Experts' CornerNews and Events

Gain Loyal Customers by Promoting Private-label Brands

Private-label brands are on the move. During the past two years, forty percent of consumers have tried new products or changed brands during the pandemic. When shoppers emptied store shelves of branded products, the only items remaining were private-label merchandise. This shortage of preferred brands continued for weeks and months at a time due to ongoing disruptions within the supply chain. Many shoppers now make a conscious choice to buy private label brands because they are less expensive and often comparable in quality to national brands.

 In a consumer survey conducted by McKinsey & Company, consumers responded, “I am concerned about my finances, and private label products are more affordable/a better value.” Additional responses:

  • Preferred brand of product was not available
  • Alternate option offered a better value
  • Alternate option was on promotional display
  • Alternate option perceived to be safer

Private-label Sales Grow
Once the underdog fighting for shelf space, the future looks bright for private label merchandise. Cadent Consulting anticipates private-label sales will grow 25.7 percent by 2027—8 percent higher than today. Just as significant, sales of store brands have grown 29 percent vs. 24 percent for national brands during the pandemic, according to Nielson. Shoppers are interested in trying new things and paying closer attention to how they spend money. Consumers are afraid the country is heading into a recession, and according to industry experts, private label brands always do well during an economic downturn.

Opportunity to Gain Customers
Consumer behavior is unpredictable and has dramatically changed since people are responding to crises they have never encountered. Shoppers are rethinking the idea of exclusively buying national brands from specific manufacturers. Loyalty to popular brands is diminishing and opening the door to store brands.

Private Labels Benefit Retailers
Home Improvement Retailers can benefit from the heightened demand for private label products. The margins are typically higher than those of nationally advertised brands and, therefore, more profitable to sell. High-quality private label brands can be a powerful tool to gain loyal customers and repeat business. However, it’s essential to incorporate private label products into a comprehensive strategy that identifies how they fit into the product assortment with national brands. 

  • Private label products can yield 35 percent profit margins vs. 26 percent for national brands
  • The top one hundred brands declined in volume due to brand shifting.

While many independent retailers currently stock house brands, the depth of assortment in specific categories may be limited to a few items. It’s a smart idea to review what is presently being sold and identify opportunities to add more products that can compete in a side-by-side comparison with national brands. Consumers are enthusiastic when it comes to saving money. Now is the ideal time for retailers to step up sales by increasing the visibility of private label brands with marketing promotions and in-store displays that prompt shoppers to stop and buy. One of the essentials of delivering exceptional service is anticipating the needs of your customers and then providing the goods that give a solution to their problems. Private-label merchandise is a practical option at any time, but especially now when the buying power of people’s dollars continues to shrink.

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