Wal-Mart Spices Up Private Label - WSJ.com

Private label is growing in dollar sales in the United States. When consumers need to do some belt tightening they look to store brands (Typically lower priced, there are some premium PL brands that sell at higher price points).

A strong brand differentiation is a solid strategy to neutralize consumer private label substitution.

Posted via web from admore's posterous

KROGER PRIVATE LABEL PUBLICATION

Mail Call via the United States Post Office

In today's mail was a publication from the Kroger Company. Kroger is our main supermarket. The publication is called "mymagazine™", "exclusive extras for our best customers"

What is so remarkable about this?

• All products are private label [available exclusively at Kroger]
• 12 coupons
• 20 pages including front and back cover.
  

Main themes

• Indulgence [vanilla cream puffs / Chocolate Oranges]
  
• Holiday [stuffed olives / Black Tiger Shrimp Ring / spiral sliced ham]
• Commodity products [frozen fruits / cheese]

Takeaway

• These private label brands are only available at Kroger
• Kroger wants to drive traffic to their stores. To drive occasion sales would increase sales at competing retailers. Using products and brands only available at Kroger accomplishes the former rather than the later.
• Calling something "exclusive" increases the consumer interest [consumers like to be on the inside / special]

What are your thoughts?

PRIVATE LABEL POWER

The Wall Street Journal has an interesting story about store brands and consumers increasing acceptance of them. The United States has a relatively small percentage of private label market share. Many nations in Europe purchase private label [store brands] at double or triple the U.S. rate.

NOVEMBER 6, 2008

At the Supermarket Checkout, Frugality Trumps Brand Loyalty

By ELLEN BYRON

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.

"I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."

A few things to think about

• Food prices have been inflated by rising grain prices as well as fuel transportation costs
• Consumers are feeling a pinch from higher fuel prices that have only recently pulled back
• People are cutting expenses where they can
• Unemployment was most recently reported as 6.1% in Sept.
• More firms have announced layoffs or initiated them since then
• People are tightening their financial belts

Benefits to Retailers of Private label brands

• Compare favorably with major competitors such as Walmart.
  
• They are hard to directly compare with Walmart bands and sizes
• Reduce comparison to prices in other stores as the items are different
  
• If a consumer falls in love with a particular item, it is not available at any other retailer, this increases store loyalty
• Loyalty increases store visits
• Loyal customers spend more because some quality outweighs potential costs savings from a less respected brand or a less expensive private label
  

Takeaway

If current economic conditions persist major branded goods producers will come under increasing pressure. This pressure will come from retailers and consumers. Even the stock market will make demands if performance of branded items slips.

It is critical for branded goods makers to create a compelling case to consumers why their product is worth a premium price. If U.S. unemployment hits 8.5% or higher branded goods firms will be under major strains.

Consumers are becoming more comfortable with private label. The longer consumers are under strain and purchasing them, the stronger their loyalty will be when things get better. It may be tougher to get up sell people in the future. The case will have to be stronger and more compelling.


What are your thoughts?