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Store brands, otherwise known as private labels, are having their moment this year. With inflation and economic uncertainty putting pressure on shoppers, they have good reason to consider cheaper alternatives.
But the price isn’t the only thing drawing consumers to store brands. Shoppers are also looking for great value, searching for store brand products that meet — or possibly even exceed — the quality of name brands.
Buying store brands no longer means settling for less. Increasingly, retailers have found ways to stand out against their name-brand competition.
Here’s a look at why customers are buying more store brands, as well as four store brand examples that illustrate ways retailers can capitalize on this shift.
A staggeringly high percentage of shoppers buy store-brand products. Salsify’s “2023 Consumer Research” found that 96% of shoppers have bought store-brand groceries, and 92% buy store-brand products for household goods and cleaners, for example. Even in product categories dominated by high-profile name brands, such as electronics, a majority of consumers (69%) will occasionally buy store brands.
Across all categories, price is the most common reason consumers cited for choosing store brands. For example, 54% of people said they buy store-brand groceries when the name brand is too expensive, while 48% do the same for household products, 45% for clothing, and 36% for electronics (“2023 Consumer Research”).
However, a significant amount of people buy store-brand products all the time. Approximately a quarter of shoppers reported always buying store brands for groceries, household goods, and toys and games, while almost a fifth reported the same for clothing, according to Salsify data.
On some level, the popularity of store brands isn’t surprising — high inflation means shoppers are motivated to shop for deals.
But there are some nuances to this story. Research from data analytics and market research company Information Resources Inc. (IRI) found that most of this growth is in the grocery sector, and the dollar share of store brand purchases for non-food items has remained stable over the past four years.
This research may suggest that consumers are more likely to consider store-brand products when shopping for essentials or perhaps that they’re willing to take chances on store-brand food items more than on other types of products. Whatever the reason may be, this trend demonstrates that price isn’t the sole driver of store brands’ rising popularity.
Deal-seeking private label shoppers aren’t always low-income. Data from research firm Numerator found that high-income shoppers and middle-income shoppers also buy store brands to save money.
The popularity of store brands among higher-income shoppers suggests that buying them isn’t just a last-resort money-saving tactic. Store brands that promise great quality can draw interest, and even loyalty, from shoppers of all types.
The key to selling private label products is to offer great quality at a great value, as well as to give consumers great shopping experiences. These store brand examples offer some inspiration for how retailers can grow their private label sales.
Few retailers offer a better example of store brand success than Aldi. According to Supermarket News, approximately 90% of the products on Aldi’s shelves are store-brand products, and they account for 77.5% of its total sales.
With locations on three continents (Aldi) and nearly $134 billion in sales in 2021 (Statista), Aldi’s approach is clearly working. The reason for this success, according to a profile in Storebrands.com, is the chain’s dedication to providing great-tasting, high-quality food at store brand prices. Aldi also streamlines the shopping experience with a “no-frills approach” to its in-store and online experiences, making it easy for consumers to find what they need.
Trader Joe’s, a subsidiary of Aldi, shares some similarities with its parent company as a grocery chain that primarily stocks its own brands. 80% of Trader Joe’s stock is private label, according to Produce Blue Book, and store brand sales make up 59.4% of its sales (Statista).
While Trader Joe’s has a much smaller reach than Aldi and operates only in the U.S., it’s managed to cultivate a dedicated fanbase. Many of its private labels make foods that can only be found at Trader Joe’s, elevating the store to a destination for shoppers who want exclusive specialty snacks or frozen meals. The grocery chain capitalizes on its status as a unique offering with engaging and attractive product pages characterized by its folksy branding.
When shoppers need a cheap, basic item, they’re increasingly buying it from AmazonBasics. While it doesn’t yet have the reach of more established store brands, AmazonBasics is the fastest-growing store brand by a significant margin, according to Numerator. It’s also the most popular of Amazon’s many private labels.
Amazon uses data from its platform to analyze what items consumers are interested in so it can offer those items at a lower price. Amazon’s platform structure also makes it easy to direct consumers to AmazonBasics’ offerings and encourages them to compare other sellers’ products with their own.
While no other digital storefront has the reach Amazon does, the success of Amazon Basics illustrates how retailers can use ecommerce platforms to improve store brand sales. Retailers who have already embraced digital commerce with their own ecommerce platforms can use data on online browsing behavior to determine what products consumers want store brand versions of. Additionally, they can optimize product content and product recommendations to drive shoppers to those store brand offerings.
While most retailers develop several private labels to differentiate different product lines, Costco only has one: Kirkland Signature.
This makes it nearly impossible for Costco shoppers to be unaware that they’re purchasing store-brand products. Regardless, Kirkland Signature is wildly successful. CNN Business reported that, with $58 billion in sales, Kirkland Signature is the best-selling consumer packaging goods (CPGs) brand based in the U.S.
The single name provides a level of consistency that many Costco members appreciate, according to the CNN Business profile of the private label, and it creates cost efficiencies as well. While there is some risk in having one brand name across all product lines, Costco demonstrates that maintaining consistent product quality lowers that risk while increasing consumer loyalty.
The popularity of store brand products will likely continue throughout 2023 and beyond as shoppers increasingly recognize their value. For retailers who want to win loyalty to their store brands, today’s retail climate provides a great opportunity.
As the store brand examples above demonstrate, winning loyalty is a matter of offering great quality products alongside an approach to branding and product content that helps engage consumers’ attention.
Store brand popularity is just one trend shaping today’s retail environment. To learn more about what modern shoppers want, download Salsify’s latest consumer research report.DOWNLOAD REPORT
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