by Scott Davis, forbes.com
Formerly synonymous with generic typeface and questionable quality, today’s private label goods are transforming categories as we speak and forever shaking up the consumer marketplace.
Retailers of every ilk – Best Buy Best Buy, Saks, Home Depot Home Depot, Walgreen Walgreen, Nordstrom Nordstromand Target Target among them – are innovating relentlessly to create compelling and inspiring brands to compete head-on with traditional, national stalwart brands. The death of the generic, private label brand of yesteryear is official, and national brands need to be on guard as their positional power weakens with every private label that “goes rogue” in entering their category.
Historically, private label brands lacked the equity and trust of their name-brand competitors. Consumers turned to P&G’s Tide, Kraft’s Macaroni & Cheese and Duracell’s batteries as they had big companies behind them, were trusted and were the only brands that truly came to mind within their respective categories.
But the retail game has changed. Top “private label” brands are beginning to look and feel like the national brands that have become staples in our daily lives. For example, Target’s Archer Farms has successfully established itself as an affordable luxury convenience brand, offering gourmet goat cheese pizza, Key Lime Cookie Straws and organic milk, all still in keeping with the whole ‘cheap chic” Target thing. Walgreens has turned Nice! into a “high quality everyday product at a way-better price.” Home Depot has made the shift with powerful private label brands such as Hampton Bay, Husky and the new HDX.
If you needed further evidence that change is afoot, according to IRI, 70% of millennial women see store brands as having excellent quality, while 80% of all shoppers believe that private label brands are equal to or better than national brands in terms of quality and packaging.
The big surprise in how these “store brands” turned into power brands is that their path to power is exactly the same that other national brands have followed for years. The big difference is that retailers realize they have far more power, leverage and sophistication to bring to bear in changing the private label landscape. Among the core (and hopefully familiar) tenets being followed to help transform from private label to power brands:
1. Distinguish your brand position, voice and design to the segments that drive disproportionate margin. The best private labels apply a sophisticated brand strategy across the categories in which they play. Kirkland Signature has done an exceptional job building its brand and leveraging existing equities to enter new categories. Each product is a value-priced alternative of equal or better quality than name brands next to them on the shelf. Initial equity built in more common consumer goods is now being transferred to higher-end products, targeting and micro-targeting moms who are looking for great deals, not just cheap products.
2. Create sticky branded experiences. Walgreens opened its first UpMarket concept in January 2012, as a living petri dish for the Walgreens store of the future. The store was designed to re-imagine the retail/convenience store shopping experience with unexpected products and services, including sushi freshly prepared in-house, fine wines, a beauty department with full-service nail and eyebrow bars and a health and wellness department. Walgreens understood that execution matters — shoppers will try new shopping environments, but these experiences must remain closely tied with consumer needs and unique enough to warrant return trips. With Boots getting folded in the mix and Nice! becoming a household brand, Walgreens is successfully leveraging experience to get consumers into their private label tent.
3. Drive continuous innovation. Staples has used the notion of hassle-free shopping to transform the entire enterprise, from its brand positioning to its merchandising to its on-line, off-line experience to its portfolio of innovations. Between the Staples’ App Center and Easy Tech support, along with One Touch Staplers and Better Binders, Staples has made innovation look easy with its own brand leading the way.
4. Embed digital seamlessly. Walmart has not only merged its in-store and online experiences, but also leveraged digital to play up its private label offerings – offering price comparisons between them and national brands. The retailer encourages use of the app in-store by offering a product location map and search option. It also discourages “showrooming” by keeping consumers engaged with the app itself versus other websites or price comparison apps.
5. Arm your ambassadors. Despite its current straits, Best Buy still provides envious end-to-end in-store sales guidance, led by the Blue Shirts and Geeks and their knowledge base of why Rocketfish and Insignia are equally strong offerings as name brands priced higher. Likewise, Home Depot’s 40,000 Orange Aprons successfully guide shoppers to high quality brand offerings across a number of categories, that just happen to be Home Depot store brands. When your own salesforce can help objectively guide traffic to store brands because the quality and promise hold up to competitor offerings, than it might be “game over” for others.
Few private labelers have mastered and can control all five of these tenets. And many more businesses will continue to slap private label brands on their cheapest offerings and call it a “value” brand. But, as product quality, better data and analytics and consumer control continue to become a reality, national brands should be mindful.
Store brands are following their playbook and rewriting it at the same time.