Dont neglect your top store brand purchasers
It’s only natural for retailers to want to win as many converts to their own brands as possible. But focusing only on bringing in the new while neglecting the current private label fan base could be a mistake.
In a Feb. 27 presentation at the Store Brands Decisions Innovation & Marketing Summit in Rosemont, Ill., Todd Hale, senior vice president of consumer and shopper insights for New York-based Nielsen, said there’s nothing wrong with working to acquire new store brand purchasers. Retailers understand that, for many reasons, they will lose customers — including ones who purchase own-brand products — over time, he explained in his presentation, titled “Store Brands Retail Score Card: Are You a Best of Breed Store Brands Retailer?”
Hey, big spenders!
However, if a retailer puts all of its store brand sales efforts into converting new shoppers over to private brands — and neglects to court its top-spending store brand purchasers — it could be doing more harm than good. According to Hale, these big spenders account for 43 percent of own-brand product sales, and they make up one-fifth of shoppers who purchase private brands. The negative consequences of losing one of those shoppers would outweigh any positives associated with gaining new store brand shoppers. Therefore, retailers need to make sure they know and understand these shoppers’ wants and needs.
Hale added that top-spending purchasers of private label products spend three times more per year than lighter store brand buyers do. They also make about twice as many shopping trips per year — and spend $7 more per trip. Top purchasers are less “deal prone” than lighter purchasers, too.
And even though U.S. purchasers of store brands — both top-spending buyers and lighter ones — spend most of their budget on national brand products, more than one-quarter of dollar sales for top-spending private label purchasers is devoted to store brands, Hale said. This equals a 10-point-share swing over dollar sales from all other store brand purchasers, who dedicate 16 percent of dollar sales to private brands.
Not a huge surprise: Large families with children over-index in terms of top-spending purchasers of store brand products. These households are driven by a need for value, given the number of mouths that need to be fed — along with the number of bodies that need to be cleaned and cared for.
However, small and no-kid households also are important top-spenders, Hale explained — especially in the dairy department and in the deli, where few high-indexing demographic groups can be found.
Of all age groups, two are especially critical to win over to the store brands side: female household heads between the ages of 35 and 44, and female household heads between the ages of 45 and 54, Hale said. These two groups are most likely to fall into the top-spending store brands segment. Most “best of breed” retailers are well-positioned to win among these two groups.
Similar connection points exist in terms of kid households vs. no-kid households, Hale stated. However, this reality makes for tough assortment decisions, as kid households drive the most store brand sales.
No magic number of brands
Hale also pointed to the top-10 “best of breed” retailers when it comes to private brands — including ALDI, Costco, Wegmans, Save-A-Lot, H-E-B, Dollar General, Hannaford and more. However, he made it clear that there is no “magic number” of private brands qualifies a retailer as “best in breed.” Costco, for example, relies only on its Kirkland Signature brand, while Save-A-Lot has more than 70 brands.
According to Hale, retailers could confuse shoppers by providing too much choice. Therefore, they should ask themselves if rationalization makes sense. They also should ask how they could avoid out-of-stocks, especially given the expanding presence of smaller-format retailers, which have limited shelf space to begin with.
