Extracting Value From In-House Brands
In hard economic times, retailers have to look at every possible way to increase revenues and drive growth. Recently, an upward trend in the private-label cateogry within South Africa has been seen. Whilst low economic growth has resulted in tough trading conditions, excellent growth potential can be achieved within the Private-Label retail category within South Africa. Although retailers have always had some private labels or ‘no name’ brands in store, retailers are starting to focus on increasing their in-house brands to drive consumer growth when consumer spending is stubbornly muted.
The Rise of In-House Brands
According to the 2018 Nielson State of Private Label in SA report, consumers are no longer seeing private labels as being cheap alternatives to known name brands. This can be attributed to the fact that retailers have focused on ensuring they procure from reliable suppliers and have strict quality control processes in place. This has, over time, ensured consumers have experienced the highest of quality with in-house brands.
Interestingly, according to the Nielson Report, the higher LSM 7-10 markets account for 50% of private label spend but lower LSM 1-4 has shown double digit growth and an increasing share of spend. This opens up excellent opportunity for retailers looking to increase growth within the lower LSM markets. The Private Label market in South Africa is worth over R49.3-Billion annually and owns over 20% of the South African retail sector. Growth in the Private Label market also exceeds Branded product growth within the South African retail market. It is against this back-drop that Private Label products have opened up opportunity for retailers to still achieve reasonable growth within poor current economic conditions.
Increasing In-House Brand Growth
Shifting consumer spending to In-House Brands is hard to achieve. Retailers need to ensure a focus on positioning these In-House brands as at the forefront of the consumers mind. To achieve this, there are three things to keep in mind:
1. Price your private label right:
Private label brands have been thought of historically as cheap alternatives for name brand products. If your product is positioned as the item in your store is that saying that your store is the cheapest, lowest-quality retailer? In the minds of your consumers, price equates to quality and value. Be sure that your label is priced high enough to reflect that image whilst also remaining competitive.
2. Have more than one private label:
You can have multiple private labels within the same product category. Some may be premium priced whilst others are discounted. This provides your consumers within options within the private label brand. However, ensure your discounted private labels are visually differentiated from the premium private labels to avoid consumer confusion.
3. Give your private label prime real estate:
Your private label should be your premier brand. Ensure that it is visible throughout your store for your consumers to see. Include the product at the front of aisles or, at minimum, at the front of the shelf, allowing it to clearly stand out from branded products.
Monitoring the Success of In-House Brands
Monitoring how your private label and in-house brands are selling is critical. By using analytical tools, you can ensure critical metrics are monitored. For example, through analytical dashboards, you must be able to view the gross-profit, cost, mark-up and selling price versus branded products. The success of promotions of in-house brands needs to be measured specifically the increase in sales and increase in profit from the promotional campaign. Finally, it is critical for retailers to track product sales of in-house brands versus branded products so the increase in in-house brands sales can be compared against the performance of their branded counterparts.