Ecommerce is radically and rapidly changing the way that consumer packaged goods are bought and marketed.
In 2016, online sales of physical goods amounted to $360.3 billion, and by 2021 they’re expected to surpass $603.4 billion. It’s a complex and fast-evolving space, and nowhere is this more the case than with private label goods.
Following a high watermark in the 2008 recession, these store brands have continued to evolve as a new wave of entrants, notably major online retailers, take on the market and shift the rules of the game. Brands are adapting to fluid omnichannel environments, where people make decisions before they begin to shop, where the old certainties around brand loyalty no longer hold, and where new entrants can gain listing and market share almost overnight.
In short, it’s never been so important to make the right play on market positioning, brand design and online presence. The brands that understand what their rivals are doing, have a clear-sighted view of how to call it for their products and audience, and then implement their strategy well, can take advantage of this rapidly growing and highly profitable area.
DESIRES AS WELL AS NEEDS
The most successful brand strategies flow from a profound understanding of the target consumer, their needs and desires. Needs address foundational, more functional aspects such as flavor, pack size, price and so on. Desires are decision drivers based on aspiration or idealized states – think convenience, premiumization or aesthetic. In a market where most or all players can meet needs, it’s these desires that often drive purchase decisions.
So, for Thrive Market customers, the need is for affordable grocery products, while the desire is for natural and organic products. Co-founder and co-CEO Nick Green has described it as “Whole Foods-type products at Costco-like prices.” His firm delivers this through a subscription model.
For other consumers, the desire is convenient choice. Look at Amazon’s kids’ clothing brand Scout + Ro. A 542 percent year-over-year increase has been achieved by meeting parents’ need for good-quality clothing at low prices – a core Amazon attribute – as well as their desire for convenient choice and speed. The product selection has increased fivefold in just the past year.
Equally, this principle of needs and desires is one of the reasons that premiumization is such a major trend in this space. Private label consumers want good value, but also aspire to more personality-driven, sharable, premium-looking brands. With its October launch of UniquelyJ, its online private label brand aimed at urban Millennials, Walmart-owned Jet.com set about reframing the market in this context. The line offers products with a design aesthetic and a sharable point of view, at prices that appeal to this consumer.
While private label brands may be growing in on-pack sophistication, they still have some way to go online. The principles of hero imagery, as set out by Cambridge University, are now widely accepted by experts and marketers, but rarely implemented by brands.
For example, FreshDirect’s Just FreshDirect brand offers high-quality products, but its design fails to convey this to consumers: As they scroll through products, the white-template design format of Just FreshDirect products is easily lost against the website’s white background.
We can expect to see more private label brands starting to work on the emotional draw of the hero image, exploring different ways of representing the product itself, not just the external packaging. Maybe they’ll look at the opportunities offered by the scroll-through images: could they show the product in-use, its scale, or offer some cross-selling of complementary products? What about language? Short but informative content in the right tone of voice can add real value to the consumer’s overall experience.
AMAZON’S CATCH-ALL APPROACH
Amazon is, of course, the market leader, and the one that everyone’s watching, particularly keenly since the acquisition of Whole Foods Market. To date, Amazon has employed a three-pronged strategy for its private label expansion.
Amazon Basics houses an ever-growing list of more than 2,000 products, pitching them as traditional value items and garnering more than $200 million in sales during the first half of 2017. For other categories, to which consumers have a more emotional connection, or which have a higher price point or greater expectation of quality, Amazon creates unique, category-specific brands. Also, it offers products exclusively to members of its Prime service.
This flexible strategy allows it breadth of reach, together with depth of engagement. That’s possible because Amazon owns and controls the platform where sales happen. The strategy also has its weaknesses, however: it offers no efficiencies across categories, and no opportunity to create a compelling story around, or equity in, the Amazon master brand.
A NEW APPROACH FROM JET
With the UniquelyJ launch, Jet is building a brand that runs across categories. It creates a single story that consumers can trust and an experience that they enjoy.
The strategy provides moments that surprise and delight, reimagining private label as an innovative brand in its own right. That being the case, all UniquelyJ products guarantee high-quality ingredients at a great price, delivered with a design that definitively breaks with the traditional codes of the value-driven private label industry. They offer shareable moments both online and offline, with illustrations and packaging that tell a story.
This approach allows Jet to build strong equity and trust in a single brand, which can then flex creatively across categories, keeping consumers surprised and delighted while providing operational efficiencies. Because they defy category norms, the products may be harder to find, so success rests to a great extent on the effectiveness of the design.
What’s more, the success of UniquelyJ is having a positive halo effect on Jet.
TIME FOR CPG GIANTS TO RESPOND
From Amazon to Walmart – and all the start-up innovators in between – private label is getting a big push in online retail channels, and all of the signs point to another uptick in private label sales. Millennials and Gen Z are less attached to branded goods than Baby Boomers and Gen X. They move more fluidly between high-end and value tiers, depending on their emotional desires and needs. Due to the economic shifts and the arrival/higher prominence in the States of German discounters Lidl and Aldi, respectively, it can’t be long before private label on this side of the pond gets close to the 40 percent market share it enjoys in Europe.
For retailers, operating in an age in which consumers can switch stores at the swipe of a thumb, it’s increasingly important for brands to focus on winning against the consumers’ consideration set, rather than necessarily building brand loyalty. The best way to do this is not necessarily through ubiquitous branded goods, but through their own strategically targeted and effectively designed private label goods.
The question increasingly is, how will the CPG giants respond? In the near term, they may welcome Jet’s assault on the dominance of Amazon, but longer term, they need to start competing more credibly in this space. If consumers don’t love them, pretty soon retailers won’t stock them – the CPG giants need to act now.
In a nutshell, private label is changing. Players in this space need to take a fresh look at the market positioning, brand design and online presence of their products. Get it right, and there is significant opportunity here – a share of that $603.4 billion predicted online sales for 2021 – but fail to act, and there’s no shortage of new brands eager and ready to steal their market share.
(This article was published in the Progressive Grocer on March 22, 2018)