KEY POINTS: McKinsey has reported that 75% of consumers have switched brands since the pandemic has started. Private label sales are increasing in double digits as current brands struggle. “What we have here is a failure to communicate”.
Target is adding hundreds of new items to its Good & Gather line that’s exclusive to the company. Additionally, Target is starting a new premium line called Good & Gather Signature, which will feature nearly 60 Italian sauces, specialty coffees ranging between $2.99 to $9.99 as well as gourmet pizzas and pasta.
Amazon is also raking in the cash from private label sales. Amazon launched its private label “AmazonBasics” in 2009 with a handful of products such as batteries and USB cables. Today Amazon sells more than 1500 private-label items under more than 200 names. According to an article in the Seattle Business Magazine, AmazonBasics’ batteries now accounts for almost one-third of all of its online battery sales. A TJI research report said it expected Amazon’s private-label business to grow from $7.5 billion in sales in 2018 to some $25 billion by 2022.
A private label brand is not the same as a commodity product. A recent trends report from Deloitte highlights a trend focused on the tension between commoditization and premiumization. Deloitte states, “To remain competitive, many retailers have shifted toward offering private labels…. While discount products (commodities) still represent the majority of private-label sales, the share of premium private labels continues to rise….”
Most retailers offering private label brands see their own labels as brands, not as commodity products. Even though a retailer may have a range of private label premium and non-premium offers, they are still brands.
What’s going on?
Very simply consumers are being forced to look for new ways to save money and private label offers them both a way to save money with quality. Why would a consumer pay 30-40% more a branded product when they know that money is for advertising?
On another level, too many brands have not kept their promises. They have failed to coddle their best customers and have remained silent about too many social issues that consumers care about.
Is this true for all brands? No, not necessarily. There is still something very good about Oreo cookies but other brands are not better than store brands in many categories.
The other issue is that retailers need to become better at product assortments that earn them more money. This is something Target excels at. Their private label products feel like premium craft brand products and women love them.
Target’s Good and Gather is a private label, or what Target calls an “owned brand.” The brand has generated over $1 billion in sales since it was created one year ago. Overall, Target’s food and beverage private brands have grown more than 30% this year.
How many brands are conducting business the same way? How many feel that they don’t need to change organizational structures to better respond to shifting consumer needs?
In the end, brands get what they deserve. The consumer market is in the middle of a drastic change and either business will adapt or they will perish.