As the price of groceries has risen, so has the stock of private-label merchandise in regional grocery stores. Stores that carry their own brand of goods are finding that expanding their offerings is a great way to boost their profit margin and build customer loyalty. But why are private-label goods performing so well?
For many consumers, price is the driving force behind their buying choices, and that’s not likely to change anytime soon. Recent research from Dunnhumby shows that price is the key driving factor for people’s grocery buying habits and that it’s expected to be that way for at least the next 30 years. Even among younger Gen Y and Z shoppers, price is still a significant concern. After living through the recession and the COVID-19 pandemic, people are naturally more cautious about the price point of the products they buy.
So, what does this mean for private label brands? It’s good news. Private label brands tend to be lower priced and decent quality, so making the switch is a popular choice among shoppers. As Ben Wynkoop, a global strategist for grocery and convenience at Blue Yonder, says, “Every time we go through a wave of financial instability, which really is either inflation, cost of living concerns, or unemployment, there’s this drive for consumers to seek value. Private brands are the best way to fulfill that need.”
With this information in mind, how can you invest in private brand labels in a way that will help boost your profit margin? Here are three data points from The Food Industry Association survey of 63 industry executives that may help.
- 80% of respondents noted that value/price is the most important factor for private brand innovation. This data shows that to make private-label products successful in your stores they need to offer an appealing price point for your shoppers. Competitive pricing that entices shoppers to choose your brand over others will help make your private-label products successful.
- 73% agreed that improving transparency on product information is also vital for boosting private label sales. Another reason consumers like to turn to private-label goods is that they know what’s in them, especially if they are locally made. As more consumers become concerned with their health and choose higher quality goods, stores that emphasize the quality of their private label goods could see a boost in sales.
- 38% of respondents also highlighted the importance of showcasing the value of private-label goods compared to national brands. This data shows that while it is a good thing to showcase how your private-label goods compare to national brands, it’s more important to focus on price point and quality. Consumers are smart enough to determine which product is cheaper, so you have to emphasize why your private-label product is more affordable and better than the national brand.
As we all know, consumer shopping trends are constantly changing. It’s why data collection for the grocery industry is so important. But using that data to help guide your store’s sales strategy is a great way to boost profit and brand loyalty. Our retail pricing services can help give your store a significant edge over your competition. With our help, you can find a competitive pricing strategy for your needs. So, if increasing brand loyalty to your private-label goods is a goal for your store, let us help!