Consumers prefer top brands, are willing to try private label - Consumer Survey, Part 2

Discount Store News, Oct 18, 1993

Consumers continue to shop discount stores for national name brand merchandise, but their interest and acceptance of private labels and store brands is growing.

This growing acceptance of private label--which coincides with the continued preference for branded goods in most categories--offers huge opportunities for retailers to enhance their position in the market and bolster their bottom line. In some cases and among some age groups (see story, page 41), shopper actually look for private label products over national brands.

According to Discount Store News' 1993 Top Brands survey of consumers, the number of discount store shoppers expressing a brand preference increased in 16 of 23 merchandise categories studied. A year ago, 13 of 19 categories revealed increases in the level of brand preference by consumers.

Discount store consumers' desire for specific brands remains quite high when shopping for soda and soft drinks, film, household cleaners, photo and camera, cosmetics, and candy and snacks.

At the same time, many consumers also appear more accepting of private label or store brand products in other categories, probably because overall quality in existing PL programs has risen substantially over the years. Stationery, domestics, glassware and dishes, greeting cards, hardware, children's apparel, women's apparel and housewares appear ripe for increased emphasis in private labels and store brands, according to the study.

In these categories, consumers expressed both a substantial willingness to try private label or store brands, while also admitting a low demand for national brands.

Many discounters are already involved in private label domestics and apparel programs, and Wal-Mart and Kmart have substantial private label hardware offerings. The survey's results provide these retailers with further evidence that they are on the right track with their store brand programs.

What this year's survey also shows is that retailers have a huge opportunity to enhance their bottom line with private label programs in some overlooked areas.

In stationery, for example, a whopping 89% of survey respondents said they would be willing to try private label merchandise. That is not to say that these shoppers are dissatisfied with the merchandise mix available to them, but that branded products in this category, which is largely dominated by back-to-school supplies, particularly paper products, are not vital.

As a result, stationery shoppers expressed the lowest degree of name brand preference of any category in the survey. Just 42% of them said they have a preferred brand in mind when shopping for stationery supplies.

These results indicate retailers can offer their own lines of merchandise at prices that satisfy customers as well as their bottom lines. Even though stationery supplies are generally sold at paper-thin margins, the apparent willingness of consumers to purchase store brand stationery paves the way for experimentation in this area.

Another store brand opportunity exist in greeting cards, where shoppers expressed a high willingness to try private label cards. Nearly eight out of 10 consumers said they would be willing to try PL greeting cards. A year ago, just 1% of survey respondents expressed such a desire.

Such a turnaround is noteworthy. These shoppers are fairly satisfied with the selection offered to them and 82% said they would simply switch brands if their preferred brand was unavailable.

When asked to rate their confidence in finding their preferred brand at the discount store they shop most often (on a nine point scale where nine means total confidence and one means no confidence), greeting cards recorded a high mean rating of 7.29. This shopper is obviously easily satisfied, willing to purchase whatever card brand is available at the discount store. Greeting cards is a very profitable merchandise line for discounters, a PL line could further enhance that.

The opportunities of private label programs as a way to build profits while adding value-oriented skus for shoppers is certainly not a new idea. What has changed over the years is the move from low-value generics to high-quality control labels. Examples include:

* Wal-Mart's Sam's American Choice consumables and hard lines, Popular Mechanics tools and Better Homes & Gardens lawn & garden;

* Kmart's Martha Stewart domestics, Jaclyn Smith apparel, BenchTop tools, Nature's Classics consumables, and Jheri Redding personal care appliances;

* Target's Country Estates domestics, Merona apparel, Greatland consumables and outdoor goods, Furio and Windsor & Brown home decor;

* Countless merchandise categories where Dollar General, Family Dollar, Rose's, Ames, Jamesway and other regionals offer a store brand alternative.

Of course, in many product categories, consumers have very strong preference for national name brands. Discount store consumers of soda and soft drinks are among the most loyal to national brand goods, even though this is a category which has seen Wal-Mart unveil several Sam's American Choice beverages. Only about 4% of consumers who had shopped Wal-Mart during the past year named Sam's Choice as their preferred brand.