• by Sarah Mahoney  @mahoney_sarah, June 26, 2013

While the importance of private labels may have grown at hyperspeed during the recession, there’s no sign of slowed growth yet. For consumers, they often represent high quality at a better price. For retailers, they provide a terrific way to bond with shoppers. And for national brands, they represent a headache that just won’t go away. Deloitte just released a study, based on responses from some 260 retail execs, detailing the way stores are scrambling to keep the innovations coming. Mike Daher, Deloitte’s retail sourcing practice leader, gives Marketing Daily the update:

Q: So why are private labels more important to stores now?

A: We’re seeing big changes in consumer behavior, fueled by mobility and online shopping. With low-cost online competitors expanding across more categories, private labels are one of the few ways retailers can gain an edge. It’s a chance to defend their market share and build loyalty, and so stores are being more aggressive in developing private-label strategies.

 Q: What characterizes a successful private-label launch today?

A: These are not the private labels we grew up with. The products need to be innovative. Retailers have invested in brand management and are often hiring from national companies, really working to build robust brands. There’s much more collaboration with suppliers now. Instead of stores going to suppliers and saying, 'Make this product for us,’ they are expecting suppliers to come to them with suggestions and ideas. After all, suppliers are already creating those products for national brands, so they know what’s coming.

Q: What surprised you most in this study?

A: How much things are being re-shored to domestic vendors. China’s costs are going up, and there is increased cost pressure and volatility all around the globe. The push toward vendor consolidation is also strong, as is the focus on ethical sourcing.

Q: Yes - factory conditions in China and Bangladesh have been a huge black eye lately. How does that affect retail brands?

A: It’s important, and 92% of those in our survey say they are working on improving their standards. With smartphones, anyone can snap a photograph in a factory, and it can go viral very fast. So there’s a bare minimum for ethical sourcing -- no child labor, for example. But those are just table stakes now. Many companies and retailers are working to go above and beyond -- with programs for worker’s education, for example -- and to communicate that with consumers. Tom’s Shoes is a great example of one brand doing really well with explaining its policies to customers.

Q: What other factors will affect private-label efforts in the coming months?

A: Omnichannel retailing. We know it’s reshaping the retail industry, but we’ve yet to see what private label will mean for retail banners in that sense. We think it will continue to play an important role as consumers become increasingly interconnected.