Know Thy Enemy

Private label competition with national brands can be tricky for retailers. They want bigger national brands to sell well in their aisles because they want all sales to be good, but they also want their store brand goods to be competitive. While store owners may not view national brands at the “enemy," the old line, “Keep your friends close, and your enemies closer," can apply when it comes to national brands’ marketing strategies. Knowing how bigger brands operate can help retailers get an edge up in marketing their private label goods as well and insight into general advertising practices.

Because private label sales continues to grow while national brands  are slumping, Pat Conroy, vice chairman, and Anupam Narula, senior research manager, both from Deloitte’s, wrote an article  titled, “The Battle for Brands in a World of Private Labels," that advises national brands on how to encourage consumers to buy them over private label goods.

The article noted more shoppers are turning to private label products as retailers have dedicated more time, money and effort into their own brands, making low-quality “generics" a thing of the past.  Retailers are also reducing the number of SKUs of national brands while making room for their own labels.

They offered the seven recommendations to help consumer product companies bolster their competitiveness in the face of mounting pressures from private labels:

1. Be a brand that the retailer cannot be. They recommend national brands exhibit leadership in exclusivity, product safety, social causes, innovation and sustainability at a level that retailers cannot compete with.  National brands can better partner to with social causes and use targeted marketing efforts, they wrote, and they should take advantage of it.

2. Be irreplaceable.

National brands should have products that consumers expect to see at the store and will change shopping patterns to find and purchase, they said, adding that these shoppers should be disappointed with substitutes of these “destination brands."  National brands should be of high value to no matter the price point. Additionally, destination products should promote claims, certifications and supporting data that are difficult to replicate.

3. Shed homogeneity.

While it may seem counterintuitive, the article recommended national brands use regional or local variations in tastes and preferences to create and sell products.

4. Create retailer-specific product portfolios that surround private labels.

More private labels are being offered in multi-tiered categories, and national brands can compete by offering similar tiered products, and may want to consider manufacturing private label goods, they wrote.

5. Make me-too strategies an onerous path for retailers.

Keeping packaging fresh, having innovate products, launching new products and protecting intellectual property helps keep store brands from copying with similar labels and ingredients. National brands that keep it fresh discourage “me-too" products from retailers who do not want to constantly reinvest in their store brands to make them more like the national offerings.

6. Stop reckless promotions.

Too many promotions can train the consumer to wait for deals and can shift the focus from product attributes to prices, they noted, adding  consumer product companies should consider non-price-related promotions. Constant low-price promotion can narrow the premium between national brands and private labels.

7. Leave retailers bricked and mortared.

They suggested selling products direct to consumers online, and not selling those products at retail. More shoppers are technologically savvy and have become accustomed to buying online.

Retailers can take these tips to heart by implementing them into their own strategies. Store brands can capitalize on the local movement, becoming a friendly face a national brand will never be. Retailers can also  differentiate their brands by offering quality products at all price points and using fewer lower-priced promotions. And, if national brand are offering direct-to-consumer products, retailers can offer similar products in store for those who want to put a face to their products.