Most successful retailers would claim to have a strong relationship with their customers, providing sought-after products at a good value, ensuring the quality of the goods they offer, and providing information and education to make good choices. Private label products offer the chance to further cement that relationship.
“Whether you’re talking about private label supplements or any other category, private label is a smart business move,” said Peter Sokoloski, NOW Foods private label manager. “A store brand can drive repeat business since it limits the availability of an SKU; consumers can only get it at your location, so if it works well for them, they will be forced to return to your store.”
Sunil Kohli, COO, Health Plus Inc., added, “Vanity labels accentuate and energize branding and identity. It adds panache and underscores credibility in the eyes of the consumer.” However, he cautioned, “Private label is an investment—it’s a short-term monetary investment and a long-term branding investment.”
That investment is one that a growing number of retailers are willing to make, given shoppers’ inclination to pick up store brand items. A study released in August 2009 by Information Resources Inc. (IRI) noted 78 percent of consumers, regardless of income level, believe private label products are typically of excellent quality. That said, IRI’s president, Thom Blischok, noted, “Although nearly 80 percent of shoppers have positive attitudes toward private label, dollar and unit share are still below 25 percent. Retailers still have enormous opportunities.”
Jason Provenzano, executive vice president of sales and marketing, Nutricap Labs, agreed on the potential in the market. “Retailers have a great chance of truly succeeding because they have a brand established and a means of marketing, and they know what products are best-sellers and what demographics look for specific products,” he said.
The established brand allows retailers to deliver a sense of exclusivity and lock in a relationship with a shopper. “One of the most effective ways for a retailer to differentiate themselves is to offer a product that is exclusive to their business, and exclusivity is built with private label nutritional supplements,” said Melissa Barns, national sales manager, Reliance Private Label Supplements. “This critical business strategy consistently builds the customer base and increases sales with products those shoppers can purchase only from you. Private label is increasingly important as the marketplace becomes flooded with high discounts, Internet sites and retail outlets. In today’s competitive marketplace, you need to make sure your customers are loyal to you.”
Differentiation can also mean offering products not found elsewhere. Stephen Lukawski, sales and marketing director, Niagara Naturals, noted the company’s “fruitritional” fortified fruit supplement snacks deliver an alternative choice for consumers. “Through creativity and innovation, we can manufacture more unique ‘can’t get elsewhere’ products, which help retailers differentiate and distinguish themselves from competitors, securing their position as a specialty retailer,” he said.
The August 2009 IRI study noted shoppers across all income levels and age groups agree variety is an important factor when buying private label, with 65 percent of shoppers preferring stores that offer a high level of private label variety. Therefore, when making decisions about a private label line, retailers need to think about variety in terms of products and packaging within a category, and manufacturers should be thinking about how they expand the expectations that consumers have for choice within a category.
To the earlier point of targeting demographics, Lukawski added retailers must understand not only what is selling in their store, but to whom. “Some retailers are located near active adult communities, others are located near neighborhoods of young families,” he said. “The core makeup of the community will dictate what sells and what doesn’t. Products that are slow movers would not be the best to invest in a store brand.”
Brad Grossman, president, Fusion Formulations, agreed that proper product selection is critical to success in private label. “You don’t want to cannibalize sales, yet you want to provide a lower-cost, but equally effective alternative, notably for the budget conscious,” he said. “Newer supplements should be allowed to stand the test of time and gain general mainstream awareness before they are private labeled.”
One such category cited by Scott Stobaugh, sales manager, contract manufacturing/finished goods, Nutraceutix Inc., was probiotics. He noted, “Probiotic sales have shown double-digit growth for the past several years; therefore, if a retailer is not offering products in this specific category, they need to make the decision to offer branded, private label or both products for this category.”
Barns agreed differentiation in product selection is important. “The product selection must be progressive and innovative enough to provide the staff with not just the staples, but also cutting edge products that are the backbone of growth in the industry,” she said.
“The retailer must choose wisely with the long-term vision clearly in mind,” Kohli added. “We advise to start small and weigh the popular products, such as multivitamins, with the more novel products. The overall picture presented to the customers is that the retail brand is a strong and widely varied one. But this does not and should not include private label versions of everything.”
Source: Natural Products Marketplace