Now is the Time for Retailers to Focus on Private Labels—But Promoting Them Needs to be About More Than Just Price if the Goal is Long-Term Loyalty

Research from McKinsey indicates 44% of consumers are cutting back on their spending, and 48% will be very careful with their money going forward. Almost a third—29%—have had their income reduced, while a full third have held back on purchases because of economic uncertainty.

With these cutbacks comes a potential opportunity in the form of private labels. Consumers are buying more of them, not only because of their lower price point, but also because in sectors like grocery, many national brands have been selling out. As a result, 14% of Canadian consumers have switched to private labels since the start of the pandemic, and 35% of those shoppers are expected to continue purchasing them once the pandemic is over.

Now is clearly the time for retailers to be promoting private labels. But retailers also need to think about private labels long-term: as a tangible way to differentiate themselves from both online and brick-and-mortar competition. Canadian Tire’s Mastercraft and Loblaws’ President’s Choice are great examples of successful private labels that differentiate trade and drive traffic, while providing consumers with another reason to choose their stores over competitors like Amazon and Walmart. 

The key to getting the most out of this opportunity is balancing both short- and long-term goals. The natural impulse in the current climate is to go hard and explicitly compare the price points of private labels with those of national brands. While this may drive sales in the short term—when consumers are much more price sensitive—it threatens the long-term success of these brands. When brands are positioned primarily according to price, it can be a dangerous race to the bottom.

The key for retailers will be developing communications that go beyond cost and connect with consumers on more functional or emotional levels—a challenging communications task.

For retailers thinking about developing or refreshing a private label, here is some added food for thought.

First, think like a CPG: Brand development needs to be extremely clear, with clear brand hierarchies and value propositions. Consumers want to know exactly where this product “fits” in their own personal purchasing landscape.

Second, behind every successful private label is a carefully planned communications strategy. This is particularly the case in retail sectors outside grocery, where private labels are less common. This means communications that:

  • Clearly outline the brand hierarchy and value proposition
  • Thoughtfully incentivize and convert consumers in a highly tactical, phased manner that fosters long-term loyalty
  • Comprehensively address all touchpoints: print, digital, social, in-store, out of store—wherever brand and customer converge

Introducing a private label is not for the faint of heart; however, radical times sometimes call for innovative thinking. Now might be the time to invest in a private label as a means to not only boost short-term sales, but also increase long-term resilience.