PL Buyer: Correcting Some False Assumptions About Today’s Shopper

Discussion
Oct 15, 2010
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By John N. Frank

Through a special arrangement, what follows is a summary
of a current article from Private Label Buyer, presented here for
discussion.

While many people have discussed a “new consumer” emerging
from the downturn, Brian Sharoff, president of the Private Label Manufacturers
Association, believes only about 25 percent have become more frugal or are
experimenting more with store brands to save money.

“The vast majority of consumers, some perhaps struggling more than others,
will continue to do what they’ve always done but attempt to make adjustments
based upon the economy,” said Mr. Sharoff.

Indeed, with over 65 percent
of consumers now saying they buy private label frequently, shoppers are looking
for private label for a variety of reasons beyond price.

“In some cases, they have decided what they are paying for is no different
at $3 a box than $5 a box,” said Mr. Sharoff. [But] there are other categories
where the consumer does believe that price indicates quality. The thing they
buy is their perception. Everyone knows that if you go to a Trader Joe’s
or a Whole Foods or a Kroger, their own brands are as good as the national
brands.”

But even if the ‘new consumer’ only represents 25 percent of shoppers, their
changing buying patterns are boosting private label expansion and will likely
continue to in the near future.

“I thinks it’s obvious that the recession is not going to be completely
over, and there will still be the impact of the recession on the psychology
of the consumer,” said Mr. Sharoff. “While it’s bad news for consumers,
it’s great news for private label growth.”

He said the decision to buy
private label often comes as consumers become dissatisfied with one of the
products they regularly buy before and start looking for an alternative at
the store.

“Private label comes into play when the consumer has to suddenly change
a decision. At that point the question of private label packaging, private
label quality, comes into effect,” said Mr. Sharoff. “A retailer
that has chosen to assign boring packaging to its products and to assign below
grade quality to its ingredients runs the risk of not making a private label
sale.”

And once they try a private label product, the quality has to be
there for repeat purchase.

Said Mr. Sharoff, “If the quality is high and
meets the expectation of the consumer, then consumers will continue to buy
the product. If the quality misses the mark, then one should not be surprised
if consumers are disappointed in the quality and do not buy the product. The
good news is that concept of quality first has taken hold and the private label
trend is definitely on the upswing.”

Discussion Questions: How do you think the downturn has changed consumers’
perceptions around buying private label products? What will be most important
for store brands to hold onto their market share gains or continue to expand
as the economy improves?

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13 Comments on "PL Buyer: Correcting Some False Assumptions About Today’s Shopper"


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Max Goldberg
Guest
10 years 7 months ago

Mr. Sharoff said it all. The recession and desire to save money drove many consumers to sample private label products. If the quality is high and meets their expectations, consumers will purchase private label again. It’s all about value and quality.

Gene Hoffman
Guest
Gene Hoffman
10 years 7 months ago

Consumers buy products based primarily on their level of self confidence about decision making and their focus on comparable costs and value.

In a bad economy, most people will seek out the lowest price, which usually favors private label. In doing so, many consumers find that PL is comparable and in some cases better quality and value than the national brand.

The trend to PL started before the current recession. To keep converted private label customers–keep product quality consistently high, make packaging contemporary, and price advantageously.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 7 months ago
Mr. Sharoff’s comments are interesting and I agree that quality needs to be a focus of private label or a customer will not come back. In fact, it could really hurt the retailer. Even in tough times, people want a product that tastes good and as the economy improves that will only become a more important factor. Growth in PL does not mean national brands can’t compete or even leverage PL for their own gains. Over the next two weeks Ahold will be running a unique program that combines national CPG brands with PL brands that are complementary and non competitive. Full disclosure, I consulted with this company and helped bring the program to market. The results of this program will be interesting and important as we look to understand ways for National Brands to work more closely with their retail partners. Keith Lincoln and Lars Thomassen describe this as Co-Opetition in their book Private Label – Turning the retail brand threat into your biggest opportunity. PL and national brands need to both exist on… Read more »
David Livingston
Guest
10 years 7 months ago

The economy seems pretty darn good to me and I can’t imagine it being better. If it stays like this forever, I would consider it paradise. In my opinion, private label is as good or better than name brands about 99% of the time. I’m glad to see them gaining ground year after year.

The fact that only 65% of consumers are regularly buying private label products tells me we still have 35% of consumers irresponsibly, aimlessly throwing money away. That is a lot of reckless spending. If we have that many reckless spenders, the economy must be pretty good. Stores don’t need to do anything to retain their private label shoppers because the cat is now out of the bag for most consumers–private label is as good or better than name branded products.

