Private label brands continue to grow at an impressive rate. Private label, or Store brands have an increasing presence in the both the online and offline retail space.
There is certainly now enough evidence to suggest that the rise of the private label is anything but a passing fad. It is a growing trend that has had a significant impact on most sectors and across many territories across the globe. In 2016, the market share of private label brands rose in 13 out of 20 European countries. In the UK that share was 46%. Switzerland even pushed above the 50% barrier, with 52% of the market share. Elsewhere on the continent, Germany reported its eighth consecutive year of private labels taking a market share in excess of 40%.
There are key players in the private label market who deserve attention. Aldi and Lidl, whose own Store brands account for over 70% of total sales, have enjoyed continued expansion over recent years. Aldi now has upwards of 10,000 stores in 19 territories. In the UK, particularly, Aldi and Lidl have increasingly stolen market share from the four major retailers in the grocery sector. In the US, Amazon is the fastest growing retailer. It is also a major player in the private label market. Their own Echo speakers account for 45% of sales among the top ten brands in America.
So, there can be denying how important private labels have become. There are several good reasons for this. Increasingly, everyday value is a key driver for customer loyalty and trust. Retailers can enjoy higher margins for their store brands compared to national or global brands. Private label brands have also seen an improvement in quality – both in the quality of the product itself and with packaging. Many retailers give prime locations to their private label brands – either near to tills to prompt impulse buys in stores, or through banners and pop-ups online.
However, despite the undeniable growing importance of private label goods, branded products do still hold several advantages over their private label counterparts.
Brand recognition and visibility is still a key advantage. National and global brands hold an enviable position. And with visibility and brand recognition, customer trust and loyalty often grows too. Many consumers are still more than willing to pay a premium price for the national brands that they trust. Typically branded companies enjoy larger advertising budgets. This gives them more flexibility to spend big on print, digital and television advertising. Private label brands tend not to invest as much in advertising, to keep their costs down.
But it’s not just with spending power that branded companies have the advantage. They benefit from their size, scale and experience too. The sheer number of products that are manufactured and distributed each year means that branded product manufacturers are often more adept at ironing out any issues in their supply chains, sourcing and manufacturing.