Private Label Brands Are Getting a Massive Boost

Stores have been working for years to get their private label brands to appeal to consumers, primarily via package design and clear brand direction. Despite their efforts (as well as significant growth), some shoppers have still held on to the perception that “store brand” products are just cheap knockoffs of national brands.

However, grocery shopping conditions during the quarantine are inadvertently causing these shoppers to be introduced to private label goods that they otherwise might never have tried. According to Dr. John Stanton of Saint Joseph’s University’s Food Marketing Institute, as big-brand items from select categories (particularly canned goods and paper products) clear out quickly, consumers are reaching for what they may consider to be the next-best thing: private label.

Now that these shoppers are trying private label products for the first time, Stanton says, there is an opportunity to convert them to loyal buyers. “When the shopper brings these products home, they try it and say hey, this isn’t so bad at all! I wonder why I never tried this before.” In Dr. Stanton’s estimation, this increase in private label sales is one of the trends that is going to carry over and continue beyond the quarantine.

Packaged food sales overall are soaring as the center store experiences huge growth during the pandemic. However, as American consumers tighten their shopping budgets due to increasing rates of unemployment, private label goods stand to pick up an even larger share. Premium groceries will be the first to be cut by affected households, followed by national brands. This leaves private label products, long a staple for financially disadvantaged families.

Despite this, Amazon’s private label brands are reportedly losing market share amid the COVID-19 outbreak. One reason for this could be that shoppers are turning to Amazon for non-food CPG products (and are doing their online grocery ordering directly through stores themselves). When it comes to emergency products like cleaning supplies, shoppers are more likely to go with name-brand products that have a strong reputation and brand history. Despite Amazon having very high global name recognition, this does not necessarily translate to trust in their private label cleaning products.

This means that in addition to a boom in sales overall and a particular spike in private label, grocery stores may finally have some advantage over Amazon. While it remains to be seen how coronavirus is going to affect grocery shopping long-term, it seems that stores may see permanent growth in private label. If this happens, it will be interesting to see how it impacts grocers’ current strategy of investing in private label design.

Will conventional wisdom still be that private label needs to “look premium” in order to compete with national brands? Or will we see a resurgence of simple branding that is more easily identifiable as private label, in order to immediately signal to shoppers that it is probably the most affordable option on shelf?

In any case, with a sustainable sales bump, grocers will have the flexibility to experiment with strategies across separate private label brands to see what works best. The important thing will be to implement a plan that is built for longevity and can weather further changes in the economy and shifts in consumer behavior, so that they can minimize necessary redesigns and rebranding down the road.

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