Here is the second post in a series from the Interbrand, publication: “Private Brands: A global guide to the rise of private label brands”.
One of these things (is not like the others)
Do you remember the game “One of These Things (Is Not Like the Others)”? Perhaps you’ve played this with your children or recall watching the singsong version from Sesame Street when you were younger. The game’s purpose was to teach you how to observe and analyze different objects.
As a kid, I loved this game and was always making comparisons. I can remember trying to find the differences between national brand packaging and the grocery store knock-offs. My mother would insist that the only difference was in the price. “It’s the same thing; it just costs a little less,” she would tell me. Since the packaging looked almost the same, I believed the food would taste almost the same. And since I would eat anything when it came to snacks, it didn’t seem to really matter.
Today, however, the shopping experience has become a little more challenging. There are more and more products screaming for your attention, and the copycat store brands complicate things further.
Consumers play “One of These Things (Is Not Like the Others)” every day in the grocery store. They see private label packaging that is similar to the name brand in color and architecture. Why does the private label brand copy? Does it really want to fool the consumer? Or is there a lack of confidence that the private label brand will not be able to compete with the national brand? Retailers such as Kroger, Safeway and CVS adopted the copycat strategy a long time ago. Why? Because it’s easy. By piggybacking on the success of national brands, retailers can elevate products that might have been viewed by consumers as generic. For a small investment, retailers can reverse-engineer the national brands and leverage what is already working. Little research is necessary, and manufacturers are often willing to create the product at a lower price.
Following the look of the national brand opens the door to parity. The concern is that the retailer often instructs its agency to simply create a package very similar to the national brand, which limits any design exploration. Sure, it’s a safe way to get a product to shelf, but is it the best way to win the consumer’s trust?
Private label is the biggest missed opportunity in the US retail market today. However, transformation of private label brands into “store brands” is on the horizon. Retailers such as Target and Wal-Mart have begun to elevate their store brands into something bigger and better. (Target’s Archer Farms brand is an example of how copycat package design is no longer the norm.) These retailers have discovered new insights into what consumers will buy, and these insights have allowed them to build connections with those consumers. The retailers also have advance notice about the marketing plans of national brands, and they control the everyday shopping environment. By capitalizing on these advantages, the retailer can identify consumers’ product needs — and, importantly, which needs currently are not being met — to build better shopper experiences. Target recently introduced a new cereal box under its store brand, Archer Farms, which has brought a new innovation to the category. “Bag in box,” a resealable cereal box, was developed to help keep the product fresh. Target fulfilled an unmet need and delivered a better consumer experience. Innovation may be as simple as challenging the consumer to think differently about a packaging structure or product use. Little surprises can delight the consumer and build loyalty for the masterbrand, which puts the retailer in a leadership role.
Look beyond our borders
In the United Kingdom, retailers such as Tesco, Marks & Spencer, and Waitrose have elevated the shopper’s experience through their store brands. However, evolving private label brands into store brands does not happen overnight. The UK market was the first to invest in this strategy, which has matured over time. Tesco launched its first private label brand in 1924. According to the book Private Label: Turning the Retail Brand Threat Into Your Biggest Opportunity, ten years ago Tesco’s private label products accounted for only a quarter of its revenue. Today it accounts for more than half of its revenue. Tesco expanded its private label into a three-tier approach: Tesco’s value brand, Tesco’s premium brand and Tesco’s Finest. Tesco’s Finest is a great example of a retailer elevating a store brand to a higher standard. Consumers view it as the best product and do not mind paying a little more for it because they trust its quality. Listening to consumers has helped Tesco identify ways to expand its product line, which, in turn, has created new shopper experiences and keeps consumers coming back for more.
Facing the challenge
The UK has shown the rest of the world how powerful store brands have become. In the US, consumers are savvier about private label than many companies believe. Target and Wal-Mart have recognized this and have put solid store brand strategies in place. Other retailers also need to invest in their own brands and begin to build a foundation of trust with consumers. Are Kroger, Safeway, and CVS ready and willing to adjust their strategies to build their store brands? The consumer is ready! If we are to copy anything, let’s copy the UK’s success and breathe new life into the shopper’s experience. Stop copying and start leading! Building store brands that mean something to the shopper will increase your share of total consumer purchases.
Rick Mariani, Senior Creative Director Cincinnati, Interbrand