compromising on quality.
2. Enhanced Brand Loyalty
Exclusive Offerings: Private-label brands create exclusivity, as these products are only available at the retailer's stores. This exclusivity can drive customer loyalty, as shoppers are drawn to the store to purchase these unique products.
Consistent Quality: When consumers have positive experiences with private-label products, they associate that positive experience with the retailer's brand. Consistent quality builds trust and loyalty, encouraging repeat purchases.
Cross-Selling Opportunities: Retailers can leverage the loyalty of customers who buy private-label products by cross-selling other products and services, further strengthening their brand loyalty.
3. Greater Control over Product Quality
Quality Assurance: Retailers have the ability to maintain strict quality control standards for their private-label products. They can implement rigorous testing and quality assurance protocols to ensure that products meet or exceed customer expectations.
Customization: Retailers can tailor product specifications to meet the specific preferences and needs of their target audience. This customization allows them to cater to niche markets or address emerging trends.
Responsiveness to Feedback: With direct control over product development, retailers can quickly respond to customer feedback and adapt their private-label products. This agility in making improvements enhances the overall quality and customer satisfaction.
Challenges and misconceptions
1. Overcoming the "Generic" Perception
Invest in Branding: Retailers should invest in branding their private-label products. A well-designed logo, attractive packaging, and a compelling brand story can differentiate these products from generic alternatives and create a distinct identity.
Communicate Value: Retailers must effectively communicate the value and benefits of their private-label products to customers. Highlight quality, affordability, and any unique selling points that set them apart from generics.
Quality Assurance: Consistently delivering high-quality products can help dispel the "generic" perception. Conduct regular quality checks and maintain transparency in sourcing and manufacturing processes.
2. Balancing Quality and Pricing
Set Realistic Quality Standards: Retailers should establish clear quality standards that align with their target market's expectations. While cost savings are important, cutting corners on quality can lead to long-term reputational damage.
Differentiate Product Tiers: Offer a range of private-label products, including basic and premium options. This allows retailers to cater to diverse customer segments and maintain a balance between quality and pricing.
Educate Customers: Educate customers about the value proposition of private-label products. Highlight the savings they can achieve without compromising on quality. Providing product comparisons with national brands can be helpful.
Effective Marketing Strategies for store brands
Leveraging In-Store Marketing
Shelf Placement and Visual Merchandising
Strategic Placement: Ensure that your private-label products are strategically placed within the store. Consider eye-level shelves or end-cap displays for maximum visibility.
Visual Appeal: Invest in attractive and informative packaging that stands out on the shelf. Use consistent branding elements, colors, and designs to create a cohesive and recognizable presence.
Cross-Promotion: Cross-promote your private-label products with related items. For example, if you have a private-label pasta sauce, display it alongside private-label pasta and complementary ingredients.
Promotional Signage and Displays
In-Store Signage: Use clear and enticing signage to communicate promotions, discounts, and the unique selling points of your private-label products. Highlight any special offers or bundle deals prominently.
Interactive Displays: Consider interactive displays or product demonstrations to engage customers and allow them to experience the quality of your private-label items.
Seasonal and Trendy Displays: Tailor displays to match seasonal trends and holidays. Create themed displays to capture customers' attention and inspire purchases.
Online and Digital Marketing
E-commerce Platforms and Product Listings
Optimized Product Pages: Ensure that your private-label products have well-optimized product pages on your e-commerce website. Use high-quality images, detailed product descriptions, and customer reviews.
Search Engine Optimization (SEO): Implement SEO strategies to improve the visibility of your private-label products in search engine results. Use relevant keywords and phrases to attract online shoppers.
Customer Reviews and Ratings: Encourage and showcase customer reviews and ratings to build trust and credibility among online shoppers.
Social Media advertising and influencer partnerships
Targeted Social Ads: Use social media advertising to target specific demographics and interests. Promote your private-label products through paid campaigns on platforms like Facebook, Instagram, and Pinterest.
Influencer Collaborations: Partner with influencers who align with your brand's values and target audience. Influencers can create authentic content that showcases your private-label products to their followers.
User-Generated Content: Encourage customers to share their experiences with your private-label products on social media. Repost user-generated content to leverage the power of social proof.
Content Marketing and Storytelling
Blog Posts, Videos, and Customer Testimonials
Informative Blog Posts: Create blog posts that provide valuable information related to your private-label products. For instance, if you sell private-label skincare, offer skincare tips and tutorials.
Engaging Videos: Produce video content that demonstrates how to use your products, shares behind-the-scenes stories, or features customer testimonials. Videos can be shared on your website and social media.
Customer Testimonials: Showcase authentic customer testimonials and reviews across your marketing channels. Positive feedback from satisfied customers can build trust and credibility.
Examples of successful private-label brands
Looking for a bit of inspiration for your next private-label campaign? Here are a few examples of successful private-label brand campaigns that have made an impact:
Carrefour Tunisia - Qualite Prix
Campaign: Carrefour Tunisia implemented a 7-day pilot campaign with the robotic POP display Tokinomo Shelfobot. The retailer wanted to test 3 different product categories (Canned Harrisa, Fondu Cheese, and newly launched Crispbread/Rusks). This in-store promotional campaign was implemented in 4 Carrefour locations in Tunisia.
Key success factors: The robotic POSM helped Carrefour increase sales for two of its products and effectively launch a new product in-store. There was a 436% sales increase for Harrisa and 136% increase in sales for Fondue Cheese. Also, this campaign managed to generate trial among shoppers. During the promotion, shoppers tried out the new product (Crispbread).
Read the full case study!
Trader Joe's "Fearless Flyer"
Retailer: Trader Joe's
Campaign: Trader Joe's "Fearless Flyer" is a printed and online publication that highlights their private-label products. It features product descriptions, customer reviews, and creative storytelling about the products, creating a unique and engaging shopping experience.
Key success factors: The "Fearless Flyer" campaign builds excitement and anticipation around Trader Joe's private-label offerings. It leverages storytelling to make each product feel special and unique, fostering brand loyalty.
Lidl's "Love It Guarantee"
Retailer: Lidl US
Campaign: Lidl's "Love It Guarantee" campaign reinforces their commitment to quality and customer satisfaction for their private-label products. If a customer is dissatisfied with any Aldi private-label product, they can receive a refund and a replacement product.
Key success factors: This campaign emphasizes Lidl's confidence in the quality of its private-label items. It removes the perceived risk for customers, encouraging them to try new products and building trust in the brand.
Promoting Store brands
In today's fiercely competitive retail landscape, private-label brands have emerged as a powerful tool for retailers to not only increase profit margins but also build stronger brand loyalty. While they have faced challenges such as overcoming the "generic" perception and balancing quality with pricing, savvy retailers have successfully navigated these hurdles to reap the rewards.
Effective marketing strategies, both in-store and online, play a pivotal role in the success of private-label brands. From strategic shelf placement and visual merchandising to online optimization and social media engagement, retailers must leverage these techniques to maximize the visibility and appeal of their private-label products.