16 Jul 2024 19:16

Advertising & Marketing

Private label’s appeal grows beyond price around the globe

Long gone are the days of no-frills packaging intended only for those on a tight budget—private labels, also known as store brands, are no longer viewed simply as low-cost alternatives to name brands. They’re increasingly high-quality products that fulfill consumer needs across a variety of price points.

Shoppers have noticed this shift and are responding positively. Today, perceptions about private label are overwhelmingly favorable—almost three-quarters of global respondents (71%) say private-label quality has improved over time. A door once opened by economic necessity has widened to include a variety of private-label products that remain viable and trusted for many consumers worldwide.

To understand current consumer perceptions about private-label quality, value, assortment and packaging, Nielsen polled more than 30,000 online consumers in 60 countries. While regional perceptions about private label vary greatly, a few universal truths emerged around the world:

Price is important to most consumers and is the primary driver of consumers’ purchase intent for private label. Sixty-nine percent of respondents globally feel it’s important to get the best price on a product. Moreover, 70% say they purchase private label to save money.

Private label’s appeal goes beyond price. Consumers are also seeking quality and value, and a majority of respondents find that private label delivers on both of these attributes. Two-thirds (67%) believe private label offers extremely good value for money, and 62% say buying private label makes them feel like a smart shopper.

But do these enthusiastic attitudes translate into sales? The answer depends on the market. In terms of private-label sales development, the world can be divided into two distinct spheres: the developed world (Europe, North America and the Pacific) and the developing world (Latin America, Asia and Africa/Middle East). While value share is at or above 15% in developed regions (and as high as 45% in Europe), it is below 10% in most developing countries in the study. In fact, it is 5% or less in key markets, such as China, India and Brazil.

While learnings about private label success in one market can help in another, there is no cookie-cutter approach for all. Private label growth requires custom-fit approaches for each market. Findings from Nielsen’s study reveal:

Private-label success is strongest in commodity-driven, high-purchase categories and those where consumers perceive little differentiation.

Private-label growth typically comes at the expense of small- and mid-sized brands, while category leaders remain relatively safe.

Retail consolidation and the expansion of the discount format are key drivers for private-label growth in developed markets.

Private label struggles to gain consumer trust in Asia and the Middle East, where consumers are fiercely brand-loyal.

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