Target And Sephora Sharpen Their 'Trading Down' Game

People are increasingly stressed about the way rising prices are wrecking family budgets, with 50% reporting that they have traded down to a private-label product in the last year. New research from Gartner highlights opportunities for both retailers and the national brands trying to hold onto sales and how chief marketing officers can take advantage of the shifting landscape.

Gartner cites industry sources that put 2021 sales of private-label products at $199 billion in 2021, with the private-label unit share rising to 19.6%. Its research finds 44% of consumers have switched to a private-label grocery product, and 37% have traded down on household products, with 26% trading down on over-the-counter products and 25% in personal care products.

Those shifts are likely to intensify. Consumers who say they’re concerned about rising costs increased by 11% in 2022, with 45% now describing themselves as “extremely concerned” heading into 2023.



“Private-label brands have been able to expand market penetration by developing a clear value proposition,” the report says. And as these sales erode the share of national brands, “it requires CMOs to place more emphasis on how brand portfolios are positioned versus private labels.”

Hanging onto those customers gets harder as retailers sharpen their skills, often with private-label offers that don’t feel like a step down in quality. Target’s multibrand approach to private labels has led to a combined $30 billion in annual sales, for example, by powerhouses such as Good & Gather, Up & Up, Cat & Jack and Threshold.

Each account for more than $2 billion in sales, with marketing that includes plenty of educational content, on-site landing pages and design aesthetics far beyond dull generics.

Gartner says Sephora’s single-name approach is also highly effective, with many products sold under the umbrella of the Sephora Collection. Not only are its products priced well below branded products, but the Sephora name also translates to the perception of quality, value and trend.

The consulting firm advises marketers to look for gaps in private-label offers and revisit brand value propositions, ensuring quality and unique offers are visible to shoppers in brand and product messaging.

At General Mills, for example, the strategy has been to tweak and expand products to retain loyalty. Its Annie’s and Cascadian Farms brands, for instance, respond quickly to trends like “Made in a peanut-free facility” labeling and more transparent ingredient labeling.

That approach does work, Gartner finds, with 66% of consumers saying they stick with a traditional brand if it consistently delivers quality products and services. And 58% say they’ll stay loyal if the name-brand product presents a great value.

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