According to Gutsatz, in a US survey of consumer shopping attitudes in 2009, 30% of consumers said they were buying more private label products, which he attributes to budget constraints, trust in quality, and being better educated about products.
For retailers, strong price competition, the expansion of the hard discount retail channel and an attractive profit margin (private label product typically have a profit margin of between 40-50%, double that of national brands) are all factors. Manufacturers use overcapacity in their production to manufacture private label products, he said, which are more profitable for them to produce than national brands.
Consumers look for guidance about product efficacy
According to Gutsatz, consumers need to be reassured about which products to purchase, and they look for authorities to help select them something which is underlined by Datamonitor research that revealed 78% of consumers think product claims are exaggerated and adjudications from the Advertising Standards Authority in the UK that has criticized advertising from several cosmetics and personal companies due to unsubstantiated product claims.
“The media is showing consumers that private label brands are as effective as national brands,” he said,citing as examples the UK BBC Horizon programme on the Boots No7 & Protect & Perfect serum, and a consumer magazine in Switzerland that placed private label products from retailers Migros and Aldi as being more effective than national brands.
Retailers as certifiers is changing the retail landscape
Gutsatz also highlighted that retailers are acting like certifiers when it comes to stocking natural products, something which is changing the retail landscape.
Examples include the Naturally Sephora label which is an internal logo created by the beauty retailer to help consumers select products identified as having been formulated with and without certain ingredients
Similarly, the Body Care standard from US retailer Whole Foods that was launched in 2008 identifies the products it stocks that contain the most natural and high quality ingredients.
“This is a real trend, retailers are becoming certification authorities, something which is linked to the fact consumers look to authorities to guide them in the purchase of products,” he said.
“Some retailers will now develop a labelling strategy to help consumers in their choices. They thus put pressure on the industry to have higher standards,” he concluded.