But that image of store brands no longer applies. Store brands, also known as private label brands or generic brands, have come a long way, and are increasingly appealing to consumers on a budget.
The main reason for their appeal? There is no longer the sense that store brands are of lower quality, making their lower prices a great value at a time when consumers remain budget-focused.
The evolution of store brands
The essential reason for store brands remains: To provide a low-cost alternative to shoppers. In the early days, retailers bought into the notion that store brands were poor, second-rate cousins to their name-brand counterparts. They existed to appeal to consumers based on savings and to retailers for higher margins.
These days, retailers are more likely to give their store brands some worthy attention. Store brands tend to get better packaging and promotion by retailers, some with an added pride of ownership.
And the quality of the product itself is also often perceived — and shown in testing — to be equal to or even better than name brands. In some cases, store brands and name brands even share a manufacturer. In fact, many mainstream media stories tout store brands as a good alternative to more expensive counterparts, advising consumers to opt for the better value.
That adds to the already diminishing sense of loyalty and increasing willingness to try new things — often a problem for retailers — that has been a boon to the success of store brands.
Store brands have arrived but require attention for growth
A fifth of U.S. consumers’ supermarket spending is on store brands, and that’s growing. Overall sales in 2013 were $112 billion. Most of that is food: Nine out of 49 of the biggest non-food store-brand categories enjoy 25% market share or better, according to Nielsen.
With consumers happy to try and even stick with store brands — 96% of consumers by store-brand grocery products of some kind — retailers have the opportunity to take in those added profits and add a little luster to their main brand. That does take some investment to develop products that can stand up to the name-brand competition.
One of the best things about store brands for retailers, aside from better margins, is that these days they can actually add to a retailer’s brand and provide an avenue for customer loyalty.
Consumers demand quality as well as savings
As with any branding strategy or loyalty program, that means retailers must develop store brands with special attention to what their customers want. Savvy shoppers read labels, and if the quality in a store-brand product isn’t there, it won’t fly with many. Women are extremely likely to compare store and name brands before making a choice. 77% of shoppers as a whole compare prices, but 90% of women do, according to “The Private Label Issue” of the Integer Group’s The Checkout report.
And while consumers are opting for store brands more often, that 2012 report found that women are less likely to make that choice when it comes to beauty lines. Some 74% of women prefer name brands, while only 56% of men care about the label on health and beauty merchandise. So it pays to understand demographic preferences, and attend to information gained from regular buyers of store brands.
Target is one example of a retailer that has changed up its store brands to include a line called Simply Balanced, featuring the organic and natural options consumers increasingly want.
The black-on-white stenciled labels of store brands featured in Repo Man are long gone. As quality goes up and packaging and advertising mimic name brands, consumers are increasingly less likely to make any distinctions between them. That is being borne out by research by several firms.
“Fewer people assume a brand name means top quality,” writes Brad Tuttle in Time magazine. “This is truly the biggest takeaway — and a cause for concern among manufacturers who think they can be successful simply because they have a nationally known brand. In 2010, 57% of consumers agreed with the statement ‘Brand names are not better quality.’ More recently, the figure inched up to 64%. And if brand names do not represent better quality, why would it be worth paying more for them?”