Roger Saunders
Guest
10 years 7 months ago
Steven Burd, Safeway’s CEO, made an important and accurate statement to analysts in a quarterly conference call yesterday. He pointed out, “Price parity is just the price of entry. It’s everything else you do to differentiate yourself that takes market share.” Burd has an accurate view of the consumer. She/he is an effective and thorough shopper who will seek the “value” proposition that generic/store brands offer. Retailers still have to perform on “convenience,” “quality,” “selection,” and “brand trust” issues to win the hearts and minds of consumers. The August Consumer Intentions & Actions (CIA) survey of over 9,000+ consumers points to the fact that 32.3% of consumers are buying more generics (28.5% of household earning $50,000+ say they are). That doesn’t mean that the entire basket is generic or store brand. The CPG field has built great loyalty and trust over the years, and deserves to keep that as they strengthen Quality, convenience, price/value relationships. In many categories, based on the same survey, consumers make use of generics/store brand at a minimal level in terms… Read more »
Ed Dennis
Guest
Ed Dennis
10 years 7 months ago

The biggest change in private label is the quantity of items now being offered. The number of PL frozen items has moved well beyond frozen vegetables. This has been spurred by the maturation of processors who cater to the PL industry. They have expertise and facilities far beyond the capability of an individual chain. They can package multi-product frozen entrees utilizing almost any legal protein source and in some situations can process and package wild game. This is clearly beyond the scope of what PL was 5 years ago.

Additionally, PL or Store Brand has moved beyond duplicating national brands and have introduced niche products that reflect regional tastes. This has created a market where national brands have difficulty competing. People aren’t necessarily trading down to PL, but are trading over to high-quality alternatives.

Mel Kleiman
Guest
10 years 7 months ago

Private label will continue to grow because:
1. Retailers have raised the quality of the their private label offering. In many cases it’s at least equal but in some cases even better than the major brands.
2. The stigma of buying private label has disappeared.
3. It is in to be price conscious.

Ed Rosenbaum
Guest
10 years 7 months ago

Private label buyers will continue to increase as/when the economy improves. The stigma has been removed because price became the determining factor. Now that quality has improved it is OK to have private label products in your shopping cart at the check out. So when the economy does turn we can look for an increase in private label products.

Jonathan Marek
Guest
10 years 7 months ago

It’s hard to know what would have happened “but for.” Clearly, PL was trending up before the recession even began. Brands ranging from Trader Joe’s to 360 to Safeway’s PL brand suite were becoming true private brands, not just private “labels.” Did the recession accelerate it? Maybe. But I believe we’d still be talking an awful lot about PL trends today even had the economy stayed strong.

Michael L. Howatt
Guest
Michael L. Howatt
10 years 7 months ago

I think there is a piece of this puzzle that we may want to consider–the psychology of the PL purchase. Are PL products getting closer to quality, taste, and other attributes of name brands? Certainly, retailers want us to believe so, but could it just be a factor of “settling?” I pay $5 for the name brand and $3 for PL. The taste of the PL is “good enough” because it saves me $2, even though I really like the taste of the name brand better. But I can convince myself to “settle” for the PL because then I feel fiscally responsible.

If the economy does turn upward, I surely will think about going back to my name brand–it would be like returning home. Something to keep in mind.

Carol Spieckerman
Guest
10 years 7 months ago

I think the conversation around private brand as a price/value proposition is getting long in the tooth, as is the terminology around branding in general. The world of private brand has become far too complex (by category, by retailer, monobrand versus tiered, not to mention the subtleties of how these brands actually come to market) to make sweeping statements about why private brands, or any others for that matter, are favored or disregarded by shoppers.

Many private brands have fan bases that are the envy of national brands such as Target’s Archer Farms and Costco’s Kirkland, and proprietary brands such as Candie’s at Kohl’s and Mossimo at Target are often lumped into the private brand category, even as they are perceived by many shoppers as national brands.

Terminology, and along with it, philosophy, has evolved from “generics,” to “private label,” to “private brand,” to “owned brand.” It’s time to stop grasping for distinction and give into the realities of the blur. The relevant term going forward is “brand.”

W. Frank Dell II
Guest
10 years 7 months ago

The Great Recession moved forward some private label growth that would have occurred anyway. The improvement in quality, range and packaging are all fueling private label increases. Unlike prior downturns, new consumers will not abandon private label when the economy improves due to these improvements.

One point many miss is that the longer this Great Recession hangs around, the more the consumer becomes trained and set in their ways of buying private label. This is the most likely scenario for the Baby Boomers which is still our largest consumer segment.

Scott Sellenbaugh
Guest
Scott Sellenbaugh
10 years 6 months ago

These poll results are surprising to me. I assume for the purposes of this discussion PL products are referring to low ticket grocery type items. If that is the case, aren’t consumers basing their buying decisions on perceived quality, via the packaging? Assuming that the growth in PL was due to the recession, wouldn’t private label brands want to focus on improving their packaging in order to maintain and grow their market share?

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