IRI notes rise in private-label purchases in new report

CHICAGO Private label is not only on the rise because store brands are cheaper versus their branded equivalents, but because shoppers feel that those branded equivalents don’t deliver greater value for the extra dollar. According to a new study released by Information Resources Inc. on Tuesday, 78% of both lower- and higher-income consumers believe private-label products are typically of excellent quality.

The study, called “Private Label 2009: Understanding and Mitigating Private Label Threat,” provides a thorough review of private label performance and best practices across channels, categories and retailers as well as current viewpoints from more than 1,500 consumers.

“Although nearly 80% of shoppers have positive attitudes toward private label, dollar and unit share are still below 25%,” stated IRI consulting & innovation president Thom Blischok. “Retailers still have enormous opportunities, and our research uncovers exactly where they should play and increase the likelihood of their success. We also analyzed the private label competitive landscape for branded manufacturers and how they should respond at the category, market and retail banner level.”

IRI consulting & innovation SVP Sean Seitzinger added that, “Four out of five shoppers are now ‘sold’ on private-label quality indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products. However, branded manufacturers still have key advantages in the strong emotional connections between their brands and their loyal customers. For instance, personal care products have successfully differentiated themselves in the minds of shoppers.”

Nearly two-thirds of shoppers often buy private-label products instead of name brands. More importantly for retailers, all age groups and income levels show a relatively strong propensity to purchase private label.

Shoppers across all income levels and age groups agree that variety is an important factor when buying private label, with 65% of shoppers preferring stores that offer a high level of private-label variety, which is up five points since late 2007. This research indicates that retailers need to think about variety in terms of products and packaging within a category, and manufacturers should be thinking about how they expand the expectations that consumers have for choice within a category.

Contrary to want many may believe, IRI research reveals that price is a less important purchase criteria to shoppers than variety, packaging and quality. While shoppers with lower-incomes (52.8%) are more likely to switch away from their typical brand for a better price, middle-income (52.2%) and higher-income (46.8%) are also more apt to switch versus a year ago.

“For retailers to maximize their private label strategies, it’s not as much about the products anymore,” Seitzinger said. “It’s about developing marketing programs that will drive purchase behavior, including trial, repeat and long-term loyalty. A successful marketing approach will center on taking these positive consumer attitudes and converting them into new shopper behavior across categories.”