What’s in a Private Brand Name?
I read an article recently that found that AmazonBasics was driving more sales than some other Amazon.com private brands. The article’s conclusion was that the success of AmazonBasics meant that the company may not need to “disguise” its private brand by removing the Amazon name from its products to drive sales. This premise didn’t sit with me because it’s not uncommon for retailers to use a combination of brands — some associated with the retailer’s banner and some not — but this isn’t to disguise a brand, it’s to develop a sound portfolio strategy.
Private brands are just as strategic in their naming strategies as national brands, which is why they use several methods across the spectrum. This isn’t a new approach. Private brands have been implementing diverse strategies and bringing unique brands to the table for some time now. Over the past quarter of a century, private brands have continued to increase penetration throughout retail channels, which is demonstrated by the fact that nearly one of every five U.S. dollars is now a private brand purchase. While there are a ton of strategies to choose from, I wanted to pick a few that give a peek into the strategy behind naming a private brand and building a portfolio.
Single Banner Brand Strategy
On one end of the spectrum there are single banner brands, like Trader Joe's, that use one brand on all products across all categories. While Trader Joe's does play with its name (it labels Latin foods Trader Jose’s), it still uses its namesake to market products. The benefits of this strategy are that it leverages the equity of the store name — a plus considering it was named the third favorite grocery chain in the U.S. this year — and helps create a clear brand message. On the other hand, because the brand is prominently featured on all products, it can hinder market segmentation and make it difficult for customers to disassociate other products from the brand name if they have a negative experience.
Multicontrol Brands Strategy
On the other end of the private brand naming spectrum there are multicontrol brands. Retailers, like the private brand-focused Lidl, which has different private brand names for specific categories (chips, pasta sauce, etc.), make use of this strategy — also known as fancy brands, when referring to discounters like Lidl — on its products to create the image of assortment to shoppers, who might otherwise be turned off from making purchases at a store that only uses one brand name for all categories. Shoppers often feel better about buying a range of brands, and this strategy helps meet that need. However, the downside to this strategy is that it can be difficult to communicate each brand to shoppers.
At the intersection of multicontrol and single banner brands is a hybrid strategy, which take elements from both ends of the spectrum. This is the strategy that Amazon has implemented. In this case, the banner name is used for a key brand, but then control brands are used for specific product groups. In the past, Amazon has tested several names with varying levels of retailer transparency, from Wicked Prime (referring to Amazon Prime) to Lark & Ro (not referencing the company at all). Among its private-label brands, AmazonBasics has risen to the top, even beating out some of its other brands in similar categories. In fact, a recent report by One-Click Retail found that roughly 85 percent of Amazon’s private brand sales come from AmazonBasics, demonstrating that retailer names can be an asset. Be that as it may, this strategy can cause confusion if each brand doesn't have a clear communications strategy.
Whether a retailer touts its own name when naming a private brand or omits its name altogether, it’s not a question of disguising or revealing, it’s a question of strategic intent and good portfolio strategy. Speaking of which, when do you think we’ll be seeing AmazonBasics for sale in Whole Foods? I’m taking bets!
At the end of the day it’s about finding the right fit to differentiate since 98 percent of what you find in most stores is carried by a competitor’s store. Therefore, as sound and strategic marketers, retailers should continue analyzing shoppers to understand what strategy works best to meet their needs. Whatever the choice is, heavy private brand shoppers are twice as loyal as the average customer, which means it’s in every retailer’s interest to show what’s in a name.
Jim Holbrook is the CEO of Daymon, a provider of expert global retail strategies and services.
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