Sunday, January 23, 2011

Will Private Labels Continue Strong After This Recession Recedes?

Many--many!--people have shifted at least some of their buying to private-label brands during the recession. In fact, one recent study found that fewer than 1 in 5 consumers believe that national brands are worth paying a premium for, compared with private label goods.

The Private Label Manufacturers Association notes that sales of private-label foods have risen by 34% and sales of private-label drug-store items have risen by 45% annually over the past five years.

No wonder the national brands are fighting back with lower-priced "basic" versions of their products and other strategies to defend sales and share.

Meanwhile, savvy private-label marketers are staying the course and even heating up the competition by improving their products and adding more of the bells and whistles typically associated with national brands. Walmart, for example, just announced it will improve the nutritional quality of its Great Value foods (and it's not alone). According to recent research, Great Value is the most widely recognized of the private label brands--and nearly three-quarters of those surveyed knew it was from Walmart. 

Macy's has an impressive array of private-label brands (above) that have become known for quality and value in their own right. These include: Charter Club, Club Room, International Concepts, Style & Co., Tools of the Trade, and The Cellar.

As the recession recedes and economic growth gives consumers more buying power, will private labels grow as quickly? My take: The "hourglass" consumption pattern will continue, with consumers seeking high-end products for categories where they are most involved in the purchase (due to status, for instance, or for gift-giving). At the lower end, consumers will keep saving money with private labels for household products where they perceive minimal differences with national brands. The middle will be the major marketing headache for brands that have no clearly defined competitive edge over private or national rivals.

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