<img alt="" src="https://secure.peak2poem.com/196389.png" style="display:none;">
Schedule a demo

How brands can combat the growing demand for private label products

Private labels were once thought of as the “cheap” alternative to big-name brands, however the pandemic combined with inflation helped usher in a new era for private labels across both multichannel and pure play retailers posing a formidable threat to brands. Today, a solid digital shelf strategy needs to include tactics to address the threat of private label brands stealing share from the shelf.

Private Labels_Obszar roboczy 1

In 2020 when panic buying saw leading brands become unavailable, shoppers switched to private labels, and many of them never switched back. In the US, for example, 20% of consumers were buying more private label products during Covid-19, and 40% of people who switched brands said they’d continue buying the new brand. Retailers saw the trend and seized the opportunity, evolving their private label strategy to not only offer value, but also choice, features and benefits. Private labels today are taking a customer-focused, data-driven approach, with products that deliver on quality and innovation as well as value. In the UK alone, private labels now account for over 50% of grocery sales, and 35% of FMCG sales. Meanwhile, almost seven in 10 German consumers think that the range of private labels has improved, with over half citing improvement in private label packaging.  

 


The threat to brands from private labels is manyfold:

  • With private labels upping their game and offering a greater range of products at different price points, they’re increasing their opportunities to compete, and they’ve got the edge in e-commerce because…

  • Retailers prioritise own-brand labels on product category pages and in search results. If a customer is searching for a particular product, and the retailer has a private label for it, the retailer will likely put their own product at the top of the list. 

  • Inflationary pressure. In September 2021, UK inflation was at its highest in nearly a decade, forcing national brands to increase their prices, widening the value gap between big brands and own brand labels.

  • Tertiary brands are making private labels indistinguishable from branded labels, creating competition where you may not be expecting it.  

  • Growing demand for private label products among mid- to high-earners. According to IRI, the number of European shoppers loyal to private labels is almost the same as those loyal to brand name labels, particularly among mid-earners and high-earners. This is in part because private labels have tapped into shopper trends, such as the growth in vegan and plant-based foods. So if you’re competing in a category that is price elastic, where demand is influenced by cost of the product, you’re more likely to be impacted by private label substitutes. 

  • Amazon is ramping up private labels, particularly with its push into grocery, both online and with physical stores. 

  • Small but growing trend for super quick delivery. This is particularly true for high-demand categories like bakery, dairy, chilled, ready meals, and alcohol. Quick delivery players are finding that they can get an uplift on their margins by sidestepping brand distributors and creating their own private labels. 

 

Our top tips for competing with private labels:

    1. Know the size of the threat. Online retailers today host a huge range of private label and tertiary brands - which of those are relevant to you and pose the biggest threat?

    2. Play to your strengths - drive visibility in categories where brand loyalty is higher. Some categories are more resilient than others to private label substitution. Focus on driving visibility in those categories you can amp it up even further if you… 

    3. Use paid media like banners, promotions, and value added packs to get ahead. Paid placements and sponsored products can offer a quick win way to improve your product visibility and boost sales, which can have a knock on effect for improving organic search results. Just make sure you have your content strategy up to scratch so you can convert on those paid placements, because…

    4. Content is everything. Review your brand’s shelf appearance and product pages against private labels to ensure a unique and competitive offering. Bonus points if you can tap into key growth areas (e.g. plant-based, sustainability, etc).

    5. Track your position on the shelf. Monitor private labels against your own brand in search and category Top 10 results. Where are the biggest gaps and why? Is it keyword SEO? Stock issues? Price wars?

    6. Close the gaps and iterate. Monitor your products continuously against private labels so you can spot issues early and take action.