Retail brands go by different names – private label, store brand or house brand – but the objective is similar. A retail brand is a means by which to achieve competitive differentiation, offer shoppers an enticing value proposition, enhance loyalty, generate a superior rate of profitability and gain leverage over branded suppliers.
Retailers employed brand building strategies early in the industry’s development as they sought to establish an identity for their stores. The concept of the retailer as a brand gained further traction in the early 20th century when chain stores began expanding more aggressively and needed to cultivate their image with shoppers in new markets. Retail brands came to occupy a special place in the minds of consumers as the businesses they represented tended to be large, successful and regarded as trustworthy.
Beginning in the 1960s, retailers sought to capitalize on that trust through several strategies that helped reshape the industry. Some sought to build entire operations focused on the sale of retail brands or proprietary branded products such as Germany’s Aldi stores. The retail brand strategy also became prevalent in the apparel sector where retailers such as The Gap, H&M and Victoria’s Secret achieved success with carefully cultivated brands.
Retailers have upgraded product quality, packaging and began applying the same type of marketing strategies that made national brands successful. The result was steady market share growth for retail brands in food and consumable categories.
Retail brands are now evident in virtually every merchandise classification and some retailers offer multiple brands within a single category. All types of retailers have developed their own brands including Safeway’s O Organics, Eating Right and Open Nature; Kroger’s Simple Truth, Comforts for Baby and Private Selection; Aldi’s Simply Nature, Costco’s Kirkland Signature and Wal-Mart’s Great Value. Even Amazon has added numerous private label brands, which generated $450 million in sales in 2017.
Private label brands will continue to grow and gain share globally not only in the more mature European retail markets, but in North America, where private label penetration is still relatively low.
Contribution to Retail History
Retail brands were a game-changing development for the industry. Shoppers’ willingness to purchase retail brands and shop at chains dedicated exclusively to particular brands created new avenues of growth and fuelled profitability. Retailers pursued direct manufacturing relationships, acquired established brands outright for their exclusive use and became less reliant on national brands that subjected them to price competition. Retail brands altered the dynamics of retailer and supplier relationships that had existed in the consumer packaged goods world for most of the 20th century, caused huge shifts in market share and contributed to consolidation in the consumer packaged goods world.