A New Era For Store Brands

We are entering a new era for store brands. At Nielsen, we measure what consumers watch and buy. When we take a look at what retailers have been doing with store brands over the last four decades, we see the development over three distinct eras: The Generics Era, the National-Brand-Equivalent Era and the era we are in now, the Store Brand Era.

The Generics Era was associated with poor quality and bland labeling. Brand packaging knockoffs, meanwhile, were the hallmarks of the National-Brand-Equivalent Era. During this time, retailers began simple marketing of their store brands, suggesting to the consumer that their store brand was just as good as the name brand.

But the Store Brand Era differs greatly from the National-Brand-Equivalent Era, especially in the areas of marketing, innovation and research. Although retailers are challenged on the development side because their store brands cross so many categories, those retailers that are doing well are managing their brands in significantly different ways than they did in the past.

First, major retailers are hiring classically trained marketers away from CPG manufacturers to run their store brand programs and adopting marketing strategies used by the national brands. Retailers are creating true brands.

Retailers also are innovating with products and packaging. They are engaging in product concept testing and packaging testing to make sure what they are considering to launch will have maximum impact. They are traveling the globe in search of innovative products and packaging they can uniquely bring to their shoppers.

And retailers are creating brand lines and line packaging. They are launching cosmetics, kids' food and baby product lines, to name just a few. Retailers are following in the footsteps of manufacturers, as well as European retailers, by expanding their tiers and adding premium, natural and organic products.

How can you, as a retailer, make the most of the Store Brand Era?

First and foremost, make sure your products meet consumer needs — not only on price, but also on quality. Price might generate trial, but repeat purchases will not happen if consumers don't feel the product is as good as what they were using before. Consumers give retailers one try to get it right. If the retailer's main tier doesn't measure up, that shopper won't try it again.

Second, invest in research related to store brand equity. Such research will help you separate the brands with strong equity from those with weak equity — and help you determine which brands might be extended to new categories. You need to understand not only which products are building retailer brand equity, but also which products are hurting equity — and take steps to fix those products.

Also consider concept-testing products and packaging. This can save you a lot of money by preventing the rollout of products or packaging that could hurt or hinder sales. Packaging is a retailer's most important marketing tool and expensive to change. Make sure it works in concept and on the shelf before launch.

Market your brands vigorously using multiple media, including but not limited to in-store vehicles and the circular. We see top retailers using end caps, shelf signage and couponing to generate trial and awareness.

Finally, tightly manage price gaps to name brands. If the gap becomes too narrow, especially with coupons on top of a feature/display, many consumers will switch back to brands for that purchase.

On the flip side, the new era of retail brands does not mark the end of healthy national brands. Retail assortments need to be the right mix of branded and store brand offerings — Nielsen's research shows that today's U.S. store brand buyer still largely prefers name brands over store brand options. However, the door is wide open for retailers to develop loyalty to their brands in many categories, through products that deliver unique benefits (tangible and intangible) to consumers.

All indicators suggest that most consumers will not go back to their old purchasing patterns. The new savvy shopper is here to stay — and she will continue to purchase those store brand items she believes perform and meet her needs as well as the national brands do, but for a lower cost.

Straight Talk delivers monthly store brand insights from The Nielsen Co., New York. Lisa Rider is Nielsen's vice president, product leadership. Contact Rider at [email protected].

Consumers give retailers one try to get it right. If the retailer's main tier doesn't measure up, that shopper won't try it again.