Mix favors national brands with smattering of PL - regional discounters mix private labels with branded products - Regionals

Discount Store News, August 15, 1994 by Dawn Wilensky

Private label goods have been supplanted by branded closeout-type merchandise as a way for some regional discounters to steer clear of the control label niche heavily exploited by the Big Three.

Several years ago, most of the regional chains entered the private label game with a gusto similar to that of the national chains. However, many of these often smaller chains realized that they did not have the buying power nor demographic penetration to fully support a control label of their own.

In fact, many realized that a smarter way to conduct business was to instead present a selection of branded goods that the chain could obtain through closeouts or opportunistic buys. This was beneficial for two reasons: first, the cost was lower and second, the chain did not lose it's brand presence.

A perfect example of this strategy is seen at Jamesway through its Special Purchase program. Branded merchandise that the chain obtains through closeouts and odd lots is sprinkled throughout the store with large signs keying the customer to the merchandise and drawing them throughout the store.

Interestingly, the merchandise is rarely featured in advertising and is used primarily as a way of creating excitement at the store level and making the consumer feel as though they are getting an extra value.

Rose's too features closeout merchandise like Levi's and Brittania in its Greatest Deals section. In fact, apparel from Target and Kmart's control labels can be found in select stores, most likely the result of a closeout. Of course there are exceptions as some regionals do a brisk business with store brands, especially in the fashion areas like apparel and domestics.

Hills greatly depends on its American Spirit apparel control label and has also expanded the line to include domestics like window treatments, fabric-covered wastebaskets and shower curtains.

This approach takes a page right out of Target, which utilizes a similar strategy with several of its control brands like Windsor & Browne which can be found in several different departments like domestics, ceiling fans, stationery and photo albums.

And, Pamida, Omaha, Neb., recently unveiled its Heartland Basics line of Gaptype clothing and next month will unveil Omaha Jeans Company controlled label goods for men's, young men's, women's and juniors. A third captive label, Alterknits, is set to debut next year.

Many regionals see viability in the food side of the business despite the breadth and depth of food carried by both Wal-Mart and Kmart in each chain's full-line discount stores and supercenters.

Ames recently introduced a new soda label called Exclaim that was advertised at five bottles for $3. Interestingly, the size of the bottle is 67.7 ozs., larger than the traditional 64 ozs. found in the national brands and labels like Sam's American Choice.

Venture, too, entered the fray last April with the launch of TasteWorks, a 19-sku line of cookies, juices and nuts; and Meijer has come on strong in candy with a hard candy program similar in scope to a drugstore.

The feeding frenzy will escalate even more now that Target is developing a line of food products under its own label, according to an article in The Wall Street Journal.

Another area of growth is in commodity-oriented products like household cleaners and H&BC.

Jamesway revitalized its Kare line of health and beauty products despite its Chapter 11 filing and now boasts approximately 150 skus up from about 50 skus.

"We price our Kare products between 30% and 50% below the national brands," said Larry Fine, senior vice president, gmm, Jamesway. "Price will sell it the first time but quality will keep the consumer coming back."

The quality issue remains the cornerstone of the category and is brought forth through on-shelf comparisons and advertising both in-store and in Jamesway circulars.

The pressure is heating up though as national brand marketers are fighting back with stepped up advertising and promotions.

In fact, sales data gathered by Chicago-based Information Resources indicated that store brands are losing ground at mass merchandisers, supermarkets and drugstores in many categories including store brand film and flash bulbs.

However, total dollar sales of private label products in the same three outlets grew 5% and unit sales by 1.1% during the 12 weeks ended May 22, according to Information Resources.