Private-Label Products Need Standardized Identifiers to Succeed in E-Commerce
Store brands have been around for decades, but until recently they were often perceived as lower quality than national brands. Today, retailers like Trader Joe’s, Whole Foods, and Kroger are able to offer private-label products that match big brands in quality while maintaining lower prices. As a result, according to a new Nielsen report, store brand sales increased by nearly 10 percent in 2017, while national brands faced declines of around 1 percent. Yet only a few retailers are taking full advantage of their brands’ potential by optimizing product information online to improve sales.
Consumers today do more research than ever before when selecting products for purchase. In addition, an eMarketer study reports that 87 percent of consumers are unlikely to return to a brand after one experience with inaccurate product information, indicating the importance of easy and accurate product visibility in the digital marketplace. This means that in the coming years successful store brands will be those products that are easy to find, verify, access information, and purchase online.
Traditionally, store brands have been sold almost exclusively in brick-and-mortar stores, and most retailers use their own product identification systems, such as manufacturer part numbers (MPNs), stock keeping units (SKUs), or number system 4 to track private-label inventory and sales. While adequate for sales within a retailer’s closed-loop supply chain, these proprietary product numbers are irrelevant in the digital marketplace.
National brands have been using global GS1 Standards as an established best practice for 40 years to uniquely identify their products, enabling them to sell through many different retailers and with greater visibility. Adopting the same GS1 Standards, retailers will be able to provide consistent and accurate product information for their store brands across both digital and physical channels. Replacing proprietary numbering systems with GS1 global trade items numbers (GTINs) will enable better searchability so that consumers can readily find and obtain information about store brand products online. GS1 Standards also help retailers keep better data when it comes to inventory, analytics and sales.
A 2017 study by GS1 US found that across 87 top U.S. retailers and nearly 1,400 individual brands, less than a third of private-label brands used GS1 Standards to identify products. Many store brands used inconsistent identification practices even within their own supply chains; some were even found to use two different methods (e.g., MPN and number system 4) simultaneously.
These inefficiencies are major hindrances for store brand products in the digital age. Today, consumers expect to find everything they need in one place, from products to information and beyond. Traditional supermarkets are being replaced with mass retailers, which are facing competition from huge online marketplaces like Amazon.com. Brands that cannot be found and correctly identified in the digital market are missing significant opportunities to generate sales, customer loyalty and future growth. Using standardized, globally unique product identification systems along with complete product information, store brands can compete directly with national brands on both physical and digital shelves.
Rich Richardson is the vice president, standards management for GS1 US and has more than 30 years of technology, supply chain, e-commerce, operations and procurement experience across multiple industries.