Commentary

Why Private Label Is Eating Your Lunch -- And What You Can Do About It

Take a look at private label today, and one thing is immediately clear: These are not generic products. They are competing with the brands we know and love on more than just price alone. Chances are they’re organic, all natural, locally sourced, non-GMO, and beautifully packaged. And of course, they’re cheaper.

According to IRI, private label generated $138 billion last year alone in the U.S., and many of those dollars came from coveted millennial buyers, 92 percent of whom are turning to store brands.

Defending our ground as packaged goods marketers means we need to know what’s driving this movement. What are shoppers really saying when they buy that jar of 365 extra virgin olive oil or gluten-free goodies?

Some thoughts on what is driving them:

Simplicity/curation: 

In general, consumers’ lives are already cluttered by a constant barrage of brand marketing. Innovative retailers like Aldi have redefined the shopping experience by taking brands out of the equation and, in fact, making that absence a point of distinction.

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Convenience

There’s a Trojan horse named Alexa sitting on the countertops of more than 27 million American households, pushing their Essentials line to indifferent consumers who are driven by convenience. Amazon has eliminated the gap between point of inspiration and point of purchase, and in doing so has raised the stakes for packaged goods marketers.

Do your consumers care enough about your brand to actively seek you out when all of the sensory cues of the traditional shelf decisions are removed? Do you have access to the first-person data to identify your most loyal customers, and who is at risk?

Status/purpose:

Disruptors like Brandless and Thrive Market offer quality and value to smart shoppers while they align with causes and beliefs that today’s shopper holds dear. These brands have made well-publicized donations to Feeding America and other organizations, but this goes beyond charity -- in the same way that the clothing brands you wear say something about you, now so does choosing private label.

Everyone, it seems, is looking for partners that can remove obstacles, curate products, simplify shopping, and think consumer-first. How can you fill that role? Here are some ways you can compete (along with a few pitfalls to avoid):

1) Don’t chase the technological darling of the moment. Right now, it’s voice, but brands should be evaluating whether they have the right to play there. Do you have enough meaningful and credible content to provide value and utility to the consumer?

Soon, the next big ticket item for mass adoption will be smart appliances -- which will inevitably get left in the dust by the next thing and your quest will begin again.

2) Invest in understanding the consumer journey instead. Go upstream. Get ahead of the occasion. The goal is to identify the triggers that lead to purchase and be meaningful in that moment.

3) Simplify the path to purchase, and make it quick and easy for consumers to go from inspiration to transaction. Don’t have your own direct-to-consumer platform? Find a partner like Shopify or PriceSpider that allows you to close the loop and measure from engagement to sale.

4) Reward consumers who sign up for automatic renewal programs via your own D2C channel or Amazon’s Subscribe & Save. Shift some trade dollars away from BOGO and other in-store promotions that are no longer the most effective way to drive loyalty, and focus on partnerships or strategies that incentivize shoppers to make those impulse purchases online that they might otherwise have made in-store.

CPG brands that want to reach millennials and beyond need to focus on the full arc of the shopper experience. The arc begins with the consumer, and if that’s not right, then nothing following will be either. Which is why the odds of winning are always in the favor of the most consumer-centric organizations. Will you be in that group?
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