Why Are Private Labels so Attractive For Many Retailers And Customers?

About 40 years ago, private labels appeared for the first time in German food retail stores. Their market share has been around 37% for several years. MPulse talked to brand expert Dr Oliver Errichiello about this rapid development, customer expectations and trends. His assessments and forecasts at a glance.

The choice Shampoo © iStock.com/FredFroese

Are private label products as good as the renowned brand manufacturers?

Thanks to legal regulations, the food standard and thus also the quality of private label products in Germany are very high. In addition, the reputation of the retailers creates trust in the quality of their products and many customers now know that behind a private label is usually a very well-known and renowned brand manufacturer. It comes to no surprise that price-conscious buyers like to buy private label products to satisfy their everyday needs instead of the often equivalent, but more expensive manufacturer brands.

Why is the selection of private label products often limited?

Mango, blackberry-vanilla or apple strudel? If you want to constantly try new flavours of yoghurt, you will be happier with the brand manufacturer. Private labels, on the other hand, tend to focus more on a few standard variants such as strawberry and peach. This allows large quantities to be produced at reasonable prices with good benefits and quality at the same time.

Woman in front of a supermarket shelf © iStock.com/SteveDebenport
Luxury buyer © iStock.com/Instants

Can private labels also meet luxury needs?

In the beginning, private labels had to be cheap and satisfy basic needs. Accordingly, the packaging was just as simple. But with the increasing competition of retailers starting in the mid-1990s their value began to rise. The retailers positioned themselves as a brand and also developed their private label assortment - from basic to premium and organic. Some discounters now offer luxury items as part of special sales promotions. This reconciliation of what is actually irreconcilable - called miracle structure in the sociology of brand awareness - gets people’s attention and makes these private labels successful.

Own Brands at METRO

Private labels also play an important role at METRO. That is why, in 2018, we are celebrating the year of own brands at all METRO Cash & Carry stores. With METRO Professional, METRO Chef and METRO Premium, there are 3 price and quality categories to choose from that serve different customer needs.

Will the private label share in the food sector continue to increase?

The proportion of private labels in the food retail sector currently stands at over 37%. The introduction of premium and organic segments is expected to further enhance their position and align them with brand-name products. But they do not displace manufacturer's brands. The customers want to dive into the colourful garden of brand-name products while they are shopping. If you take that away, the shopping experience is ruined. That means, it is also in the retailers' best interest to provide a balanced and diverse brand mix.

Store Krefeld
Champagner © iStock.com/ShotShare

When do consumers use private label products versus the manufacturer's product?

Private labels are primarily bought for daily consumption. But when people want to treat themselves, for example because they are celebrating a birthday, had a bad day or want to show their guests that they can afford something slightly more exquisite, they may prefer to reach for a drink from the brand manufacturer. Because advertising

 


About ... Oliver Errichiello

Oliver Errichiello is Managing Director and founder of the Brand Development Office. The socio-economist and brand sociologist focusses mainly on brand analysis, operational advertising and digitalisation strategies as well as green brand management.

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