Time For An Attitude Adjustment?

According to government data, the recession officially ended some time ago. Of course, with unemployment at near-record levels and consumer spending still in the doldrums, no one is really in the mood to celebrate. Store brands — also known as private label, private brands, own brands, and (shudder) generics — have been one of the few bright spots in retail circles over the past 24 months.

Although the flagging economy often is given credit for the spike in sales store brands have enjoyed of late, the fact is that these products were seeing solid year-over-year increases before the economy took a dive. Certainly sales were bolstered by value-seeking shoppers willing to trade down to save wherever possible.

Going back 30 years or so, the sales of store brand products have steadily, albeit slowly, climbed. Every recession has driven an uptick in sales, followed by shoppers returning to the national brands as financial concerns eased. But each time, store brands maintained just about a full percentage point of penetration. So far in this recession, store brands have managed to hang on to most of the gains realized, but we won't know how things really shake out until the economy is fully recovered. Given the significant gains made by store brands, and the likelihood of a very slow recovery, private brands might very well become the norm for a strong percentage of consumers.

All of this spells opportunity for retailers. But to ensure strong growth going forward, many retailers will need to change the way they view store brands internally, and how they market them externally.

The first step is to review internal nomenclature. If a retailer still considers the term "store brands" to be synonymous with "generics," it has little chance of success in building a strong private brand program. This is far more than a simple case of semantics. Generic is plain and undistinguished, and if that is an accurate description of anyone's store brand program, then it's probably not worth the effort to maintain it.

One of the popular terms for store brand programs in the past decade has been "own brands." While the logic makes sense, in the end, the brand is truly owned and defined by the customer, so maybe it would be more accurate to call them "your brands" — the point being that how an organization refers to its internal line of products is critical. Not defining the terms is an all-too-common mistake.

Another overlooked area is that of pricing strategy. Ask most merchandising people how they price their store brand products, and you'll almost always hear that pricing is based on the competing national brand. What this really means is that there is no strategy, except to be led around by the national brand. This might make sense for a national-brand-equivalent product, but it makes absolutely no sense for a premium-tier product that can build a loyal customer base for the retailer.

Finally, retailers need to think about their products as the "real thing" — not national brand knockoffs. Retailers need to see their store brands as viable offerings for their customers that they are proud to stand behind and truly believe provide higher quality and greater value. This is not making cheap food cheap. Instead, it is an extension of the retailer's banner brand and should be given all the support needed to help build on that banner brand equity.

The opportunity awaits, but only a few will respond appropriately by dedicating the resources (time, expertise, and funding) to make the most of it. Most will do what they have always done and call it good enough. Today more than ever, however, good enough isn't even close.

Jeff Weidauer is vice president of marketing for Vestcom International Inc., a Little Rock, Ark.-based provider of integrated shopper marketing solutions and recognized by the Inc. 5000 as one of America's fastest growing private companies. He can be reached at [email protected], or visit www.vestcom.com .

To ensure strong growth going forward, many retailers will need to change the way they view store brands internally, and how they market them externally.