Retailers Adopt Aggressive Private Label Pricing Strategies

    In what is perhaps the least surprising research in history nine out of 10 retailers price their private label products lower than the average prices of their respective categories, reveals the latest study from DataWeave and SunTrust Robinson Humphrey. In line with the finding, the study reveals what has been true for decades, that retailers often view private brands as a way to ensure sustained profitability.

    “As the CPG space reels under intense competition, a number of retailers are doubling down on private labels to capture valuable additional margin. For instance, Kroger, Walmart, and Amazon Fresh have a higher degree of private label penetration than the other retailers we analyzed,” says Karthik Bettadapura, Co-founder & CEO at DataWeave. “Our study unveils several such key insights covering product assortment & distribution patterns, price perception, and private label dynamics, revealing a clear snapshot of the disruptive transformations sweeping across the US CPG landscape.”

    Other findings from the report, which tracked and analyzed 450,000 products across 10 leading retailers and 10 ZIP codes each, include the following:

    • Product assortment is emerging as a driver that’s as critical as pricing when it comes to customer retention. Target, H-E-B, and Kroger have a head start here, offering the largest product assortments among the retailers analyzed.
    • A sharp assortment strategy customized to local tastes and preferences is key to sustaining and enhancing customer satisfaction. Albertsons, Walmart, and Amazon Fresh lead here, revealing a higher focus on localized assortments.
    • “Home” and “Beauty & Personal Care” categories lead the distribution of private label products across retailers. The focus on these categories echoes a similar focus among national brands as well. These categories have the highest overall brand concentration, with around 4,000 brands each.

    “The report emphasizes how customer experience has emerged as a stronger force over the past few years, with it informing almost every decision about pricing, product assortment, promotions, and private label investments,” says Youssef Squali, Global Head of Internet and Media Equity Research at SunTrust Robinson Humphrey. “These dynamics will continue to be vital in driving profitable growth as online commerce in CPG scales aggressively in the near future.”

    To download the report, click here.

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    Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.