FOR IMMEDIATE RELEASE
A Pillar of Strength
In this two part article, Atheon Analytics explores how private label brands came to be an essential part of the UK retailer arsenal, and how new ways of looking at their range and data will ensure they can keep anticipating and reflecting customer’s needs
Retailer private label brands have been a core part of the UK Grocery retail armoury since the early 90s. They appeal to retailers and customers alike, as they offer the opportunity to deliver high margin products at a lower price, and reinforce the retailer-customer relationship. With competition increasing across grocery retail, and disposable incomes shrinking in the UK, the right private label offer is becoming more important as a mark of distinction and a sign that the retailer is on the side of the shopper.
The growth in UK private label started with a raft of value brand launches in the early 90s to combat customers switching to low price Discounters. This was a classic defensive move from the Grocers; they could see they were losing customers on price to Kwiksave (who had ~8% market share) and new players in the guise of Lidl and Aldi. A low price own brand alternative could prevent this loss and reduce prices for shoppers amidst the early 90s recession. The launch of Tesco Value, and what Asda and Sainsbury’s then called Farm Stores and Economy respectively, didn’t just grow sales for the major grocers, it put those pesky discounters back in their box and banished the threat, seemingly forever...
The next breakthrough in private label brands was the relaunch and expansion of Tesco Finest in 2000. Finest had launched in 1998 as another classic defensive pose; Tesco were losing share to M&S and Waitrose at Christmas when their shoppers traded up for a treat. A range of upmarket products were launched as Tesco Finest Signature, with recipes from Celebrity Chefs (such as Anton Mosimann), and Finest display cases placed in store so upmarket customers could sample Tesco’s take on Fruit de Mer. It brought in pages of positive PR and a lot of waste.
So Tesco did something different, and transformed how retailers developed, targeted and launched their own brands. By using their clubcard insights, rather simply gap filling versus the competition, Tesco could identify their upmarket customers, the products they bought and the potential gaps in their own range for these customers. They used this to develop, re-badge, and reformulate hundreds of products under the Finest brand. This brought the very best food Tesco could offer under one banner, based on their own customers’ favourite items, and transformed their offer.
Tesco now had 3-4 own label brands that supported their ‘good better best’ merchandising strategy. They termed these “Pillar Brands”, and started to develop more, based on segmentation's from their loyalty card data which showed how their customers shopped their ranges, alongside traditional, research and gap analysis (see Fig 2). The early 2000s saw a rash of own brand launches across the major multiples, following in Tesco’s footsteps. Some of these enhanced customers’ perceptions of the retailer like Organics, Good for You, and Free From; some like the innumerable Kids brand launches, would be constantly re-branded before being quietly absorbed into the Retailer’s Standard range.
Attachment: The Expansion of Tesco’s “Pillar Brands”
Today every UK retailer has their defined private label hierarchy, with criteria, brand guidelines, and expansions into General Merchandise. After a slight fall last year, the proliferation of private label brands has seen sales grow across the Grocers (see fig 3). Since the global recession started in 2007, great quality at a reasonable price has been a critical part of every retailer’s offering, with Aldi and Lidl leading the charge on this front for customers. As customers compare promotions, prices and the retailer’s offer in real time and shop around to fulfil their needs, private label is a critical area to get right. A recent Nielsen survey showed 70% of customers buy private label to save money and 62% felt they were being smarter, savvier shoppers by buying private label lines. However, simply serving up broader ranges of private label lines, or launching new ones on the back of research and segmentation isn’t enough any more. Customers’ willingness to shop around has exposed them to different range and exploded the myth of choice.
Private label is on the rise again - https://www.thegrocer.co.uk/reports/category-reports/pdf-own-label-category-report-2017/551490.article
So what does the future hold for pillar brands? What products should the retailer develop, and in which Pillars, to reinforce that customer retailer relationship?. The answer to this might well be to “Go Local”. The use of loyalty card data to determine what the customer wants, is typically conducted at a national level, so while they quickly identified the products that most people, in aggregate, want, it misses the localised nuances of customer preferences. When you can make decisions based on the true local behaviour of the store, you can make a simpler, better, more inspiring customer shopping experience, with the brands you expect and hope to see as a shopper being given the right space in the right store. If you have a store that has a high concentration of vegans, coeliacs and health conscious customers, is a gluten free pork pie and a range of ‘Free From’ biscuits really what your shoppers want in their local store?
The secret to this, already lies in the retailer's’ data; the challenge as ever is how to open buyers and merchandisers eyes to this. In the concluding instalment of this post we will demonstrate how data visualisation meets (and exceeds) this challenge.
In Part 2 we will explore, how the next level of data can bring this to life.
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