Although there is no dearth of opinions on how the battle between national brands and retailers' store brands will pan out in the United States, most analysts agree that it's shaping up to be quite a contest. Long seen as beacons of trust and credibility, national brands watched their market shares erode as retailers became more sophisticated at developing and selling their own store brands. To be fair, without the right retail partners, national brands couldn't have created the differentiation that has allowed them to command a premium over their store brand counterparts. Retailers have played along for the most part by relying heavily on leading national brands to lure customers through their doors.
Store Brands vs. National Brands: Strategies For Success
In the last decade, the rapid evolution of store brands has led to converging competencies, and now store and national brands are at war for the same consumer dollars. It may sound like an oxymoron, but in spite of intensifying competition, future success for both will depend not only on how well their playing fields and core competencies are defined, but also on how well they can manage the strategic relationships with each other.Who is winning the battle?
During the mid-2000s, store brands were hailed as the second coming of retail, providing wonderful new opportunities for growth in previously unchartered territories. With share of sales growing at an average annual rate of 0.5 percent between 2005 and 2009, store brands became a poster child for practicality and austerity in tough economic times.1
But starting in 2010, the recovering economy created a new set of realities. Now, in 2011, retailers are forced to rethink their store brand portfolio strategies in order to remain relevant in a world where, more than ever, consumers seek brands that not only offer value but speak in a unique, identifiable voice and deliver substance with purpose.
Although store brand sales are still growing nearly twice as fast as sales of national brands, the abating recession has toned down some of the irrational exuberance. Ambitious store brands dressed in fancy packaging can no longer masquerade the aisles pretending to be the real deal. Retailers are quickly learning that prime shelf space and guaranteed foot traffic can't make up for puny marketing budgets and half promises.
The fact that national brands are reclaiming some of their lost share in the recovering economy indicates that store brands still have a long way to go before they can credibly sing a tune different than value. It also suggests that a majority of store brands, even at lower price points, lack the compelling, believable proposition necessary to compete against heritage national brands that have stayed relevant by working hard to strengthen their unique meaning in customers' hearts and minds.
As the recession ends, consumers' shopping habits and attitudes toward brand consumption are changing. And this shift is creating greater overlap in the competencies of retailers and national companies. Below are some predictions and best practices for store and national brands going forward.
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(pdf, 1.91 Mb)About the author:
Samar Birwadker is senior insights manager and BrandAsset® Valuator specialist in the San Francisco office of Landor Associates, responsible for running BAV programs to drive strategy and new business. 1 Information Resources, Inc., Times & Trends (October 2009). symphonyiri.nl/portals/0/articlePdfs/T_T-SeptOct-2009-Private-Label-US_Europe.pdf (accessed 17 January 2011).