Are You Ready For 2012?

Store brands have ample reason for optimism in 2012. Store brand sales reached $93 billion during the 52-week period ending Oct. 29, 2011, rising by 22 percent since 2007, or six times faster than name-brand offerings.

About three-quarters of shoppers said they viewed store brands as a "good alternative to name brands" in a Nielsen study. And even more encouraging for retailers, almost four in 10 buyers said they felt "some are higher quality than name brands."

What's more, the stigma once associated with store brands is dramatically diminishing, with just 17 percent of consumers believing store brands are "for people on tight budgets and [who] can't afford the best." And a continuing opportunity to fuel store brands growth can be found through more rigorous price gap management between private label and national brands.

For 2012, the market forces already at work and enjoying significant tailwinds are being fueled chiefly by demographics. A commitment to analytics and consumer research will be more important than ever, but identifying where market forces intersect will be how many store brands separate from the pack.

For example, private brand development in food and non-alcoholic beverage departments has been very successful, but some retailers are venturing into new territory such as alcoholic beverages and health and beauty. Those U.S. retailers with expansion plans could find opportunity among the growing Hispanic population. A growing body of research shows that:

• Hispanics display the most positive attitudes toward store brands among U.S. ethnic groups.
• Hispanics spend more, on average, per shopping trip and annually than African American and Asian households;

Retailers with stores in the 10 largest U.S. cities might be pleased to learn that almost half of all Hispanics reside in those metro areas. This confluence of factors may add up to a high-potential/high-growth investment for 2012.

For others, the economy, combined with other considerations, could provide the spark for a successful 2012. Consider that, economically speaking, we now have two U.S. consumer groups: those who have exited the recession and those still under water.

The wealthiest one-fifth of consumers posted more frequent shopping trips and higher spending in 2011 versus 2009, while the remaining 80 percent of the population lost ground. And although low-income consumers have a slightly stronger commitment to private label than their higher-earning counterparts, a review of top-10 store brand products for high-income consumers reveals a number of items with particularly attractive profiles.

Specifically, they are slower-moving items (paper products, vitamins, medications/remedies) with weak consumer price memory. This reality makes them ripe for price increases that allow retailers to increase profit without sacrificing volume.

Naturally, retailers have to be selective about this store brand strategy — pricing varies by category, with gaps as narrow as 24 percent and as wide as 73 percent in certain non-food departments.

For those who don't see themselves in the examples above, myriad other combinations are poised to play out in the coming year. Luckily, fundamentals for successful planning and execution remain the same: an unwavering focus on quality and shopper needs, proper assortment, innovation that builds loyalty and shopper trips, a healthy fear of being left behind by digital/ technological advances, and top-notch research to help stay on top of it all.

Straight Talk delivers monthly store brand insights from Nielsen, New York. Todd Hale is Nielsen's senior vice president, consumer & shopper insights.

The wealthiest one-fifth of consumers posted more frequent shopping trips and higher spending in 2011 versus 2009, while the remaining 80 percent of the population lost ground.