The market for private labels is evolving with different price points being introduced to capture more consumers.
Why do people buy store brands? To save money, of course, you’ll typically save 30% on a house brand versus the national name brand.
But a huge shift in the business is happening. Target has put a big effort into their Archer Farms house brand, which is designed to be superior name brands while not being necessarily cheaper than those name brand.
My family loves Archer Farms potato chips, particularly the salt and pepper variety. It’s not necessarily a deal, but it is really good. Target uses its private label as a way to differentiate from Wal-Mart, the nation’s largest grocery chain. The Red Retailer knows it can’t compete with Wal-Mart on price, so it competes on quality.
Costco Wholesale, meanwhile, takes a slightly different approach. The warehouse club has its Kirkland Signature house brand, with the goal being to give a lower price than the name brand and high quality too.
Yet another competitor, Kroger — the nation’s second largest chain after Wal-Mart — experiments with three different price points among its store brands. You have the rot gut cheap option; a second choice that of slightly higher quality that’s still cheaper than the national brand; and then something more premium with the emphasis on quality, not low price.
So the market is becoming more complicated, but this much is clear: The move toward private labels is irreversible in the United States. We are way behind the Canadians and the Europeans who are extremely focused on store brands, which means we spend more money on name brands.
Over time, buying private labels will fatten your wallet. I promise.