In the last year, private label (also known as store brand) market share hit an all-time high, commanding 22% of the share of sales in the United States and an even higher 52% of value sales in the UK.
While it’s no surprise that shoppers are turning to lower-cost items during a difficult economic period, Profitero’s latest report, “Fighting back against private label online” demonstrates the unintended consequences this trend is having on retailers as well as brands. There’s an opportunity for strategic CPG brands to improve their joint business planning and embrace the role as category advisor with retailers. The teams that combine digital shelf analytics and omnichannel sales data will have more leverage and value in negotiations.
Source: PL $ share of category/dept/aisle - Circana; PL share of page 1 search - Profitero. 4-week period 05/06/2024 through 06/02/2024 vs. the same period in 2023. Search keywords: Pasta =“pasta”; Frozen Food=“frozen appetizers”, “frozen dinners”, “frozen food”, “frozen french fries”, “frozen fries”, “frozen meals”, “frozen snacks”, “frozen tater tots”, “frozen tv dinners”; Candy =“candy”, “chocolate”
The private label threat on the digital shelf has been formidable long before rising inflation. In many categories, brands are seeing an outsized presence of private label products on page 1 vs. their share or sales.
There’s a common perception that private label brands are backed by substantial resources, have direct access to shopper insights, and might game their own search algorithms. But in reality, the real power is in the brand and retailer partnership. Retail category managers need the support and insights from brand managers. National brand manufacturers sit on valuable data and a deep bench of category knowledge and premium branding investments. By using these assets, brands can develop a category management strategy that helps the consumer, themselves and each retailer partner all win in achieving their goals.
Earn a fairer share of the profits on the digital shelf
To help your brand compete effectively, Profitero created an action plan for eCommerce leaders with insights to influence, tools to activate, and partnership strategies for long-term success.
There are three parts to a successful strategy in tackling the challenge of private label’s rise to the front page. Begin with gathering the right information about what’s happening to the product listings in your category. Next, equip your team to take holistic action on the product content you can control. And finally, this strategy requires building partnerships with your retailers to communicate issues and provide insight on how to improve profitability for both businesses. Read on for more detail on each strategy, or get your copy of the full report, “Fighting back against private label online”.
Part one: Influence your retailers with data
Increased private label sales doesn’t always equal greater category growth. There are unintended consequences that result when private label brands overrun national brands on the digital shelf. Category growth overall plays a critical role in retailer profits, and Profitero found that category growth was lower when private labels had an outsized share of the listings.
Your brand needs data to better educate and influence retailers about potential private label trade-offs. Profitero equips brands with organic and paid search analytics for entire categories across 1,200+ retailers in order to track private label trends. Category managers should seek to analyze sales, profit, basket size and frequency changes due to digital shelf positional changes similar to how it’s done on the physical planograms.
Learn more about how to gather impactful data. Get your copy of “Fighting back against private label online.”
Part two: Protect the premium value of your brand
Private label brands purport to offer equivalent products at lower prices - brands must do everything they can to activate and articulate their value proposition through compelling content. National brands that commit to creating excellent, advanced content have the upper hand to differentiate themselves and justify premiums. By providing optimized hero images and using retailer and category specific keyword product pages can stand apart from private label listings.
National brands can also use price consistency and product availability to their advantage. Consumers say they buy from other brands most frequently when products are out of stock.
Targeting generic keywords when a private label product goes out-of-stock is highly effective. Profitero’s Shelf Intelligent Media with Pacvue or Skai allows brands to automatically increase retailer ad budgets when competitors are out of stock on specific retailers. This strategy can capture buyers from competitors, including private label brands, and improve new customer orders.
Get more insights on how to boost your brand’s premium value. Get your copy of “Fighting back against private label online.”
Part three: Strengthen your joint business planning strategy
Effective partnerships are critical to ensuring that your efforts have long-term success. Our latest eCommerce benchmark report found that only 52% of brands discuss eCommerce data and insights with retailers as part of an integrated strategy. Work with your retailers to understand what’s happening in your category instead of assuming that you are being deliberately crowded out. By creating a shared understanding and mutually beneficial set of goals, you can help to maximize both national brand sales as well as total category growth for the retailer.
Profitero Advisory services have helped brands mitigate the threat of private label brand growth by assessing the size of the problem, creating a retailer-specific mitigation playbook and a 6-month action plan for brands. Arming yourself with data and keeping communication open with your retailers will help you in negotiation.
For more data about the impact of private label brands on the digital shelf as well as holistic strategies on how to influence, activate, and partner with each retailer channel, read the full report here.