One of the most common requests we get from our clients centers around private label: Who is buying it? How will it affect my brand? Does it affect shopper loyalty? Given the widespread interest, we decided to take a deep dive into private label, leveraging InfoScout consumer panel data to understand the growing trends at the retailer, category, and product levels. Following are just a few of the highlights from that study. For a more in-depth analysis, we encourage you to watch our recent webinar, The Private Label Paradox: The Intertwined Fates of Brands & Retailers.
Private labels were once associated with generic, cheaper versions of established brands. They were little more than knockoffs, offering somewhat lower quality at discount prices. But today, there are two forces at work: 1) perceptions of private label are shifting to premium quality, value, and innovation, and 2) retailers are facing increasing competition from online competitors and are having to invest in customer experiences like Click & Collect which add more margin pressures. Everyone Buys Private Label
That’s not an exaggeration. In fact, 100% of U.S. households bought at least one private label product in 2017. And on average, shoppers make a private label purchase once every five days.
Last year, Americans spent over $146 billion on private label products, with the average household spending nearly $1,200, which represents 20% of annual spending. They are certainly saving money in their wallets with each purchase, as the average unit price for private label in 2017 was $2.82, compared to $3.45, the average unit price of anything else in their basket. Which Categories Lead Private Label?
If we look at just core consumable goods (grocery, health & beauty, household goods, baby, and pet), private label skews heavily towards grocery items and, to a lesser extent, household goods and health & beauty. Out of shoppers’ consumable private label spending, almost 77% of it is for private label grocery products, which is higher than the percentage that grocery represents of consumables.
The influence of private label is not only found in sales growth, but also in the number of categories in which the average household sees private label as a viable option. The average household buys across 150 different consumable categories and they choose to buy private label in 54 of them (36% of all the categories they buy), a number that has been growing steadily each year.
We also have seen that food staples (typically center store packaged food) is a core entry point for private label purchases. People that buy one private label food staples category are also likely to buy across other categories. They are also then more likely to try private label in fresh food (much of the grocery perimeter). After that, we see shoppers gravitate towards cleaning & hygiene products, personal care, household cleaning, and OTC products. Private Label Is a Major Blind Spot
As private label continues to find growth opportunities, many brands struggle with understanding the extent of this growth. Largely, it is because traditional data providers have a very large blindspot for the retailers that have been growing the fastest (and also growing private label the fastest).
If we rank retailers by the percentage of their business that is private label, we see that six of the top 10 are invisible to clients using the leading legacy point-of-sale data provider. Unfortunately, these are also the retailers that are growing fast and causing a great gap between true omnichannel growth estimates and the limited scope of point-of-sale data (and we haven’t even talked about Amazon, yet!). As a result of this blind spot, some of the most dramatic growth in private label has gone unnoticed and, more importantly, unmeasured.
We’ll leave you with a very interesting fact. When asked which retailer is the largest seller of private label in the U.S., most people would say Walmart — big retailer, big brands. Sorry for the clickbait phrase, but number two will surprise you! It’s Aldi. Aldi has not so quietly been growing fast and capturing the hearts (and wallets) of thousands with a no-frills concept and virtually 100% private label experience. Given the current growth trends, by 2021, we expect Aldi to be the largest private label seller in the U.S. — amazing for a banner in less than four years!
Stay tuned for more insights on private label as only InfoScout can bring them. We will venture further into a topic that is quietly changing the landscape of U.S. retail with a lot less fanfare than online and omnichannel shifting.