Reflecting back on private brands since 2020 and observing the roller coaster ride many categories of product have experienced, specifically in grocery, has been enough to make anyone’s head spin. Many of the long-term effects of this retail phenomena have yet to be unfolded, but as we take a closer look at both National and Private Label brands and what they are going through to navigate the uncharted waters of a looming recession, we begin to see the dangling carrot both retailers and manufacturers can capitalize on in the ever-changing economic landscape of post-pandemic, retail America.
Much of 2020 – 2021 saw Private label brands struggle as consumers turned to familiar big name offerings. Many analysts predicted homebound consumers would be looking for ways to save more money. We also made the assumption that this could lead to a change in brand preference as consumers would be forced to try private labels that would normally not be in consideration. However, 2020 proved to be just the opposite with national brands outpacing the growth of private labels for the first time in 10 years. Why?
- Supply chain issues plagued manufacturers world-wide in areas such as transportation or distribution. No category was left unaffected. Brand name manufacturers started to prioritize manufacturing their higher-margin products instead of their lower-margin private label offerings therefore being the only option available on shelf for consumers to choose from.
- Commuting or traveling basically came to a standstill during the early days of the pandemic. Everyday expenses such as gas mileage and that coffee on the run were no longer being spent. Weekly household budgets became more robust with extra spending cash, creating a freedom to splurge on national brands.
Always keep in mind that one of the key priorities for consumers is getting a good value. As we begin to try and recover from the pandemic and inflation grips our current economy, consumers will begin to tighten their budgets and maybe begin to rethink many of their old shopping habits. In turn, retailers will have to step up their private label strategies, if they haven’t already, improving their range within their private label offerings and demonstrate that they cannot just appeal to those consumers that are looking for a bargain out of necessity but also appeal to those that are looking for choice as well. Post-pandemic times have given retailers another chance, creating new opportunities for retailers to differentiate their brand’s range and compete in a competitive, but ever-changing marketplace.
There are four key trends that may help shape the future of private label and help retailers not only gain market share, but also gain that coveted title of “THE choice” with their consumer.
- Stepping up private label objectives: As always, retailers can and should make sure their private label strategies are well-defined and meet the changing needs of their present consumer. But is that enough? Many retailers will find that if there is not an aggressive push toward an omnichannel presence, a decline in market share is eminent regardless of how much is invested in a private label program. Mainstream retailers need to quickly realize the importance of ramping up investments in technology and online growth, targeting efforts to improve fulfillment and delivery capabilities to their consumers.
- Local or regional solutions: Expectations for a product go well beyond its quality or value perceptions. Consumers are looking for more transparency from their brands, wanting to know where products are from or even who makes them. These expectations will continue to live on past the pandemic perpetuating the need for retailers to demonstrate to their consumers they are actively giving back to their communities. Innovations in product development should include a plan for both manufacturers and retailers to help enrich local economies or environments while providing a sustainable future while building on local values.
- Elevate the home dining experience: As stated earlier, providing consumers with a range of product can help sway shopping decisions. Analysts point out that consumers prefer to shop a retailer with a much wider range of private label products over one with a smaller selection. This idea held true with small restaurants as well. During the business shutdown of 2020, restaurants offered DIY kits above and beyond their take-out menu offering, giving consumers the choice to elevate their take out experience. Allowing for choice always wins, giving consumers the privilege to make their own informed decisions to satisfy their need for value.
- Committed awareness to sustainability: With the pandemic came the added awareness and concerns consumers have toward their health and environment. Transparency has now become more important than ever, providing consumers the scoop on the who, what, where, how and why of product origins or manufacturing, again allowing consumers to make that informed selection decision and undoubtedly enforce the value proposition of choosing private label over a national brand.
As inflation continues to take grip on our wallets, consumers will start to reconsider their buying habits as we move forward in 2022-23. They will demand more in selection and consideration of a product’s eco footprint. Manufacturers must pay to play in order to capture consumer loyalty and remain in the high stakes game of the ever-changing post-pandemic economic landscape.