4 Reasons Private Labels Are Booming

STAMFORD, Conn. -- Private-label products have come a long way the past few years. What used to be associated as simply generic and low-priced, these items are now sought out by consumers daily. In fact, 61% of consumers are purchasing more private-label brands now than they were two years ago, according to retail service provider Daymon’s new Private Brand Intelligence Report.

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Since the start of 2017, private-brand sales have increased 4%, which is eight times the amount of national brand sales, the report says. Moreover, these brands have contributed about $50 billion in margin to retailers—a $2 billion increase since 2016. And private-label products are being purchased regularly, as 81% of consumers said they do so on every or almost every shopping trip.

“Private brands have entered a renaissance period that has allowed them to become more differentiated than ever before,” said Jim Holbrook, CEO of Daymon. “We are seeing that retailers with distinctive, one-of-a-kind private brands will survive and thrive, while those with national-brand equivalents will struggle as competitive pressures mount.”

Here are four reasons private-label brands are thriving in today’s market …

Private labels offer high-quality items at a reduced price, and nearly three-fourths (74%) of consumers said that private brands are now a better value for their money, the Daymon report says. Additionally, 61% of respondents said they want to see more deals customized to their shopping habits. Holbrook said top retailers are using private-label brands to do so, with some now offering proprietary brands in sectors such as clothing and beverages.

"With private brands, there’s the notion that you’re getting a deal or at least not paying a nonsensical premium for the name on the packaging, and that’s why these brands are growing so much,” he said.

The more unique a retailer’s private-brand lineup is, the more loyal its shoppers are, the report said. In fact, 53% of consumers said they shop at a store specifically for its private brand. Increased loyalty aligns with trustworthiness, too, and 85% of consumers said they trust private-label brands just as much as national brands.

Wellness brands are the fastest growing private-label segment, as sales in the top five organic private-label categories grew 17% between 2016 and 2017, per the report. Touching on the healthy-eating trend, 60% of consumers said they want to see more private brands in the fresh category, while 41% requested the removal of sugar and sodium from private-label products.

Retailers with proprietary brands are noticing these requests. Aldi, for instance, offers private-label meal plans, recipes, videos and tips for paleo, vegan and plant-based shopping. The German company, with U.S. headquarters in Batavia, Ill., has partnered with various food and lifestyle experts to curate these initiatives and has registered dietitians who help shoppers find healthy options. Also, in 2015, Aldi removed synthetic colors, hydrogenated oils and MSG from its private brands.

Private-label retailers are dabbling with create-your-own products and services, and for good reason. About 77% of consumers have chosen, recommended or paid more for a brand that provides a personalized service or experience, the report said.

Moreover, 59% of consumers want an engaging shopping experience, which includes interacting with and providing feedback to retailers. This is especially true for younger consumers, as 78% of millennials said experiences are more important than products. The report suggests consumers are likely to make impulse purchases and buy gifts, specialty products and more if kept engaged.

Combining technological innovation with customization, New York-based Dylan’s Candy Bar, for example, has a personalization area that uses 3-D printers to deliver fully customized, private-label candies to shoppers in real time.

Stamford, Conn.-based Daymon provides global retail strategies and services to more than 100 major retailers and nearly 6,000 manufacturers across 50 countries. The company handles more than 1,700 brands and approximately 165,000 individual SKUs globally. Its Private Brand Intelligence Report, provides analysis on how private brands compare to national brands based on proprietary survey data, category research from Daymon analysts and insights from experts under the Daymon umbrella.