Michael Taylor is chairman of daymona global solution provider affecting all aspects of private label development.
As a veteran of the private label industry, I have seen many different economic cycles come and go with different consequences for retailers and consumers.
That said, I’ve never seen a cycle quite like this one. The difference today is that there are so many challenges at once. Rising inflation is driving significantly higher prices for consumers, retailers and consumer product manufacturers. And ongoing supply chain problems that started during the height of the pandemic and developed during the latest geopolitical conflict are creating uncertainty for everyone.
Even if inflation starts to decline, I think the impact on consumer behavior will be long-lasting. I predict that private label will emerge as a more critical solution for consumers in the remainder of this year. I see two powerful and very different opportunities for private label in the future. Let me explain them briefly one by one.
Opportunity 1: Help consumers navigate this economy
Recent statistics tell the story of the economic pain and consumer concerns. About three quarters of US consumers rank inflation as the most serious economic problem. In fact, consumers faced with rising prices tend to overestimate the true level of inflation by more than twice the true number.
Lower-income buyers generally experience the greatest difficulty when spending approx 77% of their budgets on basic needs, compared to just 31% for higher incomes. When it comes to food as a core need, food retailers can help these shoppers by ensuring their private label programs participate in WIC and SNAP where they qualify.
Understandably, price increases hit lower-income buyers the hardest, but most importantly: 95% of consumers are concerned about food cost inflation. I suggest that retailers strive to use their private labels to help all shoppers spend smart and find overall savings when faced with inflationary pressures.
In addition to inflation, prospect of recession is also a growing concern. Consumers see private labels as an important solution in times like these, when they are strongly focused on saving money and looking for more value. Almost 70% say Private labels are sometimes or always better value for money than national brands – a point that stands whether it’s opening price points or premium categories. To help buyers navigate this economy, private label promotes options that save on price and create better overall value, such as cross-category solutions and bulk options.
Opportunity 2: Meet Consumer Lifestyle Needs
Another opportunity I see for private labels lies in consumer lifestyle preferences. I firmly believe that consumers have changed forever in seeking solutions tailored to their needs. They expect brands to come through for them. I predict inflation and recession will not derail this accelerating trend. I see a few key areas where lifestyle needs are rising to the top, including health and wellness, convenience and sustainability. Of 89% of consumers Because I have as much or more confidence in private labels than national brands, I encourage retailers to capitalize on lifestyle needs to position their brands to win.
Health and wellness have become imperative, especially in the wake of the pandemic. Consumers who buy food, for example, are increasingly buying examining labels and product claims. I find that private labels have become leaders in meeting new health and wellness needs – in many cases with product lines dedicated to attributes such as organic or fewer ingredients.
Another example of a growing need for lifestyle is convenience-oriented products, platforms and experiences. I notice that consumers are pushing for convenience in product choices and purchasing options, from quick checkout to take-away items. Interestingly, the largest audience for what I would call lifestyle needs are not low-income buyers. They are middle- and high-income households, given their higher spending levels and brand loyalty. A particularly promising audience is younger buyers, many of whom have growing incomes and are more open to a private label trial than older customers. In reality, 46% of Generation Z see private labels as better than national brands when it comes to offering new and innovative products.
Shoppers are considering lifestyle needs focused on sustainability, with the goal of minimizing environmental damage becoming increasingly important to them.
With more than 60% of private label consumers interested in eco-friendly packaging, retailers may consider using it as a tool to support sustainability. Sustainable innovation is brought to life through creative solutions to packaging problems and innovative materials such as molded fiber technology using wheat shank, coconut fibers and even a plastic made from corn. Consider how you can better find solutions for minimizing environmental damage; this can be creative or mean the use of mono packaging without an added label. Opportunities beyond packaging include sustainable sourcing of ingredients and cleanup supply chain operations as tools to achieve sustainability in private label programs.
Succeed with both chances
Private labels can capitalize on both opportunities by helping to meet consumer needs as this volatile economic landscape continues to shift and adjust in the last quarter of this year. We know that price and savings become crucial for many consumers in difficult economic times.
Syndicated data sources such as Nielsen and IRI show that private labels not only grow during economic downturns, but remain at even higher levels once the downturn is over, earning an estimated $35 billion between 2008 and 2022 – highlighting both the importance of private labels. to customers during recessions and their loyalty to store brands when they are over.
Consumer trust and loyalty are giving private labels permission to step out of their old role as mere price leaders. I find that this has led executives to develop highly tailored and innovative solutions for consumer needs – a vital strategy regardless of the economic cycle. Thoughtfully implementing customer-centric strategies will benefit retailers and shoppers alike as we navigate the end of 2022 and beyond.