Private lives

Store brands are moving up the quality ladder and positioning themselves for the smart phone shopping revolution, as Carol Houghton discovered at the recent World of Private Label Show in Amsterdam

Private Label (PL) brands are more of a threat to global brands than ever. PL market share has grown in every European country since 1999, now accounting for up to 40 percent of sales in some markets. Recent research by consumer analyst Mintel found that the number of PL products launched in 2011 overtook ‘name’ brands for the first time. This growth has been achieved by improving packaging and labels, something which is becoming a great driver for value.

‘Private label growth is a long term trend,’ says Tim Simmons, vice president/communications at the Private Label Manufacturers Association (PLMA). ‘There have been various economic swings during this period; the economy has gone up and down but growth has continued.’

According to a report by market research firm Nielsen, PL brands are now in a position to compete on quality as well as value – key attributes that today’s consumers seek. Retailers are also now willing to invest into new categories. For example German retailer Rewe recently introduced gluten and lactose free dairy product ranges, as well as ‘bio’ ranges. Carrefour, in France, launched a beauty range of 650 products with packaging that rivalled its big name brand competitors – demonstrating that retailers are no longer afraid to move into an area previously owned by big name brands.

PL brands have a close relationship with their customers, enabling them to effectively react and adapt to demand – something other brands find harder to achieve. British retailer Asda has increased its market share by developing a new line of products following targeted discussions and taste tests with customers to define what they wanted. The range is called ‘Chosen by you’.

Much of the growth in PL has come from the discount retailers. Aldi and Lidl, for example, have always been a strong presence in Germany, but now take a combined share of seven percent in France and six percent in the UK. This growth has increased PL market share through the chains’ own sales, as well as by encouraging mainstream supermarkets to broaden their offering.

‘We thought PL was reaching its peak in the recession,’ says Gill Atkinson, president at brand research specialist Ipos Marketing. ‘It looks as though they are positioning themselves to succeed very well in an improving economy as well.’

Moving online

A key trend that both PL and global brand need to take into account is online and mobile shopping.

Richard Wallace, business analyst at the Institute of Grocery Distribution (IGD), shared results from the IGD’s monthly shopper survey, which suggests 44 percent of the 1,000 participants would use online shopping in the next five to 10 years – mostly 25 to 40 year-olds and families with young children. Currently six percent of respondents use smart phones to shop, but well over 50 percent of respondents said mobile shopping was something they would consider.

The key drivers of online grocery are the same as for the physical store: convenience, price, product range, service and the ease of obtaining additional information. Wallace says any online PL offering needs to exploit these factors, for example by showcasing the ‘infinite shelf’. There is a broad consensus among consumers that PL is better value for money and 42 percent of shoppers think PL premium products offer the best quality in the whole store. Personalization is also a key opportunity for online stores.

Retailers are already creating the extra capacity to handle the rising tide of online ordering. Tesco, for example, has opened a ‘.com store’ in Enfield, London, where staff are trained to pick top quality produce as if shopping for themselves. They work at night so that fresh products – such as store-baked bread – can be delivered to the customer in the morning. Such ‘Dark stores’, or warehouses for packers of online orders, reduce pressure on physical stores.

Social networking is also hitting the purchasing cycle, and not just amongst the younger generation. The IGD says that well over half of 35 to 44 year olds actively use social networks, increasingly accessed through smart phones. ‘The mobile revolution is imminent,’ says Wallace. ‘With smart scanners, GPS-triggered deal responders and on the spot price comparison, growth is coming from clicks rather than bricks.’

Convenience

‘Convenience’ – allowing shoppers to buy where and whenever they need to – is a major trend in Europe. Cliona Lynch, senior retail analyst at the Verdict consultancy, focused on the ‘top-up shop’, where consumers buy little and often at a local store, a trend which is increasing as consumers begin to do a main shop online. Local, ‘top-up shops’ are used for forgotten or emergency items and treats.

There are four main trends in top-up shopping:

•          The typical ‘top-up’ shopper is 25 years old and male. They could be targeted with apps, social media and the kinds of ‘window shopping walls’ trialed by Tesco in South Korea and Delhaze in Belgium, which use ‘cubes’ showing 300 key products.

•          Freshness and quality is key. UK retailer Morrison’s M-local store, for example, will receive deliveries throughout the day from the main store, enabling it to adapt its stock to customer demand and provide fresh, local produce.

•          The mobile channel is expected to grow by over 55 percent, compared to eight percent online, driving the trend for ‘click and collect’ shopping.

•          The quality, freshness and range of ‘food to go’ products has increased as the foodservice boundaries blur and it becomes more common for people to eat breakfast and dinner out of home.

Pictured: A selection of coffee jars on display at the PLMA show

This article was published in L&L issue 4, 2012