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Study: 63% of consumers opt for private label in search of savings

The trade-down trend is spreading beyond groceries, Salsify found.


Basically: Gopuff's private label

Ever since inflation started to spike last year, a familiar phrase has moved to the top of the list of areas to monitor for many consumer goods executives.

Private label.

Also known as store brands, private label products are offered by retailers as a lower-price alternative to name brand products. When prices increase for name brand items, consumers may trade down in search of savings. While private label goods have propelled Walmart and Target for years, even emerging retail channels like Gopuff and Gorillas are now launching their own brands. But at CPG companies, the trend brings trepidation. Executives are constantly tracking and analyzing the threshold at which consumers will trade down, and whether they are losing share to private label brands that could eat into margins.

More than a year into this bout of 40-year inflation, there are signs that consumers are equating private label products with lower prices.

A new study out Thursday from digital shelf platform Salsify found that 63% of consumers are choosing private label brands because they offer lower prices.

Food and cleaning supplies remain the most vulnerable to private label trade-down, as the survey found 96% of consumers buy private label groceries.

But the survey of 6,000 consumers across five countries also found that private label switching is spreading across categories.

Fashion labels are under pressure, as the survey found that 82% of consumers are choosing store-brand apparel. Consumers are also tinkering with gadget-buying habits, as 69% of consumers are buying store brand electronics.

The results come at a time when consumer goods companies have taken multiple rounds of price increases amid inflation. Even as brands like Kraft Heinz halt their hikes and inflation begins to moderate, food prices remain particularly high. Online grocery inflation was up 10.3% in March, even as prices as a whole were in deflation. It’s a leading indicator that shoppers will continue to seek out savings on the digital shelf, even as the economic data shows prices coming down.

As consumers exercise more caution about purchases, the strength of a brand and accrued loyalty matter when it comes to making the decision to continue to buy from a name brand.

But don’t forget the fundamentals. At a time when consumers are taking extra moments to think about buying decisions and considering more options, there’s additional value in making a great product and executing key elements of the digital shelf. The Salsify survey found that product quality was the top factor in maintaining loyalty for 82% of consumers, while 57% prioritized a great online shopping experience.

“Product quality is under much greater scrutiny and more than half of consumers said they wouldn’t buy a product with bad product content that doesn’t include enough information or includes low quality images,” said Cara Wood, head of research at Salsify, in a statement. “In fact, strong product content is so important that shoppers are more likely to purchase products from unfamiliar brands or those with bad reputations than those with missing or bad information.”

The findings indicate that brands have a lot to gain from diving into the details that convey the quality of products in online listings. That means paying close attention to content and reviews. The survey found that 72% of shoppers said descriptions and reviews were the top product page features that helped them decide what to buy, while images rose to the top for 45% of shoppers. About 32% said videos were key to their perception.

And remember: Consumers aren’t just seeing a brand in one place. These details have to be high-quality and consistent in the growing number of channels where consumers shop. Shopping is a journey, from stores and ecommerce marketplaces to search, social media and a brand’s own site.

These channels aren’t only there to raise awareness. The purchase is happening in more places, too. The survey found that 42% of consumers buy directly from social media, while 25% said they used AR or VR shopping tools in the last six months. Consumers are also crossing channels, as 39% of consumers said they plan to seek out buy online, pickup in store options in 2023.

“Expect shoppers to continue looking for great product details on every channel they use,” the survey states. “…If brands and retailers want to win their business, they must deliver the best product experience at every stage — and on every channel — of the buying journey.”

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