Store brands in FMCG : Has their time arrived?

The current Covid scenario has seen a significant bump-up in the E-com channel. This has happened on the back on additional convenience and safety that the channel provides with contactless home-delivery. One of the big beneficiary for these e-commerce portals is not only the new shoppers, but also exposing them to store brands (also called private labels).

E-com portals like all other channels suffer from the inherent issue of differentiating between themselves. This is because the assortment that they sell is similar i.e brands from the same manufacturers. One of the approaches to differentiate and to build long term loyalty was to build their store brands. These brands in addition to building ‘stickiness’, also brought in a higher profitability due to lesser intermediaries. Lastly, it was used as an effective tool to negotiate with large manufacturers.

Types of store brands

Typically, two types of store brand exist – let’s call them type 1 store brands and type 2 store brands.

Type 1 store brands – the retailer builds independent brands exactly like FMCG companies would with the only catch being that they are available only at their store. Brands like ‘Tasty Treat’ of Big Bazaar & ‘Feasters’ of more are examples of this. These brands require all the regular challenges – brand name selection, packaging design, brand values, formulation, commercials etc. These brands have gained traction as retailers become more mainstream and gain credibility. These brands are more suited to compete with regular FMCG brands as their packaging & pricing  are in line / better than competing national brands.

Type 2 store brands – the retailer leverages it’s own brand name to brands products under the same. Examples would include ‘BB’ at Big Basket, ‘Grofers’ at Grofers and ‘more’ at more retail . The brand name itself denotes quality / credibility of the retailer and thus are more suited to commodities / functional products. The pricing advantage is significant to convert shoppers to type 2 store brands. These brands build on the store brand itself and thus are beneficial not only from a financial perspective, but also on building a greater share of mind with the shoppers.

Leveraging store brands is an excellent way for retailers to build greater relevance for themselves and add to the bottom line. In these times, wherein shopper preference is first to get the product, there is a significant possibility of switching this preference towards inducing trial of store brands. All routes of pricing, combo offers with national brands and free sampling should be leveraged to get trials. Focus typically has to be on categories which are for ‘everyone in the family’ or provide functional benefit as these provide far higher acceptance than categories which are ‘personal’ in nature.

For manufacturers, this is a unique challenge as the retailer has significant interest in building it’s own store brands. The focus for manufacturers, which have traditionally focused only on consumer marketing towards building awareness and likeability, need to further build on shopper marketing. The idea here is to influence trial, switching to their brands and advocacy as an integral component of the entire lifecycle.

If you are a shopper, go try the store brands. With strong customer focus by the retailers, these are good quality products. The common perception of 'poor quality' is in the past and with retailers gaining scale, the cost benefit is due to scale and disintermediation. Trial for these is definitely a choice that the shopper exhibits.