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11/25/2020

Private label brands see renewal amid rapidly changing shopper behavior

Grocery retailers have seen seismic change in 2020, and in this change there are two macro-trends impacting private brand strategies as retailers seek to acquire new customers and build loyalty with their own brand assortments.

One of the most significant changes related to shopper behavior has been the increased propensity of shoppers to leverage grocery e-commerce. What was a steadily growing trend pre-pandemic has accelerated dramatically, with the number of active monthly online grocery shoppers almost tripling, and monthly online grocery revenue increasing over six times versus 2019.

Another area of rapidly evolving shopper behavior is the trend toward products that meet specific health, wellness and values-based need states. What lands in shoppers’ baskets is changing as a result, as they increasingly seek health and wellness products.

Large swaths of the U.S. population are now shopping to fulfill evolving dietary needs with 200 million Americans adhering to a particular diet or health-related eating program and 180 million shoppers shopping with food allergies or intolerances in mind.

Looking at these trends, here's how private brands are adjusting or need to adjust to these new shopper behaviors:

Private label brands increasing in importance
First, private label brands have come more into focus in 2020 as a result of COVID-19. Many retailers have experienced unexpected private label growth this year as shoppers look for cheaper options in the face of economic uncertainty, or try store brands when their preferred choice is out of stock.

A September 2020 McKinsey study confirms this: The top two drivers of consumer purchase intent for private label brands are “private label brands are a better value” and “I purchase private label brands only when national branded products are not available.”

Private brands are playing an increasingly important role in retailer strategic planning as creating repeat purchase loyalty amongst shoppers who have recently tried private label brands, even if by accident, and they represent material improvement to overall profit margins.

But, private label brand loyalty and basket growth is dependent upon creating differentiated engagement with shoppers across channels, especially e-commerce channels.

Health and wellness differentiation through private label brands
The consumer trend of shopping based upon health and wellness need-states greatly impacts private label brands. McKinsey has found consumers believe private label brands are healthier and safer — the third largest driver of purchasing intent.

Leading retailers are tapping into health and wellness as a private label differentiator that appeals directly to the growing consumer trend of shopping based upon health and wellness need-states like “keto,” “paraben free,” “heart healthy,” or “sustainable.”

Walmart’s "Great For You" health and wellness program applies an icon to qualifying Great Value and Marketplace private label products that meet stringent nutritional standards. This is a great way to call out the differentiation. Target's health and wellness icon program connects need-state shoppers with private label options across categories, including private label food brand Good and Gather, featuring icons like “vegan” or “plant based." Private label personal care brand Everspring features icons like “cruelty-free” and private label household cleaner brand Smartly features icons like “clean.” 

A recent audit of 30 leading retailer websites found that consumer searches for the most common health and wellness need-states are returning empty.

While leading retailers have recognized the importance of the health and wellness need-state shopper, many retailer e-commerce sites are currently missing a major opportunity to present need-state shoppers with a full product assortment.

Most private label products are missing from website searches
As more and more shoppers engage with retailers online, the point of sale has in many cases become the point of search. But, a recent audit of 30 leading retailer websites found that consumer searches for the most common health and wellness need-states are returning empty “digital shelves.”

According to Label Insight’s Empty Aisles website audit report, retailer websites fail to return 92% of the products in their assortments that qualify to be returned for top consumer need-state searches.

For example, search results for “dairy free” are missing, on average, 98% of the products in a retailer’s assortment that qualify based on ingredient analysis. Another example, search results for “high protein” are missing, on average, 89% of the products that qualify. Simply put, a large majority of private label brands that qualify are not being presented as a purchase option to online need-state shoppers — a big missed opportunity. Although website navigation and search functionality play a role in this poor experience, the root cause is incomplete and inaccurate product data. 

Improving private label product data will improve the shopper experience
The missed opportunity for many private label brands is tied to a lack of accurate and complete product attribute data to inform their website search functionality.

Basic product information can be scraped from product labels, although even that can sometimes be challenging to keep up-to-date and accurate. But the key to providing online shoppers with specific need-states a “digital aisle” full of relevant and qualifying private label products is product attribute data based on ingredient analysis that goes beyond the label.

A full selection of private label options tailored to need-state shoppers will lead to new customers, increased loyalty, and as a result, higher margin revenue growth.

Todd Morris is chief executive officer of Label Insight, with offices in Chicago and St. Louis. 

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