McKinsey shares exclusive private label take on consumer trends during pandemic
In the next few months, private brand sales are poised to grow, due to a reduction of spending by U.S. consumers and continuing supply chain issues getting national brands on shelves, according to exclusive insights from McKinsey & Co.
Tamara Charm, agile consumer insights leader at McKinsey, told Store Brands that the Delta variant and ongoing pandemic concerns has induced about 75% of consumers to make some type of change to their buying habits, and 1 in 3 have already switched to additional private brands during the pandemic.
“While consumers cite a variety of motivations to change the brands they purchase, the top reason they switch is to find better value,” she said. Charm answered questions regarding results from the company’s latest “Consumer Sentiment Report."
Charm told Store Brands that two leading factors could drive more purchases toward store brands in the coming months. “As lower income consumers are reducing spend, year over year, many are likely to seek out private label to stretch their dollars further,” she said. “[Secondly], given supply chain constraints, consumers will be looking for products in stock that they can buy right away — this is an additional opportunity for private label brands that are well stocked.”
The McKinsey study found that despite the Delta variant surge, there are high levels of optimism around spending, driven by higher income consumers and Gen Z consumers. The report said that the number of U.S. consumers looking to splurge on spending is less now than it was in February, but remains among this demographic. McKinsey found Gen Z, in particular, is looking to splurge on apparel (50%) and cosmetics (39%).
E-commerce, Loyalty
Shaking up how consumers are shopping, even as consumers look to return to in-store shopping experiences, showing 5% growth year over year in August, per the study, e-commerce continues to rise, up 30% year over year.
With both shopping behaviors up, the study expects a rise in omnichannel shopping The study found that about 60-70% of consumers across categories are shopping for and researching their purchases both in-store and online, and the categories driving this are groceries, household supplies and personal care products — all areas with strong private label programs.
The study also noted that 40% of consumers said they are being influenced by social media for purchases, especially in glamor categories like jewelry, accessories and fitness. On the other hand, groceries, household supplies and personal care products are the least influenced by social media.
McKinsey finds in its report that it all leads to different shopping habits and is causing a “loyalty shakeup” among consumers. Among younger consumers and higher-income consumers, they are shifting loyalty by choosing brands that reflect their values and purpose, the study said, finding 60% prioritize value and 26% seek social or environmental purpose from brands. For older consumers, they seek value and availability.
“Private label products are well positioned to emerge as contenders for consumers’ attention amidst the ongoing ‘loyalty shakeup’ among consumers who are shopping differently and changing the brands they buy,” Charm told Store Brands.
For a look at the study, visit McKinsey here.