The following is my guest commentary for this months PLMA preview edition of the trade magazine PLBuyer.
The headlines are everywhere “Private Label Can Save Consumers Up to 60%,” “A Good Economy for Private Label Brands” or the perennial “Private Label Deemed Equal to Name Brands” they are fueled by research conducted or funded by some of the biggest names in the industry. And they all suffer from a few fundamentally incorrect assumptions:
1. All Private Brands are the same.
In black & white the assumption seems absurd – of course they are not. They are no more the same than all national brands are the same – yet year after year researchers ask consumers broad generic questions about their likelihood to buy private labels or the now clichéd “Are private labels a good alternative to national brands?”
Over the last ten years Private Brand portfolios have evolved beyond “Compare and save” to include brands like Simple Truth at Kroger, Tul at OfficeMax and Craftsman at Sears each with consumer focused unique brand postionings. Even traditional Private Brands, which carry the retailer’s name, vary dramatically. Does anyone assume that products in the Family Dollar brand are the same as Fresh Market brand or Williams Sonoma brand? Lumping all retailer owned brands into one “private label” bucket only continues to encourage the commoditization of all brands and delivers data that caters to the old school notion of generic private label.
2. Consumers know or care who owns brands.
This one is very simple consumers do not know who owns brands and they do not care. National brands are often owned by mega-corporations: Burt’s Bees is owned by Clorox, boutique beauty brand Kiehl’s is owned by L’Oreal, premium denim brand 7 for all Mankind is owned by VF Corporation (Lee and Wrangler). In fact most of the world’s national brands are owned by just 10 multi-national conglomerates: Kraft, Coca-Cola, General Mills, Kellog’s, Mars, Unilever, Johnson & Johnson, Pepsico, P&G and Nestle.
Lest you think that customers love national brands because they are manufacturers the seemingly endless product recalls of the last couple of years have more often than not proved that the name on the package has little connection to the manufacturer.
Remember, Apple designs a lot of great products but manufacturers virtually none.
3. The only reason to buy Private Brand products is price.
Unfortunately many retailers continue to manage their Private Brands with this mantra as their sole guiding principle and their Private Brand strategy is a reflection of that principle. The more evolved retailers have added brands at multiple tiers, however the brands are still mimics of national brand products at a cheaper price. And a small group of progressive retailers have begun to create brands that truly engage the consumer and provide something beyond price, a few examples include: Threshold at Target, Inkind at Safeway, Kindle at Amazon or Greenwise at Publix.
A National Brand Equivalent (NBE) “compare and save” strategy is the cost of entry for most mainstream retailers
Research is good. Getting to know your customers and creating brands that solve their problems and attempt to fill their needs is even better. Retailers must create and own Private Brand portfolios that are composed of a set of consumer relevant brand assets designed to create differentiation. Brands that are unique and compelling, brands that profoundly change the conversation and compel researchers to ask questions about the specific brand, consumer awareness and love. Retailers must own brands not labels; they must manage them as assets that ultimately add measurable value to their balance sheet.
Retailers must challenge the absurd notion that all private labels are the same with strong relevant BRANDS.