The rise of the private label?
For some time now we have seen hypermarket and supermarket chains entering certain fast moving categories that are represented on their shelves, essentially competing with their own customers, while offering consumers a suite of ‘quality’ at a ‘better value’. The thinking is simple and is an absolute win-win for all the parties. The hypermarket chain gets to improve the throughput of its supply chain and warehousing and earn better margins given that they do not have to pay themselves out of the value chain. The customer gets an alternate that is available through the year and is an interim brand when their regular choice is unavailable for some reason or the other. Competing brands in many cases for the sourcing and supply chain partners for certain categories where the chain might have not built scale.
However, it is important that hypermarket chains do not leave their proprietary brand at the level of a smart supply chain intervention to grow margins and build market share in growing categories. These brands need to be built too. They need to work hard at accruing value in the minds of their consumers – value that is beyond mere price managed between the MRP and the seemingly perennial offers. Like any other brand they need to focus on all the elements that contribute to the story telling for – packaging, POSM, promotional and brand messaging across owned, shared and paid media vehicles. Staff need to be trained to explain why the store brand is better than the recognised brands – there has to be clear identification of the core principles of the brand itself. These principles need to reflect the idea behind the chain itself and be strong enough to straddle multiple categories that the brand may be currently present, or may want to enter in the future. ‘We offer good quality at a mid-range price’ is not a story at all. Sometimes, the storytelling may be built on an idea that is directed outward – e.g. being the home-maker’s best help in running a household with fixed budgets, without having to compromise on quality. This or a brand specific idea needs to be palpable in every element of the mix to the point that the consumer begins to replay the same consciously or unconsciously and no longer treat the store brand as a solution to a price-value equation.
Given the disruption to global supply chains and the increased financial pressures that brands operate under, this might be the best opportunity for hypermarket and supermarket chains to treat their store brand as a separate P&L that competes with other available brands and takes advantage of their reach and inherent strengths and knowledge of the intrinsics. This is true even of smaller chains that have just city-wide or region-wide operations…plan for success and grow on the fact that you know your customers the best and can rely on them walking in at the beginning of every month and then following it up with smaller runs thereafter.