Honestly I’m too busy to say this well, but just a quick word or two about a recent Wall Street Journal story about improved sales of private-label products as proof that “frugality trumps branding.” (Mentioned also here and here.)
First, private-label sales have been rising steadily for many years. This is not a break with recent trends, it’s a continuation of it.
Second, while many people still describe private-label products as “generics,” the fact is that the broadest trend in the private-label business has been to make such products more brand-like. I get the feeling that some of the people who write about this think you can still walk into a store and find the kinds of totally brand-free generic products, like cereal boxes marked simply Corn Flakes, available in the 1970s (and preserved forever in Repo Man). Obviously, you can’t. Moreover, the familiar tactic of crafting packaging that simply apes brand-name goods, but clearly bears the name of whatever store is selling the stuff, has increasingly been supplanted by strategies that seek to position private-label goods as brands.
It happens that I’ve dealt with this subject in various ways in Consumed:
- In a 2004 column about Ol Roy, a Wal-Mart private-label product that is the nation’s top-selling brand of dog food
- a 2005 column about private-label products at Wegmans, which are actually invented by that chain, and don’t knock off any brand-name product at all;
- a 2006 column about the package-design strategy for private-label goods at Publix, which quite intentionally pop from the shelf as something much more like a unique stand-alone brand than an echo of traditional branded merch;
- and, finally, a 2008 column about Safeway’s O Organics private-label brand, which the chain has actually supported with traditional advertising, and is selling in venues other than Safeway. (Target has also supported some of its private-label goods, such as the Choxie line, with traditional advertising.)
What unites all of these things is that they’re all very much branded goods. They were simply branded by a retailer, not a manufacturer.
Are they cheaper than manufacturer-branded goods? Often. And yes, that’s partly because, in general (I’ve just noted some exceptions) the brand-building isn’t done by way of traditional advertising, which can be expensive. But they’re also cheaper because there’s no middleman: Stores are dealing directly with production facilities to get this stuff made.
So, sure, private-label goods are probably doing great because more people are being “frugal,” but it’s not just about competing on price alone, or about improvements to the quality of private-label goods. I am certain that the profit margins work out quite nicely for the retailers — and much better than they did back in the days of “generic” goods — precisely because private-label goods today increasingly include something very much like a brand premium.