In today’s dynamic world where consumers seem to be shaping choices, private labels have comfortably entrenched themselves in shoppers’ hearts. The advent of online retail has also spurred this popularity.
Today, we see more and more e-commerce players in categories beyond apparel such as food, grocery and electronics offering a competitive range in quality and pricing, attracting a significant number of buyers who are as happy to own a private label or store brand.
Here’s a list of strategies retailers can employ to forward their private labels:
A CLEAR STRATEGY ON THE ROLE OF THE PRIVATE LABEL PORTFOLIO: Retailers will have to define roles for each of their private labels basis price, convenience, differentiated offering etc. The tendency generally is to build a strong private label and stretch it both horizontally (across categories) and vertically (across price points). Over-stretching can lead to spreading it too thin which will ultimately weaken it so retailers must avoid this temptation.
STAY ABREAST OF CHANGING CONSUMER TRENDS AND EXPECTATIONS: In the last few years, many consumer trends have impacted how consumption at retail happens. Some of these trends include:
-Rise of digital consumers
-A growing interest in health and wellness
-Rapidly shifting demographics
-Experimentation with new products
-Shift towards sustainability
An understanding of emerging codes will enable retailers to address new opportunities and garner huge rewards
THOUGHTFUL SEGMENTATION: The industry has enough authentic consumer data to share which retailers can easily access. The broad strokes of demographics and psychographics cannot be applied when segmenting consumers. The challenge lies in analyzing the data in a way that it reveals the shifts in consumer demand. Retailers must churn the data to understand the different types of customers, their specific needs, and build product offerings which have value to each different segment. A one-size-fits-all strategy is a sure shot way to fail.
KEEP UP WITH RURALIZATION: Rural markets are emerging to be as dominant as urban ones. Consumers in smaller cities and town are growing in aspiration and purchase power. While private players can find a new market in these segments, it is important to bear in mind that they will need different cues to grab their eyeballs. Assuming an urban lens for rural India will be as detrimental as applying a western lens to the Indian market. While the value proposition may still be relevant, the changing aspirations of the rural consumer differs from the urban one. In addition, rapid exposure to technology and increasing connectivity could mean a favourable predisposition towards the digital, as we are already witnessing in the telecom and mobile phone sectors.
BUILDING COMPETITIVE ADVANTAGES ACROSS THE VALUE CHAIN: Back-end integration is equally important to stay price competitive without sacrificing margins. This will involve identifying the right manufacturing partners (who offer high quality at low cost), building an efficient supply chain, investing in value-oriented design and sourcing – anything that helps build internal efficiencies.
USE STORES AS TEST SITES FOR PRICING STRATEGIES: Existing stores provide a more or less authentic platform for accurate pricing as retailers can get direct feedback from consumers. Benchmarking against lead brands, understanding price elasticity, gauging product popularity, consumer reviews provide important insights and can be used as a pricing compass.
CONSTANTLY EVALUATE THE PRIVATE LABEL TO NATIONAL BRAND RATIO: Consumers are accustomed to popular national brands and whether they buy them or not, find them reassuring. Not seeing them on the shelf can cause mistrust with the store and even lead to the consumer moving to another outlet. Consumers prefer to do a feature-to-feature comparison between the private label and popular brand and the absence of the latter could cause dissonance. Retailers cannot afford to ignore this point and will therefore constantly have to do the balancing act between the two brands given that even today large brands are the footfall drivers in most categories.
CREATE STRATEGIES TO WIN IN THE DIGITAL WORLD: The online world has changed the dynamics of buying and does not look like it is going to let up. Offline retailers will have to understand and devise a way to win in this new world. They will have to ask strategic questions to find a direction on brand building in the online space. This will help them compete with online retailers as they will gain a better understanding of their consumers and connect with them on an emotional level.
BRING FOCUS ON INNOVATION: National brands invest in research and innovation and bringing newness to the category. Creating me-too brands is no longer the solution. Private labels will need to innovate and find a strong differentiator in terms of their value proposition, product, packaging or even usage. Incorporating the voice of the consumer in the innovation process will ensure that the chances of creating successful products which meet consumer demands, is high.