Interesting article about private labels (those store branded generica for all the basic items, from cookies to dish washing liquid). As the article hints at, this current downturn makes people more price sensitive—and that’s a major driving force towards these private label products:
Over 45% of customers buy private brands because of pricing, followed by availability, quality and taste. And more than 41% of customers bought more private label brands recently than before the pandemic.
It starts with a few statistics about growing sales for these products—and that they are growing faster than the non-store branded versions. Then, the article takes a left, and becomes surprisingly insightful. It digs into how those private label products are born: how they are chosen, made and priced.
Here is the outline—but do read it yourself:
- the retail workers who oversee a product category are called—surprise—category managers. they figure out what sells, and what doesn’t. and where there might be an opening for a private label product.
- why such a product? maybe a value-priced option doesn’t exist for veggie burgers—so they create one. or they want to have a negotiation lever against a name brand who’s overpricing a product.
- then they call up a manufacturer who can dissect the brand product and produce a slimmed down version of it
- the money for promotion and marketing of products needs to come from somewhere—from you, with 10-20% on top of the wholesale price. private label products don’t have that cost
- a bunch of other interesting tidbits, like how to not eat into the profits from the name brands
Towards the end you’ll find this bit of philosophy:
If the purpose of capitalism is to create products for profit and then continually lower costs to achieve the best value, then that also summarizes the role of private label products at retail to a tee.
You don’t have to agree with this “purpose” of capitalism but the why and how of private label products shows the market at work. And of course, customers in a recession are looking for exactly that slimmed down, super-focused product for the best price possible.
Go read the article, if any of the above sounds interesting. :-)