How own-label brands are dialling up desirability

As consumers feel the squeeze post-Brexit retailers are tapping into demand for own label alternatives, focusing not just on value, but on driving brand desirability.

Coop

As post-Brexit price hikes continue to bite, consumers across the UK are opting for own brand products in increasing numbers. According to recent research by Retail Economics, 48% of 2,000 consumers questioned said they would switch to cheaper own-label alternatives if their weekly food shopping bills rose by 3%.

Analysts suggest that between now and the conclusion of the Brexit process the price of food imported from the EU is expected to rise by 8%. The price of goods is already up 2.3% compared to the same time last year, according to Kantar Worldpanel, costing the average household an additional £21.31 over the 12 weeks ending 26 March.

In an atmosphere of accelerating inflation and declining promotional activity, consumers are turning to own brands as cheaper alternatives. The market share of supermarket own brands has risen 5% over the 12 week period. Some 64% of shoppers purchased a product from Tesco’s own label Farm Brands range, while the Co-op’s Irresistible range was the supermarket’s fastest-growing line within the business, according to the same Kantar Worldpanel data.

READ MORE: How Tesco is taking on the discounters with value own-label rebrand

Brexit price woes and rising inflation are expected to have ramifications beyond the grocery sector. In January, fashion retailer Next warned prices for its clothes could rise by 5% in 2017 due to the weakened value of the pound following Britain’s decision to leave the European Union.

Our customers know they can rely on our own brands and it is a major driver in trust and credibility, as well as providing them with the best value choices.

Simon Comins, Superdrug

Then John Lewis’s managing director Paula Nickolds confirmed the department store is considering prices rises due to the “dramatic effect” the plummeting pound is having on the cost of buying products across an international supply chain. Nickolds stated her hope that by 2020 half of the department store’s range will be exclusive own brand products.

Carving out a niche

One brand that has seen big success with its own brand strategy is Evans Cycles, whose British bike brand Pinnacle is celebrating its 10th anniversary this year.

Going up against established international bike brands such as Specialised, Trek and MBC could have been difficult. But with Pinnacle, Evans Cycles has been able to carve out a niche as an entry- to mid-level UK bike brand focused on the needs of British riders. The styling is deliberately clean, sleek and simple, designed to be age and gender agnostic in order to appeal to the widest audience.

“We know quite a lot about what our customers want from a bicycle. Our road surfaces and weather are unique, as is the attitude of the people who cycle. So by creating our own brand we can design bikes that are perfect for British riders and don’t require the compromises,” marketing director James Backhouse explains.

Superdrug has a unique positioning for its own brand products as well. Keen to show there is more to it than simply value, the retailer has positioned itself as an
affordable option for cruelty free beauty products. All its cosmetics carry the leaping rabbit symbol to indicate they are certified by Cruelty Free International and in June Superdrug will relaunch its B.Makeup range as a fully vegan cosmetics collection.

Superdrug Solait own brand
Solait is one of Superdrug’s 43 own brand beauty collections.

“Our customers know they can rely on our own brands and it is a major driver in trust and credibility, as well as providing them with the best value choices,” says commercial director Simon Comins.

Acting as a complement to brands

Having an extensive own brand collection also helps Superdrug put a mainstream spin on premium beauty trends. In January, the high street retailer took on beauty heavyweight Estee Lauder with the launch of Optimum PhytoFreeze, Superdrug’s mass-market answer to the emerging trend for cryogenic anti-ageing treatments.

While the £14.99 price tag is certainly attractive in comparison to the £65 Estee Lauder alternative, Superdrug’s product marketing for the face and neck cream is focused on the quality of the ingredients, which include frozen grapes harvested from Swiss vineyards.

“Superdrug’s own brand range is a core part of our customer offer and we continue to see customers trade from well recognised brands to our own brands,” explains Comins.

Own brand is also core to the product offering at the Co-op, significantly contributing to the supermarket’s overall business performance, explains customer director Jemima Bird. To drive loyalty, the supermarket chain makes own brand a central part of its membership strategy, offering members 5% back for themselves and 1% for a local community cause when they buy a Co-op own brand product.

“We have been able to grow own brand faster than the market and encouragingly, in most cases, not at the expense of credible brands,” she says.

At Debenhams, £1 in every £5 is spent on a Designers at Debenhams product. Launched in 1993, Designers at Debenhams spans various collaborations between the retailer and established designers including Jasper Conran, Matthew Williamson and Henry Holland. There are currently 22 own brands in womenswear and women’s accessories, and eight in menswear.

Debenhams
Studio by Preen is the latest Designers at Debenhams collection to launch for spring 2017.

“Nearly half of our business is own brand, which for a department store business is quite unique. They give us a key point of difference and enable us to be more flexible in our offer to customers. Our own brands play a complementary role alongside our concession partners,” Debenhams marketing director Richard Cristofoli explains.

“The international brands dominate certain categories, such as in beauty. Versus the global marketing firepower of some of those beauty houses it would be naïve of us to try and create a huge own brand business in that premium beauty market. So the own brands provide us with a complementary mix.”

