It’s been a tumultuous time for retail, and 2017 has set records — a lot of them to the negative with store closings, bankruptcies and CEO departures filling up the news feed. There have also been quite a few bright spots: Walmart finally hit the gas in its competition with Amazon, e-commerce pure plays began investing in brick and mortar and new technology began to go mainstream (yes, we’re talking about Amazon’s Alexa).
Retailers are coming off the best holiday season since 2011. Sales surged 4.9%, according to Mastercard SpendingPulse, and e-commerce jumped 18.1%. So while many retailers are still struggling to find their niche or shed debt loads, others are investing in new technology, stores and programs to ride this wave of strong consumer confidence. No doubt, 2018 will be as exciting as the past year.
Looking ahead to the new year, here is one trend explained by our retail expert, Matt Sargent.
Private label grabs the spotlight
The rise of private label in 2017 was astonishing, with retailers like Amazon and Target standing out in particular for their breadth of new proprietary lines. In 2018, other retailers will likely follow suit — and for good reason.
“Private label allows retailers to provide an experience that can’t be easily replicated,” Matt Sargent, senior vice president of retail for Frank N. Magid Associates, told Retail Dive in an email. “An essential trend for 2018 will be seen when winning retailers look to cultivate and promote their private label brands more aggressively. This is also a huge risk factor for manufacturers who will struggle to maintain equity in brands they have built over time.
So why are retailers making such a big push to develop their own brands? A few simple reasons: gross margin dollars, leverage with national brands and exclusivity — all of which have become increasingly necessary priorities. “That’s what Target has done really well,” Rosenblum told Retail Dive.”When they get a designer to do a line of home goods, it creates an air of cheap chic that frankly, made the Target brand what it is. Other types of commodity items are much more around ‘good value.'”
Rolling out private label lines will be easier for some retailers than others. “You don’t just ‘poof’ create a brand and expect people will start buying it — especially in grocery,” Rosenblum said. “As I recall, Walmart got whacked pretty hard the last time they tried to make a quick switch from Hefty bags to their own private label. I always use the Publix example: buy a national brand and get a private label version free. They did six of these a week during the Great Recession and managed to really highlight value and quality, simply by extending the offer.”
The bottom line is that retailers pushing into this sector as they look for growth need to keep in mind that in order to be successful, private label brands need to have an exciting differentiating factor that entices shoppers — and is about more than just price.
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