With the Christmas trading results all in, Kieran Forsey takes a look at the learnings for private brands and where to focus in 2019.
Not since 1953, the year Dwight D. Eisenhower became President of the United States of America, and Queen Elizabeth II was crowned, has John Lewis not paid staff bonuses. In 2019, there is a strong possibility it could befall this fate as a result of a lacklustre Christmas 2018.
Yet at the same time as one of UK’s most impressive Christmas performers over recent years has wobbled, so the insatiable rise of the so called (but now not-so-often called) discounters Aldi and Lidl, continues unabated with two thirds of us shopping there in the build up to Christmas (according to Kantar Worldpanel). Surely, one of the most impressive facts over this period was Lidl’s 33% surge in sales of their Deluxe premium brand.
How did other supermarkets compare to Lidl?
These contrasting fortunes have played out across the UK market with several past masters of premium own brand, such as Sainsbury’s and Morrisons, feeling that the premium bubble has burst, while others such as Tesco and Waitrose are seeing better results.
Waitrose, who may yet be the saviour of the John Lewis bonus, said of their 500 new or improved lines that have proven to be a great success this Christmas, that as their innovation has been market-leading, their customers have chosen to indulge.
It is true we are living through unprecedented times, just as the country was in 1953 when there was still post-war rationing, but to put these contrasting results down to political turmoil over Brexit or austerity is misinterpreting what is really going on. Shoppers of all ages – even Gen Zs – are smarter and more savvy that ever before and are willing to respond to retailers that offer good promotions, convenient location and great product quality.
Lidl’s Deluxe range is closing the gap
The important point is that shoppers are placing a newer, much wider definition on ‘great product quality’. It is no longer just about ‘it is what it says on the tin’ at a great price. Today, it is about a great product experience at an incredibly low price.
In many ways, this is borne out by Sainsbury’s Taste the Difference brand. Consumers haven’t fallen out of love with premium own brand as Lidl has aptly shown, but if products that make up the brand are falling short of the mark then shoppers will vote by abandoning the brand.
As the competitors have closed the gap, so Taste the Difference’s crown has dropped and it’s previous ‘Best’ mantel in the ‘Good, Better, Best’ portfolio at Sainsbury’s, has dropped all too often to ‘Better’, making it appear a less attractive proposition.
What have we learnt from Lidl’s Christmas performance?
The product remains king. Products are ultimately judged at their point of consumption not at the point of purchase. Consumption is the moment of truth. Get this right and shoppers rejoice at an amazing bargain and will return for more. Get this wrong and the brand is in a perilous position. Get it wrong more than once and there may be no going back.
A good brand name in well-created packaging is not a substitution for a great, innovative product. As Tom Stephens, global expert in private brand strategy, wrote in his recent white paper ‘Build and sustain your private brands with a greater level of success in the face of rapid change’ – which I recommend all to read – ‘ … make no mistake: it’s what’s inside the package that carries your future and either ensures success or failure.’
Just spending large amounts of creative money attempting to convince consumers that their lovely designs were in fact lovely products is like ‘The Emperor’s New Clothes’ or ‘putting lipstick on a pig’. Harsh maybe, but there is more than a grain of truth in what Stephens is saying and it has played out once again in the contrasting Christmas performances of UK private brands.
What can be done to slow Lidl’s march on Christmas sales in 2019?
So, as we are well into the new year and are just 11 months away from Christmas 2019, what can we take from the fact that so many of us were busy shopping at Lidl as opposed to our previous shopping favourites?
1. Listen carefully to your private brand shoppers – assume nothing.
Retail Week’s recent study of 1,000 Gen Z shoppers found 62% either prefer in-store as their shopping destination or score it equal to shopping online with just 38% favouring online shopping alone.
This same group are turned off by items out of stock, poor customer service and data breaches, but from a private brand perspective, product quality made their top three preferences. These findings tend to be supported by all age groups. But how a shopper feels about one particular retailer’s private brand over another is less certain.
Private brand retailers need to find ways of improving their listening to their shoppers to find out how they feel about their brands to gain a fuller understanding of sentiments and opinions so that products can either be replaced, refreshed or improved as needed to keep up with trends and remain competitive.
Listening to your shoppers isn’t just something to do once and move on. The world is changing so fast, retailers need to listen continuously if they really want their private brands to be among the winners in Christmas 2019.
2. Product quality includes transparency credentials
Now, and even more so with Millennials and Gen Zs, shoppers they are becoming ‘conscious consumers’, where transparency, authenticity and sincerity are important product attributes and play an increasingly prominent role in choice and decision making.
‘How can we continue to sell increasing amounts of stuff made from a finite amount of resources to more ethically savvy consumers?’ This is a question that more of us are wrestling with according to Ian Middleton, Managing Director at VegaModa, in his article ‘Ethical consumerism has gone from fad to mainstream’. These feelings are central to the shopping habits of conscious consumers, and their numbers are growing.
Inspired by popular writers such as Mark Bittman, author of VB6: Vegan before 6 (a New York Times bestseller) and Dawn Jackson Blatner, author of The Flexitarian Diet, the whole notion of Flexitarianism is growing in popularity where vegetarian or even vegan options are chosen in place of meat. When these consumers choose meat-based products they want to know more about its origins, provenance and practices associated with its supply. This information needs to be available and transparent to the shoppers.
Private brands are responding with a range of new innovations such as meal kits, novel fresh options and veggie/vegan food on-the-go. However, expanding the information flow about these products and ensuring suppliers provide this information in an easy-to-access form is an increasingly vital component for the success of these new product innovations. In addition, providing more comprehensive data on the all fresh and meat-based products is also of high importance.
3. Convenience will thrive
All retailers have worked hard on their convenience formats and this format will continue to grow. Aldi and Lidl are planning more stores, Tesco are focused on refining Tesco Express; and Co-op stores, many of whom recorded year-on-year improvements this Christmas, are poised to improve their overall performance. All focussed on seemingly getting to grips with both format, product quality and most importantly, product experience.
4. Unification of shopping channels
Walmart in many ways are leading the charge by amalgamating their store and ecommerce teams. As Walmart’s CTO explained at NRF 2019, customers don’t see a difference between Walmart.com and Walmart store and it is important that the retailer follows this lead. The change was a tough one with many organisational and leadership challenges, but after nine months, change is now being seen by customers. For example, customers can now buy online and return in store.
Shoppers move effortlessly across retail channels and retailers need to find ways to be more consistent across channels. Shoppers want to have a seamless experience.
5. ‘One Team’ with suppliers
Shoppers also want greater transparency of the origin and supply of products as we covered above. Where does a product come from? How it was made? What practices were followed?
These are all becoming more mainstream questions among shoppers. When it comes to private brands, shoppers don’t see suppliers and retailers as separated, they seem them as joined-up and therefore, retailers need to expand their thinking to allow a greater flow of data from suppliers through retail teams and back to their shoppers.
In the same way, retailers need to amalgamate their teams internally to provide a more consistent cross-channel shopping experience so they also need to focus on working with suppliers across all transactions as one team.
In Christmas 2019, private brands will continue to be a primary differentiator for retailers, but the big lesson is there are no short-cuts. Brand experience will be the deciding factor in the minds of shoppers and a great brand experience comes as a result of the cumulation of great product experiences that make up the brand. Get this right and as Lidl in particular has shown, the prize is good growth. Get this wrong and consumers will punish the brand by shopping elsewhere.
Only 322 days until Christmas!