Differentiating through brand positioning

The concept of the summer 2017 “Match Made in Debenhams” fashion marketing campaign plays into the consumer habit of mixing own brand and branded fashion. The campaign shows model Helena Christensen pairing a top from concession brand Warehouse with printed trousers from own brand collection Star by Julien Macdonald.

This mix and match way of shopping is the reason Cristofoli believes the vast majority of customers do not consider many Designers at Debenhams brands as traditional own brands.

“We have very little in the way of Debenhams branded products, what we have is a collection of brands. Some of them are concessions, some are international and some we manage ourselves,” he explains.

From the designer’s point of view, partnering with a mass market retailer brings with it reach and a diverse customer base, while for Debenhams a designer collaboration offers real kudos and a different design perspective.

READ MORE: Brand storytelling in a discount age

“One of our strengths as a department store is our breadth and depth of choice,” says Cristofoli. “That translates into dwell time, but also puts the onus on us in an online age to create an exciting and interesting proposition. Our own brands are always at the forefront of our messaging because we see it as our key point of difference.”

For Evans Cycles and Pinnacle, the link between the two is not made explicit in the bike design. Nevertheless, Backhouse expects the majority of customers are aware that Pinnacle is an own brand.

“We’re not creating the Tesco Value or Tesco Finest range. You’re not riding an Evans Cycles bike, you’re riding a Pinnacle bike that is exclusively available at Evans Cycles,” he explains.

“The approach of most bike brands is to splash their logo on the bike in as large a font as possible. I think our bikes are more understated than most other mainstream brands. We did that on purpose to create our own visual identity.”

Pinnacle Evans Cycles
The Pinnacle bike design does not feature overt Evans Cycles branding in order like the brand speak for itself.

The Pinnacle brand has grown organically over the past decade. Evans Cycles has shunned TV advertising or sponsorships in favour of word of mouth recommendations from consumers and the staff working across its 62 shops.

“We don’t appear in TV advertising and we don’t copy lots of the other brands in terms of sponsoring professional race teams. We’ve never tried to create some mythical backstory to it. It’s deliberately the purest development of a brand I can think of, which is that the product does the talking,” says Backhouse.

Superdrug currently has 43 own brand beauty collections and has plans for a number of new launches in 2017, as well as the rebranding of its Solait suncare and bronzing collection. To maintain consistency across the various product lines all own brand products feature Superdrug’s star logo and ‘100% happiness money-back guarantee’ branding, which offers consumers 25% off their next own brand buy.

The business benefits

There are also wider benefits to having a strong own brand business. Evans Cycles’ Backhouse says controlling production allows it to alter designs to keep pace with consumer trends, as well as manage costs along the supply chain.

“One of the reasons retailers have an own brand is that if you control the supply chain you can typically reduce your cost, which means that we are able to provide a bike that is better value for money than a distributed brand bike, but that gives us the same margin. So we can make a profit and pass on the saving to the customer, meaning the customer gets a really good value product,” he explains.

Our own brands are always at the forefront of our messaging because we see it as our key point of difference.

Richard Cristofoli, Debenhams

“We’re selling bikes to people all over the country and our buyers are going to see bike brands all over the world, so we pick up on things. We can see all those trends coming through, which allows us to be at the front of a trend.”

Having an own brand offering enables retailers to better weather the economic storm, according to Debenhams’ Cristofoli.

“One of the things having a strong own brand offer has enabled us to do is be more resilient during the challenging times for the concession brands,” he explains.

“It has made us less susceptible to some of the changes that have happened on the high street in the last 15 years. A number of those concession brands that were around 15 years ago are no longer with us. And that’s why we’ve built our own brand credibility.”

READ MORE: M&S wants a ‘single front door to the brand’

He also believes having a wide selection of own brands makes the department store a more attractive franchise partner overseas. Debenhams currently has 68 stores internationally operating through franchise partners.

“The reason the franchise thing works is that they can fill half the box before they even start their journey developing relationships with local brands or partnerships with the beauty houses,” says Cristofoli.

“This is quite unusual for a department store group, which normally has a far smaller own brand proposition and therefore you’re having to do a lot more work as a franchisee to fill the space.”

While third-party brands will likely always make up the majority of Evans Cycles’ business, having an own brand means it can crucially control the shipping dates and when stock arrives, rather than being at the mercy of a brand partner.

“If a supplier’s website breaks or the system breaks down we’re completely at their mercy. Whereas, being fully in control of the supply chain makes us more resilient,” says Backhouse.

“We are in charge from start to finish, so we can control the design, quality and if there is something we don’t like about it we can change the factory or the way it’s made.”

Bird, from the Co-op, agrees: “Choosing the right supply partners has been critical to the success of own brand. We work hard with our suppliers to create long term, engaged and mutually beneficial partnerships which help deliver fantastic own brand product ranges.”

Own brand is only set to become more important as shoppers look for value and choice amid rising prices. Retailers keen to capitalise on this consumer shift have to successfully communicate both the value and desirability of their products compared to branded rivals and their position in the market. Those that do will discover the added benefits to controlling an element of production in-house.

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