BRANDS
compete on price if the gap is 25 %. Private labels also get a prominent in-store display . Thus , private labels score over national brands on both the dominating Ps of marketing , Price and Place .
Brand Warfare : Current Status
In America , in the year 2019 , private labels contributed 19.5 % of the market share , in terms of the value of the Consumer Package Products ( CPG ) amounting to $ 158.80 billion . In volume terms , it was 23.5 %. Pandemic had even positive impact on the sales of the private labels . A C Nielsen study that was referred in the Forbes revealed that about two-thirds of the American consumers rated private labels or store brands to be of good in quality as traditional brands , and more than a third even ranked some private labels better than traditional national brands .
In Western Europe , private label acceptance is even higher . The largest countries in Europe , Germany and UK have more than 40 % private label shares whereas France is nearing that figure soon . Belgium , Portugal and Austria also have more than 40 %. Spain and Switzerland lead globally , in the market share of the private labels . In those countries , the national brand market share is being pushed to almost half .
One recent study found that in America , 81 % of consumers buy private-label products every time they shop . Another revealed that 25 % buy more store brands than they did five years ago . About 70 % of shoppers say private labels offer extremely good value for the money , and 62 % say buying private labels makes them feel like smart shoppers .
Interesting observations : Rich countries have a higher share of private labels ; Online retailers have a poor share of private labels ; German Deep Discount Supermarkets , LIDL and ALDI have 85 % sales from private labels ; Walmart is reaching a 50 % share of private labels .
The private label provides a point of difference for a retailer in a digital age . It ’ s not just a product at retail ; it ’ s a reason to shop on retail websites and in stores . One of the top-selling private labels in America is Kirkland .
Kirkland : A mega private label brand at Costco
Costco is the second-largest retailer in the world . Their format is ‘ Warehouse Club ’. They collect annual membership fees and bill only members . Membership fees are $ 60 and $ 100 . They have about 93 million member customers of which 90 % of members renew memberships . Two third of the profits come from memberships . Costco ’ s private label brand , Kirkland raked in nearly $ 40 billion , in 2018 , an 11 % increase from 2017 . That ’ s more than JCPenney and Macy ’ s combined . Kirkland ’ s sales also beat out Campbell Soup , Kellogg , and Hershey put together . At Costco price of 40 Kirkland half-litre water bottles was $ 2.99 . That move forced national brands like Poland Springs
“ One recent study found that in America , 81 % of consumers buy private-label products every time they shop . Another revealed that 25 % buy more store brands than they did five years ago . About 70 % of shoppers say private labels offer extremely good value for the money , and 62 % say buying private labels makes them feel like smart shoppers ”
to follow suit . People go to Costco to buy Kirkland products . In the year 2020 , about 30 % of Costco ’ s sales of $ 140 billion came from Kirkland . Sales only 3800 products ( Walmart sells more than 1,00,000 ) with only 600 stores and $ 1200 per square foot sales which is more than double of any global retailer .
Private Labels at Walmart
Walmart is the pioneer of private labels in the world . They began selling private labels in the early 1990s to attract and satisfy bargain hunters and value seekers . About
84 % of Walmart customers keep buying their private labels . Currently , 48 % of Walmart sales come from its private labels . Walmart adopts multiple branding strategies for its private labels . Their popular private labels are : Great Value , Equate , George , etc . Walmart ’ s private label has 29,153 products listed for sale on their website . The largest private label category in Walmart is Auto and Tires 5,208 . The category with the highest number of private label brands is Home 78 . Sam ’ s Club ( Walmart ’ s warehouse club branch which is the second-largest warehouse store in America ) sells 27 % of its merchandise under ‘ Member ’ s mark ’, a private label brand .
Pandemic and Private Labels
Pre-pandemic private label sale in America was 15.5 % of the total retail sales . During the pandemic , it rose to 19.5 %. Many Americans lost jobs reducing the purchasing power of consumers . National brands disappeared from store shelves due to overstocking by consumers , and also due to manufacturing and logistics issues . Many customers moved to private labels in such situations . It is to be seen what percentage of customers will remain with private labels once the supply normalizes and the economy bounces back . McKinsey ’ s research shows 45 % of the respondents tried private labels during a pandemic and 40 % of them will continue to do it even after the pandemic .
Online Retailing and Private Labels
Online retail has been growing globally and its growth got accelerated in the pandemic era . Surprisingly , the performance of online retailers is poor in private labels . Amazon is selling about 400 private labels but they are not contributing even 1 % of the overall sales . Why ? That is a topic for research and enough research has not been done on the consumer preferences of private labels of online retailers . Maybe customers are yet to develop that feel . Thus , online retailing isn ’ t a major threat for national brands . Brands can use the online route to counter the monopolistic business policies of the offline ( brick and mortar ) retailer . For example , Nike is selling 21 % of its merchandise online . Samsonite sells 9 % of its bags online but they are trying to take the ratio to 25 % by 2025 .
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