The UK is often singled out as a pioneer nation when it comes to private brands. Compared with the rest of the world, British enthusiasm for creating supermarket alternatives to popular basket items has been extraordinary, both driven by and driving a consumer base that seeks to maintain a certain standard of living without having to spend too much. Depending on which reports you read, anything from 45-55% of all supermarket sales in Britain can currently be attributed to private brand products.
But success today – however impressive – doesn’t necessarily translate into growth or innovation tomorrow. In fact, for all that the Brits have led the world in the introduction, enthusiastic adoption and evolution of private brands, there are now significant new challenges on the horizon.
Historically, consumers have made purchasing decisions based on the twin drivers of taste and price, visiting a small number of shops on a regular basis and selecting the most appealing products from the relatively limited range available. And so, we have seen years of sustained price-driven competition, with supermarkets intent on being cheaper than national brands and, to a lesser extent, than other supermarkets.
Price will continue to be a key battleground but retailers also need to find new ways to truly differentiate their products. That’s why at S4RB we work with own label retailers to help them monitor and improve product consistency and quality.
A big part of this is helping them tap into different channels to gain an understanding of their customers’ experience. For instance, gathering and combining feedback from call centres and social media can provide a very clear picture of product performance and customer preferences, leading to better-informed decisions about new product development.
Insights like these allow retailers to understand what consumers value, but at the same time they can also lead to genuine cost reduction (more than just price cuts) by highlighting cost items that could potentially be removed from products because they matter less to target customers. For example, those visiting a budget shop may value product price over store appearance.
Value or values?
The brand loyalty that once characterised the majority of shoppers in the UK is now in steep decline, driven in no small part by the success of private brands. Coupled with the increased freedom to shop around afforded by the internet and local convenience stores, this means there is more focus than ever before on the attributes of the product itself rather than its price. Factors such as convenience, health and wellness, and social impact are all becoming much more significant for consumers.
The value message has become overused
As stated in The Grocer’s 2016 feature on own label (for which this blog was originally penned) by Kim Van Elkan, MD of the brand and design consultancy that helped develop Asda’s Chosen by You range: “The value message has become the most overused in retail. Customers are looking for an experience, and authenticity is key.”
In short, there is now a need for own label products to have clearer value propositions. Morrisons and Asda have both publicly stated the need to balance quality with price and are making significant strides in this area. However, there is also a pressing need to define exactly what ‘quality’ means to customers. After all, a product should not try to offer ‘everything’ as its identity can be lost in a myriad of claims and certifications, sending out a confused message to customers.
It is likely that we will see an increase in the number of own label products available in UK stores, with more sub-brands providing differentiated messages and clear brand value propositions. One early example of this is Tesco’s revamp of its fresh lines under the ‘farm’ brand, which aims to send a clear message to consumers that these products offer farm-fresh quality and local values as well as low prices.
Retailers know they must work closely with their own label suppliers to develop and deliver the products customers truly want. In the past they have often been demonised for the financial pressures they apply to their suppliers, but at S4RB we have found that retailers are increasingly seeing the benefit of better Supplier Engagement, building mutually beneficial and respectful partnerships with effective businesses.
Suppliers’ brand advocacy (or lack of) is every bit as important as customers’. Many retailers have now implemented systems to improve communication and transparency with their suppliers, for instance installing self-help websites, or monitoring tools to help improve efficiency, reduce costs and deliver more innovative products for customers.
Shared insights, shared success
Today, private brand strategies are by necessity becoming increasingly about delivering the right quality at the right price, with each own label team working to establish the correct value proposition for their target customer demographic.
This might include provenance, responsible sourcing, health benefits, or any number of other concerns. In order to survive and really thrive, retailers need to be making their decisions based on insights drawn from as wide a range of sources as possible. The better they understand how existing products perform, what customers want, and what opportunities for innovation are available, the better they can face up to the challenge of increasingly exacting consumer tastes.
New challenges mean that UK retailers need to look to new ideas and work with new insights and renewed energy, but they also bring with them new opportunities for private brand growth. Supermarkets and suppliers alike stand to make big wins if they work together to turn product and customer insights into the next generation of private brands.