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Shifting the Private Label Image

Jul 12th 2012, 08:08

Shifting the Private Label Image

Compiled by Deloitte

“Consumers have the power and are responsible for the shifts we are seeing in retail shopping. As shoppers tighten their belts, the sale of private label products has increased significantly and this leaves retailers in a quandary as to how to invest in their own brands,” says Deloitte Partner and Consumer Business leader in the Western Cape, Michael van Wyk.

Retailers are also starting to understand the power of knowing and controlling their own private label products and are becoming more agile in responding to the ever changing needs of the modern day consumer. Customers are giving retailers the permission to grow their private label brands by exercising their right of choice. They are telling the retailers what they want and the retailers are responding and, in the process are building brand loyalty and equity, says van Wyk.

However, the real question is: Will retailers grow private label brand value or simply add more private label products to their existing range? In this age of booming private label brands, the trend for retailers to grow their own product ranges is causing national consumer product goods brand managers’ added anxiety. It also presents some relationship challenges for retailers who want to grow value and trust for private labels with their customers.

It should also be noted, that in comparison to Europe or other developed markets, private label penetration levels in South Africa are relatively low, especially when looking at the independent trade segment which accounts for more than half of national grocery retailing. van Wyk cited Planet Retail (, a leading information provider to the retail industry, which estimates that private labels now account for 9.3% of domestic consumer spending on groceries, as well as 24.7% of spending in modern grocery retail channels. The 9.3% share, however, pales in comparison to the just over 40% in the UK, which has the highest private label presence in Europe.

Private labels have become omnipresent and have achieved enormous success, thus providing a base for the improvement in branding activities. A Deloitte global private label report indicates consumer perceptions and attitudes toward private label brands are changing significantly. The report offers insight into the notion that spending less for private label brands does not necessarily mean consumers are settling for less. “I believe private labels have changed from inferior generics to brands in their own right with value beyond functional attributes,” said van Wyk.

Consumers seeking to save some money in tough times may be fuelling the current growth in private label brands, however progressive retailers will continue to innovate and leverage the immediate access they have to their customers to the fullest advantage. “Are you doing the same?” asks van Wyk.

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