81% of consumers regularly buy Private Label (PL) and view store brands as a differentiator when choosing where they shop. According to recent Nielsen research, shoppers during COVID became significantly less brand loyal with large national brands, benefitting PL during the early stages of the COVID-19 pandemic shopping. Mid-tier and Premium PL offerings had the most significant gains within Private Label, driven by increased household penetration and larger basket sizes. This growth trajectory is expected to continue and outpace branded items with an incremental $216B spent on Private Label by 2027.
Traditionally, retailers would price their Private Label items 15-20% below the branded equivalent for each respective item. But because of these PL price investments, we are now seeing price spreads between branded and PL items of as much as 50%.
Private Label Investments from Large National Players
Retailers like Walmart, Amazon, and Kroger are investing in expanded PL assortments and aggressive pricing to win more than their fair share of this expected $216B of growth that is up for grabs. Engage3 has identified a large national retailer that is already investing in price on 806 Private Label items —dropping prices by an average of 32%, with some reductions of up to 50-60%. Investment items are concentrated in Grocery and included items such as: Dressing, Pasta/Sauce, Deli, Chips, Yogurt and Shredded Cheese. These price investments are being made strategically by market — based on the unique preferences of local shoppers and their distinct competitive landscape.
Breaking Historical Price Gap Norms
Traditionally, retailers would price their PL items 15-20% below the branded equivalent for each respective item. But because of these PL price investments, we are now seeing price spreads between branded and PL items of as much as 50%. Following traditional price gap rules that many Price Optimization systems still use to automatically price PL 15% below the national brand item will leave you uncompetitive on PL in the face of these increased investments.
Iselin, N.J.-based Allegiance Retail said Engage3’s Competitive Intelligence Management (CIM) software can increase its competitive pricing visibility by 60%, link private label items to equivalent items at competitors, and provide seamless data transfer to embed pricing insights across the organization.Winsight Grocery News, January 2021
Increasing PL Visibility
The problem for most retailers is that they are working with incomplete competitive data that isn’t allowing them to compete effectively on Private Label. We find that most competitive intelligence programs don’t accurately match a retailer’s exclusive items, like PL, to their rest of market equivalents at scale. This leaves them flying blind to their PL assortment and pricing gaps. To create a best practice competitive intelligence program that provides visibility to Private Label, it is best to:
- Leverage Machine Learning (ML) technology to match your items to rest of market items using hundreds of robust attributes (to ensure like for like equivalent items),
- Tier your and your competitors’ Private Label items to create matches that align products of similar specs,
- Equivalize item price gaps based on total item size for an apples-to-apples view,
- Score your links based on their quality to guide their application in your pricing system, and
- Establish an ongoing stale link review process to ensure that links are constantly updated to reflect ongoing assortment changes and competitor swaps.
Learn how Engage3 can help you gain complete Private Label visibility and improve your overall Competitive Intelligence program by clicking HERE or on the button below.
You can also watch a webinar recording – Beyond the Price Check: How Product Linking Can Unlock Competitive Intelligence.