Own brands have been around in the UK since the 1800s, starting out as basic groceries and gradually growing to compete in almost all retail categories.
Whilst Co-op is the UK’s oldest operating retailer, Sainsbury’s have often led the way in own brands; from the variety of products offered, to their innovative (for the time) packaging. Both retailers seemed to realise quite early on that own label products were the way forward, as they can offer reasonably priced products to consumers whilst also enjoying the high profit margins.
One key strength that own brands have, almost through necessity, is their high rate of product redevelopment and the innovation that comes along with it. This redevelopment helps to keep own brands competitive within their chosen categories, as well as potentially increasing the market space that they operate in.
Even though they are miles ahead of national brands in the breadth of products supplied and therefore frequency of new products, innovation is something that own label retailers do still need to improve on. This is something that can only really be achieved with the help of suppliers. As the grocery market becomes increasingly saturated with own label products, suppliers are becoming more concerned with gaining market share from their competitors rather than truly innovating and increasing the market opportunities for retailers.
Threats to own label in the UK
Loyalty - Consumers are increasingly fickle, becoming less loyal to one supermarket and more likely to shop around for the right product, whether this be on price, quality or novelty. Since brand loyalty to own label is often a by-product of loyalty to the retailer it is associated with, this poses quite an issue for retailers.
Online shopping - The rise of online shopping is also a threat to own label because their brand recognition tends to be lower than that of national brands. I know that when I go shopping, I rarely plan to buy own label, it is usually the visual cue of the lower price or a new product that leads me to buy them over a national brand. That visual cue is often less prominent when shopping online. If a product isn’t top of mind, we are less likely to search for it. There are of course various ways to counteract this through page layout, suggested products etc but that is unlikely to have quite the same impact as physically seeing an item on the shelf.
Poor relationships with suppliers - As well as engaging with consumers, retailers also need to engage more with their suppliers. Many retailers are coming to realise the importance of keeping suppliers on their side, so those who do not follow suit could quickly find service from their suppliers falling as they begin to favour their competitors. We’ve written many blogs about the importance of good supplier engagement for own brands Supplier Engagement is not about ‘getting more out of suppliers’ but about private brand teams and private brand suppliers working to achieve more together.
For retailers who do manage to successfully engage their suppliers there are a number of ways that those suppliers can help them to succeed in the challenging marketplace:
- Suppliers simply co-operating and working with retailers to innovate and maintain standards will make a big difference to the quality of the products being offered to consumers.
- Having suppliers who are proactive in the face of changing market place regulations as well as changing consumer needs will be a great advantage to retailers over the coming years
Until retailers embrace this and provide suppliers with the tools and information to engage with suppliers, those strong and productive relations and the subsequent benefits, will not be possible.