Given the recent economic slowdown in developed markets, the ‘value conscious’ shopper is more visible across store aisles than ever before. No doubt, this trend will continue even as economies stagger out of the recession and rehabilitate. This environment will see a fair share of shoppers retain their ‘value mindset’ with an increased preference to shop at stores that have everyday low prices (EDLP) and exhibit a tendency to be uncharacteristically frugal. Retailers too will adjust to this environment by exploring newer formats like shop within shops and smaller formats that cater to this shopper. Findings from a 2010 Nielsen global online survey of more than 26,000 respondents across 52 countries show that the private label phenomenon is here to stay. In fact, while more than half of online consumers surveyed said they purchased more private label brands during the economic downturn, fully 91 percent said they will continue to do so when the economy improves.
Global Progress is Continual
On a global scale, the impact of the economic environment on private label has played a more marginal role. Looking at a comparison across markets, there is a slow, but steady continuation of private label progress, which is actually the result of more retailers deploying private label products in a growing number of categories, a phenomenon that’s continued for more than two decades. The victims of this transformation are the small and medium brands that get delisted in favor of private label. Generally, the leading brands in the category are not suffering and private label isn’t fatal for healthy brand leaders. Consider this:
In Europe where private label is most developed, store brands still only capture an average 35 percent market share. In the U.S., private label’s market share is still under 20 percent.
As retailers continue to become more adept at using national advertising to build store brands, growth will surely continue. The advertising of retailer banners has grown over time and this has a positive impact on the brands that these retailers carry. The evolution of private label products has also resulted in these brands operating above the lowest price band. Increased store visibility through facings and a proliferation of SKUs has resulted in greater familiarity and awareness of these brands among shoppers.
National manufacturers will realize that the best way to guard their brands’ turf will be to treat private label as legitimate competition and reactionary price reduction measures will only provide a temporary reprieve. Clearly, national brands still command a greater proportion of their categories at an overall level and private label usually takes the place of ‘challenger’ to a vibrant and dynamic market for shoppers.
Private label brands are in a position to compete on value and quality—key attributes that today’s consumers seek. The opportunity for retailers is to use private label to differentiate themselves and lead the way with innovation to help build and sustain the image of the entire franchise.
Perception of Quality and Price
Private label has come a long way since the early days when plain, generic-style packaging was used. And quality often rivals the most trusted name brand products. According to Nielsen’s survey, more than one in three global online respondents (37%) perceives private label brands to be a good alternative to name brands. Twenty-nine percent think the quality of most private labels goods is as good as name brands and 35 percent believe that some private label products are of a higher quality than name brands.
However, more than half (52%) Taiwanese respondents considered ‘private label brands have cheap-looking packaging’, ranked No. 1 around the globe with 20 percent more than the global average. Two in five, ranked No. 3 around the world, claimed ‘private label brands are not suitable for products when quality matters’. Comparing with global average’s 40 percent believe ‘private label is extremely good value for the money’, only one in four Taiwanese agreed. However, when thinking of ‘name brand products are worth the extra price’, three in ten Taiwanese consumers agreed, seven percent more than the global average. Also, 41 percent Taiwanese respondents saidit's important to get the best price on a product’ and ‘private label brands are meant for those on tight budgets or those that can't afford the best brand’.
‘The result reveals that the conception toward private label brands among Taiwanese consumers is cheap-looking packaging and poor product quality. Also, they consider private label products are “for limited budget persons”. However, Taiwanese consumers are keen to purchase groceries with the best price. Retailers who want to well develop private label brands should enhance their differentiation on product features and quality as well as positioning private label brands as value for money with good quality through marketing and communications toward consumers. There will be a big breakthrough for private label market in Taiwan,’ commented by Terri Kang, Associate Director, Retailer Service, Nielsen Taiwan.
On the price/value front, 40 percent of consumers surveyed said that private label brands are usually extremely good value for the money. In fact, more than one in four consumers (27%) said that they would be willing to pay same/more for a private label brand if they liked it. Only 22 percent of respondents said that name branded products are worth the extra price. About half of consumers (47%) indicated they purchased private label in less than five categories and one in three purchased private label products in six to ten categories.
Consumers in the most hard-hit economic countries turned to private label to help ease their financial burdens. Consumers in Spain, Greece, Portugal and Ireland were among the top five countries who said they purchased more private label brands during the downturn. Vietnam was the only economically-stable country in the top five, where 79 percent of consumers said they purchased more private label when the economy took a turn for the worst.
The Swiss, Danes, Lithuanians, Czechs and Italians were least likely to say they have purchased more private label during the downturn. Showing tremendous support and affinity towards private label brands, virtually all consumers in Norway, Sweden, Japan, Hungary, Austria, Finland, Great Britain, Netherlands, Portugal and Canada said with more than 95 percent certainty that when the economy improves, they will continue to purchase private label.
Regional Round-Up: Asia Pacific
While retailers in Asia are increasing their investment in private label, it remains largely undeveloped in all markets. Australia, New Zealand and Japan hold the highest private label penetration and thus are generally the most positive about private label products. The most negative countries on private label are typically the Chinese markets of Taiwan, China and Hong Kong. Like the rest of Asia, Indian shoppers reflect a lower affinity for private labels. However, for a large mass of ‘new’ consumers who are experiencing modern format for the first time, private label represents an opportunity to ‘up-trade’ at a price that represents value while still being affordable. Since private label is still nascent in India, retailers will continue experimenting with it and some will play the game better than others. The private labels that gain a greater share of the shopper basket in a value conscious market like India will invariably be the ones that build themselves around a deeper understanding of shoppers with
the same sophistication and focus that national brands do.
Generally, mid- to higher-income consumers in developing countries are often the first to be positive towards private label as low-income shoppers need higher levels of trust in a product because they can’t afford to make a mistake. Better to spend a little bit more than to waste money on a product you are not satisfied with. The categories that tend to have the highest private label shares are those found in basic non-food and commodity-type products like paper, rice, cooking oil and bread.
Packaging & Price Perceptions
Private label packaging needs work in Taiwan and Hong Kong, according to consumers: 52 percent and 51 percent, respectively, said private label brand packaging was cheap-looking. Just 27 percent of Japanese and Koreans said the same. Regionally, cheap-looking private label brand packaging was noted by 40 percent of survey respondents.
The perception of private label brands being geared toward households on tight budgets or those that can’t afford the ‘best’ brand was highest in Singapore, where almost half (47%) said as much. Meanwhile, that opinion was in the clearest minority in China, Hong Kong and Japan, where just 22 percent, 22 percent and 24 percent, respectively believed that. Despite that, half of Japanese consumers were most inclined to agree that name brand products were worth the extra price. Just 14 percent of Vietnamese consumers thought the same. Regionally, 36 percent of consumers thought name brands were worth spending more.
About the Nielsen Global Consumer Online Survey
The Nielsen Global Consumer Confidence Survey was conducted between September 3 and September 21, 2010 and polled over 26, 000 consumers in 52 countries throughout Asia Pacific, Europe, Latin America, the Middle East, Africa and North America. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of ±0.6%.
About The Nielsen Company
The Nielsen Company (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related assets. The company has a presence in approximately 100 countries, with headquarters in New York, USA. For more information on The Nielsen Company, visit www.nielsen.com.