From "me too" towards "me first" - this is the title of Mr Joao Ramos' lecture. Me Ramos is Assortment Strategy Director of Jeronimo Martins Poland. The market expert shared his thoughts on private labels' future. The text is available at the popular LindkedIn portal.
- We are living the transition into the 3rd wave of private brands’ life. From the humble beginnings of “White labels” (branded with the distributor's logo) whose main purpose was functional help for the consumer - product identification, be it “rice” or “sugar”. The retailers evolved in the direction of well-known Private Labels. These are no longer black-and-white commodity labels. They have meaning of their own, name and logo, a common identity across a line of products.
This 2nd generation of private labels was however very dependent on their National Brands counterparts. Most of them tried only to replicate in the best possible way what the category leader was doing, what the benchmark stood for. The main attribute of such labels was, not surprisingly, price. Not having an distinguishing identity of its own, the only differentiator was being cheap. And together with that, poor quality was often another association. In this game, they are condemned to be 2nd to National brands 9 out of 10 times.
Today, the best retailers are evolving from Private Labels and already embracing the Private Brand , true brands competing with the most well-known brands in the world. Not because they are cheaper. They have a story to support them, a consistency and quality assurance to be reliable, and a strategy that is beating the brands for the consumer's hearts and minds. The private brands of the future are no longer copying the category leader, they are the category leader or fighting toe to toe for that spot. This is how they are doing it:
FIRST TO THE MARKET
They are first to market. With the agility and speed developed by years of launching hundreds of products per year (instead of the few products FMCG companies launch), Retailers are now better prepared than traditional FMCG companies to think, create and develop a product from paper to shelf in record time. Retailers invent, create and develop products. From on-paper plan to shelf. This happens in record-breaking time They follow trends at the same time or before anyone else, and drive them faster and deeper into many product categories at the same time. If Greek Yogurt becomes the choice of customers, some brands might launch Greek yogurt and Greek yogurt with fruits. Other different company might develop a Greek yogurt butter. But a retailer can launch all of that plus Greek yogurt ice-cream and Greek yoghurt pancakes. All at once, and truly own the new trend across the store and the client's basket.
UNIQUENESS
When few retailers had a private brand, to be the store with the cheap alternative was an asset. Today, with the world better connected than ever and the virtual endless choice of products and brands, cheap can be found anywhere. Even national brands are pressed for price reduction. We live in an era of savvy consumers. Their live on a tight budget. Cash strained consumers still recovering from recent recessions and more cautions than ever in their spending. This is when a Private Brand becomes ever more important. Because they are no longer replicating some other product, these new private brands have the luxury to not have direct competitors, to be more than just a price tag, and truly rule, at least for some time, their category or the consumer need they aim to satisfy. A well-executed private brand strategy will allow the most well prepared retailer to have the next Coca Cola or Pepsi in exclusivity, at least for some time. Until they jump to the next best thing. A quick search on Google for “Trader Joe’s” will show many articles featuring “only found on Trader Joe’s” lists of products. This is when a Retailer gets loyal customers.
TEMPORARY MONOPOLYS
By being first to market and driving trends faster than most of their FMCG partners, they place themselves in a momentary monopoly. They gain clients' awareness and share of mind not only for the Private Brand but for the store as a whole. They start to be perceived as the place to find novelties, the shop of the new products, where the best things come to first. The secret to this is to continuously reinvent the store and product categories going from one monopoly to the other, always leaving competitors fighting to copy the "old" innovation, while quickly uncovering the next best thing.
MEANINGFULNESS
All this unique and innovative attributes won't come just from a new found ingredient or a new packaging application. As retailers grow into this new found world, so do their teams in what regards product development and branding. A Private Brand product will no longer be just the sum of its technical attributes and ingredients, but the whole concept behind the product and its brand. Build them will be the whole concept of the product and the brand. Take the recent example of Patti LaBelle Sweet Potato pie, which was selling 1 pie per second at Wal-Mart this past November, after it got a help from great product development and some social media attention. Everyone could put the same ingredients together and make another sweet potato pie, but no one could replicate Patti LaBelle's. But no one can imitate Patti LaBelle. Brand Management focused on Private Brands (not just the retailer brand) will play a crucial role from here onwards.
BRAND MANAGEMENT
Private Brands become central to the strategy of many Retailers, the attention to the management of these brands will also grow. Teams of Brand Managers on the Retailer side will become a differentiating asset Teams of Brand Managers on the Retailer side will become a differentiating asset and brand management work a key element of a Retailers daily life, be it in-store activation, co-branding, celebrity endorsements, etc.
CONSUMER BASED
In the old days, research was confined to the big FMCG brands. Partially because the risk of failure was much greater, but also because (as today) the NPD process is so long on the FMCG side that any risk reduction tool was welcome. As retailers evolve to being true brand owners and brand managers, so will their usage of data and market research, before and after a product launch. More than that, there is no amount of data and research that can precisely replicate or predict the final in store experience and product performance like having the actual product on the shelf for real consumers to buy (or not buy). Unlike FMCG companies, Retailer own actual stores, thousands of them, Unlike FMCG companies, Retailer own actual stores, thousands of them, and can decide when and how to place new products, product iterations and/or new brand for real consumers to speak their minds. It is a valuable source of knowledge. The knowledge, together with cross category data and fast adjustments will keep the new private brands aligned with their customers for a long time to come.
DESTINATION BRANDS
If they succeed in listening to the customer, creating unique products, and pushing them to the market faster than anyone else, clients will notice and retailers will gain a most coveted asset: destination brands. Brands that are so unique and have a loyal target group, that make people come back to the same store time and time again to get that product (as well as the remaining basket). The line that once separated National Brands and Private Brands is thinner than ever. For some Retailers the Private Brands of tomorrow are starting today. The ones who fail to embrace this new reality might not be here to see it much longer.
(KK)
