In the past, criticism over poor quality hindered the popularity of private labels. But as consumer attitudes towards store brands evolve, retailers have begun to transition away from their conventional generic approach to product development, focusing instead on aligning themselves with the needs and values of modern consumers in a bid to stand out as go-to brands in their own right.

In recent years, the proliferation in innovation by private labels has been highlighted as one of the driving forces behind consumer traction and market growth in the private label space. In the recent report from GlobalData, ‘TrendSights Analysis: Private Label Evolution’, associate analyst Iliana Mesheva examines how private label manufacturers have been working to revamp their image and win over modern shoppers by expanding their product categories by offering exclusive ranges, aligning with consumers’ health, transparency and sustainability values.

As private labels become increasingly multifaceted operations, three core categories have become apparent in the market: premium, national brand equivalent and value. By targeting these themes, retailers aim to capitalise on consumers’ willingness to experiment with new and different varieties of product. With retailers doubling-down on efforts to blur the space between private label and national brands, it is becoming harder for shoppers to differentiate between the two. But how can retailers utilise the positive perception of private labels across consumers in both developed and emerging markets to attract shoppers?

Premiumisation of beverage products

Traditionally, private labels have focused on commodity categories that feature little product differentiation, limited innovation and high price sensitivity. But, as consumer demand shifts towards ‘healthier’, ‘better-for-me’ beverages, retailers have adapted by expanding into new areas, focusing on innovative, premium and speciality categories that cater to the needs of proactive, health-conscious consumers.

In a bid to compete against national brands on a higher level, these retailers are tapping into more sophisticated product ranges by launching premium-oriented, organic, natural, locally sourced and eco-friendly offerings that target specific consumer needs. By responding to prominent consumer trends with insightful product innovation, retail marketers can create a high level of involvement in the purchase decision process of their offerings. But, for today’s savvy shoppers, offering superior quality is no longer enough to sustain long-term traction. To successfully encourage consumer engagement in the premium space, it is important that private label retailers look beyond quality and price, to understand and address consumers’ individual needs and lifestyle preferences.

Aligning with the needs and values of shoppers can help private labels to remain relevant in the eyes of shoppers, while simultaneously allowing retailers to capitalise on the popularity of current health and wellbeing trends. According to GlobalData’s 2016 Q3 global consumer survey, 66% of consumers are most likely to purchase products developed for their lifestyle.

Consequently, retailers should focus on creating an emotional connection between their products and the consumer through in-store marketing and product packaging strategies, as can be seen in the example of the Spar Premium Green Energy Saver fruit juice launched under the Spar Premium banner. Comprised of key ‘healthy’ ingredients, including spinach, apple and ginger, this non-alcoholic fruit juice drink taps into the ‘green juice’ trend and targets those shoppers looking for soft drink offerings that do not contain preservatives.

National Brand Equivalent

While negative connotations may have deterred shoppers from purchasing private label offerings in the past, store brands no longer suffer the stigma of inferior quality in the eyes of consumers. Nowadays, nearly two thirds (63%) of both millennials and generation X shoppers consider private label products to be good alternatives to famous name brands, according to GlobalData’s 2016 Q3 global consumer survey.

As the majority of consumers purchase their household shopping from supermarkets, retailers are in a convenient position to fill their shelves with more of their own private label offerings and in doing so blur the line between national brand and private labels with multi-tiered store brands. But, in order to increase consumer traction and encourage spending on private label products, retailers will need to develop or revamp private label strategies to differentiate their product ranges from national brands and compete on an equal level.

Building trust is an integral part of this process. Savvy shoppers are sceptical about in-store marketing claims, so private labels need to focus on clear communication, particularly when it comes to packaging. Listing ingredients and the country of origin can be a useful way for retailers to foster a perception of quality and trustworthiness in the eyes of browsing consumers.

By meeting consumer demands for healthy, trustworthy and varied products, private labels can position themselves as equivalents to national brands. For example, Trader Joe’s ready-to-drink matcha green tea, said to be made with premium tea leaves and pure Japanese unsweetened matcha, targets health-conscious consumers seeking low-sugar, calorie-free drink alternatives.

Exclusivity, innovation and sustainability efforts can also help store brands to gain a competitive edge over other retailers and national brands.

Value for money

Private labels in the value sector tend to be less innovative, often predominantly appealing to more price-conscious consumers as retailers work to capitalise on making profits through economies of scale and low margins. However, meeting quality standards is still of high importance, and retailers should not be discouraged from creating offerings that address consumer needs and demands as they focus on transitioning away from traditionally generic offerings and exploring more diverse developments.

While innovation in the value segment is relatively low in comparison to the higher-tiered segments, private labels have an opportunity to drive growth in value-led offerings by capitalising on the need for low-priced products. This can be achieved by consistent development of high-quality beverages that target the individual needs and lifestyle preferences of price-conscious shoppers.

One such example is the flavoured organic iced tea range launched by Ikea Food Services. Sold in two sophisticated and unusual flavour varieties – birch and pine – and made using organic ingredients, the offering showcases the evolution of quality in private label products, which makes it highly appealing to value-conscious drinkers.

Busy consumers often seek value in time-saving and multifunctional products as well as lower priced offerings. As such, retailers are in a favourable position to target these consumer needs with on-the-go beverages without compromising the quality of products. By addressing core concerns of value-seeking consumers, private labels can maintain the overall satisfaction of shoppers and encourage a positive perception of the brand that stands out against low-priced national offerings.

80% of consumers say they check prices online before making a purchase, according to GlobalData’s 2016 Q3 global consumer survey, which suggests that consumers are still very much price-driven. This cost-conscious approach to decision-making appears to be most apparent among millennial consumers than in other demographics. Nearly half of millennials surveyed by GlobalData somewhat or completely agree that they are willing to compromise on taste, scent and experience for a lower price.

To appeal to shoppers who actively use price comparison methods before making a purchase, retailers should focus on strengthening their online marketing strategies, spotlighting their own product ranges and ensuring that they are visible and accessible to shoppers for both in-store purchases and through e-commerce channels.