Future premiumization of products will benefit store brands

Analysts at Deloitte assembled seven trends that they predict will have a large impact on the future of retail and consumer products, naming the growth of private brands as one of the pivotal trends. Deloitte spent six months studying the industry through its Deloitte InsightIQ platform and its 450 billion consumer location data points, factoring in sales of more than 10,000 brands, surveying more than 100,000 people, taking in COVID-19 impacts, and more.

The first trend of seven listed in the report on the future said retailers are focusing on store brands due to the “commoditization and premiumization of products” and because they offer 25-30% higher margins than traditional brands.

The report said grocery stores stock five times as many products as they did during the ’90s, and 73% of consumers are buying across several channels: brick and mortar, e-commerce, mobile apps, social commerce and marketplace platforms.

Further benefiting from this shift in shopping will be private brands, per the report. “Spanning across multiple retail categories and channels, private label products have outpaced the growth of their traditional counterparts by three times since 2015. Within this category, mass-retail private label segment sales have increased by 41% over the past five years — about four times higher than overall private label growth.”

The report noted that shoppers continue to change their perception of private brands from cheap to premium, too. 

“The days when consumers considered private label brands cheap, generic, and low-quality are gone,” as written in the report. “The percentage of consumers willing to pay the same or more for private labels over brand-name products rose from 34% in 2014 to 40% in 2019.”

COVID-19 behaviors are also accelerating private brand acceptance, seeing private brand dollar sales up 15% year over year and 65% of consumers trending brand preference for what’s available during the pandemic.

Other trends in the report included the massive rise of digital sales expecting to continue, physical stores shrinking in footprint, new models like DTC and subscription boxes will grow, convenient shopping will surpass any need for retail theater, health and sustainability practices will continue to carry more weight on shopper decisions, and retail consolidation will fragment market share.

Read the full piece here.