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The Popularity of Own-Label Products During the Cost-of-Living Crisis

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Houston, Texas USA 12-23-2019: Generic bleach bottles on a super

The cost-of-living crisis has been a significant concern for many households worldwide, as rising prices and low or no wage rises make it increasingly challenging to make ends meet. In the current economic climate, own-label groceries have emerged as a popular choice among supermarket shoppers. Own label, also known as private label or store own brand products, are produced and sold exclusively by retailers.

As of June 2023, consumers have been continually trading down to own label products since the cost-of-living crisis began, with prices rising fastest on essentials like milk, eggs, and margarine. Sales of white labels rose 9.3% in January compared to just 1% for branded goods, and 13.3% in December compared to 4.7% for branded lines.

Own brand products are products that are manufactured or produced by a retailer or a company and are sold under their own brand name instead of a well-known or established brand name. These products are typically sold exclusively in the retailer’s stores or through their online platforms.

Own brand products can be found in various industries, including food and beverages, household goods, clothing, electronics, and cosmetics, and are more closely associated with large supermarket chains. They are often created to provide an alternative to name-brand products and offer consumers a more affordable option.

Characteristics and advantages of own brand products

Branding

Own brand products carry the retailer’s brand name or a specific sub-brand, allowing the retailer to create a distinct identity and differentiate themselves from competitors.

Control

Retailers have control over the production, quality, and pricing of own brand products. They can tailor the products to meet specific customer needs and preferences.

Cost-effectiveness

Own brand products are typically priced lower than comparable name-brand products. This affordability can attract price-conscious consumers and create a value proposition for the retailer.

Exclusivity

Retailers can offer unique products that are not available elsewhere, giving them a competitive advantage and encouraging customer loyalty.

Profit Margins

By manufacturing their own products, retailers can capture a larger portion of the profit margin, as they don’t have to pay licensing fees or rely on third-party suppliers.

Flexibility and innovation

Retailers can introduce new products quickly and respond to market trends and consumer demands more effectively compared to relying solely on external suppliers.

It’s important to note that the quality of own brand products can vary depending on the retailer. Some retailers invest in research and development, ensuring their own brand products meet high standards, while others may offer more budget-friendly options. Consumers should evaluate the quality and value of each own brand product based on their individual preferences and needs.

The surging popularity of own-label products

We have explored the reasons behind the surging popularity of own-label products and groceries during the cost-of-living crisis, highlighting factors such as affordability, quality, variety, and changing consumer attitudes.

Saving Money in Tough Times

One of the primary reasons for the surge in popularity of own-label groceries during the cost-of-living crisis is their affordability. As consumers face rising prices for essential goods, own-label products offer a cost-effective alternative to national brands. These products are often priced lower than their branded counterparts, enabling consumers to stretch their limited budgets further. By opting for own-label groceries, individuals and families can save a significant amount of money on their grocery bills, which is especially appealing during times of financial strain, when many families have been forced to choose between heating and eating.

Bridging the Gap

Gone are the days when own-label products were perceived as low-quality substitutes for branded items. Retailers have invested in improving the quality and value of their own-label ranges, thereby dispelling the notion that cheaper prices equate to inferior goods and products. In fact, many own-label groceries now rival or even surpass their branded equivalents in terms of quality and taste. Retailers have realised that providing high-quality own-label products can enhance their reputation, build customer loyalty, and ultimately drive sales. As a result, consumers have gained confidence in purchasing own-label groceries, knowing that they can obtain excellent value for their money without compromising on quality.

Catering to Diverse Preferences

Another factor contributing to the popularity of own-label groceries during the cost-of-living crisis is the increasing variety and choice available to consumers. Retailers have expanded their own-label ranges to cover a wide spectrum of products, including fresh produce, non-perishable staples, and even premium items. This diversification allows consumers to find own-label alternatives for almost any product they require, enabling them to make significant savings across their entire shopping list. Retailers have realised that they need to cater to specific dietary needs and preferences, such as gluten-free, organic, and vegan options within their own-label offerings. This enhanced variety ensures that consumers can find products that align with their values and dietary requirements whilst still enjoying the cost savings associated with own-label groceries.

Shifting Perceptions

The cost-of-living crisis has forced consumers to reassess their purchasing habits and prioritise value for money. As a result, there has been a shift in consumer attitudes towards own-label groceries. Previously, some individuals may have associated own-label products with inferior quality or a lack of choice. However, the cost pressures experienced during the current economic climate have prompted consumers to re-evaluate these perceptions. Increasingly, consumers now recognise that own-label groceries can deliver both affordability and quality. This change in mindset has played a crucial role in driving the popularity of own-label products, as consumers have become more receptive to exploring these options and breaking away from traditional brand loyalty.

In times of economic hardship and rising living costs, own-label groceries have gained significant popularity among consumers. Affordability, improved quality, increased variety, and shifting consumer attitudes have all contributed to this rise. By offering cheaper alternatives without compromising on quality, own-label products have become an attractive option for individuals and families looking to stretch their budgets further. As retailers continue to invest in and expand their own-label ranges, it is likely that the popularity of these products will continue to grow, providing consumers with a viable solution during the ongoing cost of living crisis.

How is the cost-of-living crisis affecting supermarkets?

The cost-of-living crisis can have several effects on supermarkets, including the following:

Consumer Behaviour

When the cost of living rises, consumers tend to tighten their belts and become more price-conscious. This may lead them to reduce their spending on groceries or seek cheaper alternatives. Supermarkets may experience a decrease in sales volume as a result.

Changing Purchase Patterns

As people try to save money, they often change their shopping habits. For example, they may shift from buying premium or branded products to more affordable or private label/store brand items. As already stated, supermarkets have had to adjust their product offerings to cater to these changing preferences.

Demand for Discounts and Promotions

Consumers facing financial constraints may become more reliant on discounts, promotions, and loyalty programs to save money. Supermarkets may need to adapt their pricing strategies and increase the frequency of promotional activities to attract customers.

Squeezed Profit Margins

If supermarkets want to maintain competitive prices while dealing with rising costs, such as inflation, they may face tightened profit margins. They may need to negotiate better deals with suppliers, optimise their operations, or find other ways to manage costs without compromising quality.

Supply Chain Challenges

Rising costs can affect the entire supply chain, from producers to distributors and retailers. Increased transportation costs, higher commodity prices, or inflationary pressures on inputs can impact the availability and affordability of products in supermarkets. Negotiations may need to take place with suppliers or alternative sourcing options found.

It’s important to note that the specific impact on supermarkets can vary depending on the local economic conditions, market competition, and consumer behaviour.

Whatever your brand or business, RGS Labels provides a full consultancy service to help you design the best labels for your products, whether they’re budget friendly or high-end luxury. Get in touch with us to find out how we can help you.