A Private Matter

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A Private Matter

NEW YORK--The penny-pinching stigma long associated with private labels are beginning to break down and with that loyalties to national brands are being reexamined, reported Brandweek .

"For too long, private label was seen as low-value, low-quality," Laurie Demeritt, COO at marketing research firm The Hartman Group, Bellevue, Wash, told the magazine. "But consumers now have an elevated perception that private label items can have good quality."

"It used to be that private label was only about price,” Scott Lucas, executive director at design firm Interbrand, New York, told Brandweek . “Now, they're still about 30 percent below national brand prices but they've come up in quality. And they're forging these unique niche brands."

Today, private label accounts for 15 percent of all retail sales, with food garnering the greatest share, at 19 percent. According to ACNielsen, private label sales are growing at a faster pace than that of branded products: Between 1997 and 2005, store brand sales are up 64 percent versus 30 percent for major label competitors. Shoppers who buy private labels also frequent the stores more often and spend more money when they do. Grocery chains are seeing the majority of this action, ringing up 20 percent of private label sales, with supercenters like Wal-Mart close behind at 17 percent.

According to a new study by ACNielsen/Daymon Worldwide, private labels are not only achieving the sort of brand recognition historically reserved for major national brands, retailers may be missing an opportunity for better margins on private label items, reported Brandweek .

While some past research has suggested that many consumers believe private labels are of comparable quality to major brands, the Nielsen study takes it a step further: 72 percent of surveyed shoppers said that national brands are "not worth the extra cost," while 68 percent believed private labels are "an extremely good value." Moreover, "There is no correct price gap [between private labels and national brands]," the study stated. "The best private label price is dependent upon the consumer, the market, the competition and the category."