The Rise of Private Label Branding And What It Means For Retailers

According to research conducted by the IHL Group, there is a shift toward minimalistic products over household brands.

Of all the retailers researched, all of which have over 50 U.S. locations, there is a surge of Dollar General and Dollar Tree openings. Top retailers that closed during the research time period include Payless ShoeSource and Gymboree. 

The IHL Group also found that discount retailers were at the top of the list for store openings. Retailers such as Five Below and Aldi have a plethora of private label products, which are, in essence, considered generic products compared to big-name brands. 

One reason why generic options are successful, is because they make it easier for customers to make decisions. With a plethora of brands available at a brick-and-mortar store, some customers may be paralyzed by the number of choices. According to the research of Barry Schwart, who wrote The Paradox of Choice: Why More Is Less, an increased number of choices makes a customer experience increased stress and anxiety. 

Costco is a great example of this paradox of choice at play and how it can affect the bottom line. Although brick-and-mortar stores are big in terms of size, they make the purchasing experience easier for customers. Rather than having many brands for a certain product, Costo only carries a handful of brands. Kirkland, which is Costo’s private label brand, has become a staple for customers who seek value.

Macy’s is another example of a retailer that has created private label brands. These include Alfani and INC. Molly Langenstei, who was Macy’s Ready-to-Wear general business manager, stated at a ShopTalk conference that using private label branding as a growth strategy is effective because exclusive items can create loyal customers. 

Other retailers using a similar strategy include Amazon, Target and Walmart. Amazon has its own line of items that customers can purchase at competitive prices within the digital realm. 

However, this is a concern for parties selling through Amazon’s platform. According to CNBC, multiple sellers have indicated their concerns about the online retailer’s move toward the private label strategy. These sellers are now up against their own selling platform in addition to other competitors. 

With the increase of private label brands, and the shifting brick-and-mortar and digital marketing landscape, businesses need to respond quickly and effectively. To take your business to the next level and get a one-up in branding strategies, call the Find Your Audience team at 647-479-0688. Find Your Audience may also be reached through email at  hi@findyouraudience.online.

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