Private-label products are gaining traction among U.S. consumers, with an increasing number opting for these alternatives
Private-label products are gaining traction among U.S. consumers, with an increasing number opting for these alternatives in search of both affordability and quality. Recent consumer sentiment studies reveal that nearly 75% of US shoppers are turning to private brands, underscoring a powerful shift in consumer preferences. As retailers continue to capitalize on this trend, private brands are evolving beyond simple cost savings, emerging as a key driver of customer loyalty and margin growth.
Core Data and Market Insights
- 75% of US consumers and 85% of European consumers are “trading down” to private-label brands.
- Private brands now make up 38% of the European market, compared to 19% in the US.
- Over 80% of US consumers consider the quality of private-brand food products equal to or better than national brands.
Merchandising and Brand Building
As private brands evolve, retailers need to rethink their approach to merchandising. Gone are the days when these products were simply about saving a few bucks. Today, private brands must stand out for their quality and differentiation. Retailers should focus on building a coherent portfolio that blends affordability with innovation.
Insights-Driven Product Development
Retailers can boost the success of their private brands by leveraging consumer insights. Tools like AI and digital feedback loops allow brands to quickly iterate and improve their offerings. This not only enhances product quality but also drives customer loyalty by aligning more closely with consumer preferences.
Next-Gen Sourcing for Competitive Advantage
Private brands succeed when sourcing is efficient and cost-effective. Digital tools that allow real-time tracking of input costs, along with sourcing transparency, enable retailers to secure better margins while maintaining high-quality standards.
The Challenges Ahead
While the private-brand opportunity is clear, retailers must overcome challenges like establishing a centralized team and managing the complexity of their supply chains. Successful retailers will need to invest in a center of excellence to centralize and streamline private brand development.
Building a Winning Strategy
Retailers should develop a dedicated private-brand COE focused on sourcing, product development, and analytics. By doing so, they can more effectively scale their private brands and capitalize on the growing consumer demand for quality, value, and differentiation.
Conclusion:
With U.S. consumer sentiment shifting strongly in favor of private brands, the time for retailers to invest in these offerings is now. Those that can differentiate their private brands through quality, innovation, and efficiency will be best positioned to capture more market share and strengthen customer loyalty in the years ahead.
Original article source: “A turning point for private brands: How retailers can seize the opportunity” published by McKinsey & Company on [Nov. 4, 2024].
