Retailer private label products are now estimated to be 20% of all items sold in U.S. supermarkets, according to Nielsen, and the future of private labels seems to be heading in a forward-motion, upward-trending trajectory, with no signs of slowing down. The percent of private label items sold is forecasted to grow to 25% in 2027, which has businesses researching, strategizing, and creating, to meet the needs of private label demand.
Today’s “paradox of choice” consumer economy makes the selection of a private label item simple and smart because consumers already trust the retailer. Here are 2 examples of how trusted retailers are utilizing private labels to boost their business and keep their consumers engaged with their brand.
With 100 million Prime members already loyal to the company, Amazon has ambitious private label plans. Currently, AmazonBasics products are only available to Prime members and 86% of the private label offerings are clothing, shoes, and jewelry. Although these are the biggest current categories, there have been aggressive launches in the garden, outdoor, grocery, health, household, and kitchen spaces. Last year’s launch of Wag dog food (a direct competitor to Blue Wilderness, but at a lower price point) shows that Amazon’s private label plans seem limitless.
Gartner L2 shows that AmazonBasics is the big winner in private label creation, usually selling for less than other name brands. In short, Amazon is making their message clear: private label is playing and will continue to play an increasingly important role in Amazon’s overall business and consumer strategy.
With the goal of becoming the #3 grocery retailer in the U.S. (behind Walmart and Kroger), Aldi’s strategy is not e-commerce-centric at all, but is instead based upon aggressive private-label launches and 1000 new physical store expansions to a younger, middle-income target customer. The grocery retailer is also placing strategic importance on physical store expansions. Aldi, who currently has 1,600 stores in 35 states, is continuing to expand and is rolling out organic meats and produce, vegan and vegetarian categories, and a private-label wine to better meet their consumers’ needs.
Private label helps Aldi, and other retailers, grow a loyal following and keep customers in the
retailer’s ecosystem, all while protecting the company’s margins. Millennials and Generation Z consumers are increasingly recognizing private label brands as a premium option, too, and Aldi is staying right on top of that consumer trend. Aldi currently offers 3 premium private label brands: Earth Grown (vegetarian and vegan), Never Any! (meat free from antibiotics, hormones, and preservatives), and Simply Nature (organic and non-GMO). Aldi is one to watch in the private label space and is a good model for how private label brands can positively impact your customer offerings and bottom line.
The impact is clear
Amazon and Aldi, while they effortlessly execute a private label brand, are not the only players in the game. What does this mean for your brand? How do you take advantage of the impact that private labels can have on your business and consumers? How do you play the game with Aldi and Amazon?
- Get very serious about differentiating your unique features and benefits with your carefully targeted consumer.
- Ensure that your own e-commerce channel is growing and thriving, instead of just depending upon Amazon as your primary e-commerce capability.
- Communicate your brand’s benefits in a frequent, two-way conversation with your customers. Listen to why your customers buy your product and what changes they would like from your brand.
- Consider utilizing excess capacity to provide private label offerings to retailers who are determined to drive this option in their business model.
Don’t get left behind as retailers continue to develop private label brands. Take a look at your business model, consumer palette, and product offerings, and develop a strategic plan that allows you to create your own luck with this growing private label trend.