A new survey suggests that some brands might find it difficult to tempt back consumers who switched to private label during the cost of living crisis.
The EY Future Consumer Index (FCI), which surveyed more than 23,000 consumers across 30 countries, found that nearly a third (28%) bought private label over branded goods in response to rising costs. However, this trend appears to have become a sustained habit, with 66% saying they found these less expensive alternatives satisfying their needs just as well as branded lines, with 38% having no plans to switch back.
Significantly, the research also reveals that this trend is not exclusive to mid- to lower-income bands. Higher-income consumers are planning to buy private label brands in the future and are considering this across every category, including fresh food (60%), home and household care (56%), packaged food (52%), clothing, shoes and accessories (49%), personal care (49%), and beauty and cosmetics (39%).
According to the FCI, retailers are trying hard to capitalise on the opportunity by promoting private label aggressively – with eye-level shelving and front-of-store placements – and increasing the range of products they offer. Instead of just emulating branded products at a lesser price, they are offering a range of product options and analysing their point-of-sale data to identify early trends, meaning they are in a strong position to respond to buying patterns and consumer needs. EY noted that the closer retailers get to the consumer, the more power they have to curate buying choices, and the more they can drive lasting loyalty.
Kristina Rogers, the firm’s Global Consumer Leader, said: “In response to the growing popularity of private label with consumers, many consumer products (CP) companies are focusing on volume recovery. Efforts to simplify the portfolio, drive down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.
“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivise private label purchases and create alternative revenue streams by promoting their partner brands. CP companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”
NAM Implications:
- The brand nightmare!
- Consumer-switchers found these less expensive alternatives satisfy their needs just as well as branded lines.
- Retailers need to maintain a high level of consumer trust…
- (by delivering more than it says on the tin, every time)
- …whilst brands, the damage already having been done, have to either drop prices to a point that minimises the difference…
- …or develop the potential of Retail Media to a point where the retailer has more to gain from the brand, than from their own label alternative.
