Store Brands Are Retailers' Second-Most Important Point of Difference

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November 23, 2010

Expansion of store brands is a key way retailers are creating marketable differentiation, ranking second only to product freshness, according to the 2010 Food Retailing Industry Speaks: Annual State of the Industry Review by the Food Marketing Institute (FMI).

Supermarket sales grew a meager 0.12 percent in 2009, while and same-store sales decreased 0.82 percent, according to the. When adjusted for inflation, the industry lost ground for the second year in a row

“Shoppers’ overwhelming focus on price and value has led to fierce price competition among food retailers,” said Leslie G. Sarasin, FMI president and CEO. “As a result, supermarkets are focused on trying to distinguish themselves from the competition by fine tuning their private label strategies, SKU reduction and price differentiation in order to retain their current customers and attract new ones.”

Food retailers continue to differentiate themselves from the competition by emphasizing quality produce, fruit, meat and poultry, the most-used differentiation strategy.

Increased focus on store brands is the second most popular way to create a “differential advantage” used by more than 90 percent of retailers, according to FMI. Many retailers believe that the increased interest in store brands will remain even when the economy recovers. Private label sales accounted for an average of 15.7 percent of total sales in 2009 and nearly 10 percent of the total store SKUs.

Meanwhile, price is used by 86.9 percent of retailers –– the third most used differentiation strategy –– to lure shoppers away from the competition.

The industry experienced a median loss for same-store sales of 0.82 percent, down 4.3 percentage points from 2008. More than half, 56.9 percent of retailers, reported negative identical-store sales growth, which is up significantly from only 16.9 percent in 2008.

“Our research shows that as shoppers altered their grocery shopping behavior, some formats benefited from this change and others have struggled to grow sales, same-store sales and profits,” said Sarasin. Retailers report that health and wellness is another important area for sales growth and differentiation. They are addressing health and wellness in their stores in a number of ways, including:

• Promoting healthy items from all departments, fresh and dry grocery;
• Educating consumers on nutritional values of food products;
• Marketing healthy products and events with a team of registered dietitians in the community and through media outlets; and
• Supporting and promoting in-store pharmacies.

Read These Related Articles:

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• Study: Consumers Name Aldi Grocery Price Leader
• Price Study: PL Saves Shoppers Upwards of 33 Percent
• Research: Household Products Brands Under Attack as Consumers Still Fixate on Price
• Research: The New Path to Purchase

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