Following my visit to FMI Connect, I noticed that the recent figures on private label sales in Europe didn’t make for a great headline. Then, looking much deeper, it soon became apparent that the message relating to the performance of private label in Europe is actually very similar to the message in the US.
According to IRI’s recent publication, after enjoying continuous year-on-year growth for many years, private label market share by value and unit sales has fallen in Europe. The value of the European market fell by 0.6% and market share measured by pack sales dropped by 0.5%.
However, this fall is not consistent across all types of private label. The fall in market share is primarily across mid-tier and ‘economy’ brands, while premium private brands actually increased their market share. Tim Eales, Director of Strategic Insights at IRI suggested that retailers should focus much more on developing their premium ranges “…to win shoppers’ hearts and minds”.
This concurs with FMI’s recent market study of Generation Y shoppers (millennials) covered by Leslie Sarasin, President and CEO of FMI, during her keynote presentation at FMI Connect 2016. Millennials are attracted by premium private brands because they offer great quality products at a great price. Private brand retailers also often go the extra mile to provide full disclosure about their products’ integrity relating to information about provenance, supplier ethics and supply chain sustainability practices.
Today, many US retailers predominantly focus on economy and mid-tier private brands but are actively moving towards delivering more premium private brands. To be successful, this move requires a different approach involving listening more intently to what different groups of shoppers really want. This can be achieved cost effectively by harvesting customer feedback that is already captured via existing customer touchpoints and combining it with results from product quality assessments.
By aggregating this data and sharing it with trusted suppliers, retailers and manufacturers can work together to innovate and create the products that shoppers really want and therefore will buy. This short video shows how this works in practice.
Take a look at this case study where one US retailer adopted this approach, sharing all consumer feedback with its suppliers – the good, the bad and the ugly – which resulted in improved quality, product innovation and an 18% increase in sales.
Today, US private brand sales are at 16.4% (based on IRI data), which is considerably lower than in the UK and Europe which averaged 47.7% even after the recent fall. By increasing the footprint of premium private brands, retailers can provide their shoppers with the products they really want, driving footfall and growth.
Further reading from FMI Connect: