A revolution is taking place in own label. The spectacular growth of the discounters has disrupted the market irreversibly. Premium and fresh categories – historically the stronghold of mainstream retailers – are now core pillars of discount retailers’ own-label offerings.
It’s a phenomenon I like to call the ‘supermarketification’ of discount retail, and it’s something to which established retailers find extremely difficult to respond. So what should their strategy be?
First, supermarketification is more than just broader own-label ranges. It also involves a new approach to shopper communication, including TV adverts and the use of social media. Plus, a new emphasis on sustainability and corporate social responsibility – in the past, all unthinkable for the discounters.
At the same time, the own-label ranges of traditional retailers have become increasingly unfit for purpose. Value own label in particular is no longer enough to stop shoppers from switching to the discounters. Ranges now have to match the discounters on price as well as quality.
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In Germany, the homeland of Aldi and Lidl, retailers such as Rewe and Edeka have learned that lesson and are successfully fighting back with a new, disruptive approach to own label. They have upgraded or replaced their value ranges to standard tier, thereby moving away from the classic three-tier own-label architecture of good, better, best.
Other European retailers, such as Albert Heijn, Jumbo, Système U and Coop Italy, have followed suit. In the UK, however, this strategy hasn’t yet taken hold.
Yes, Tesco did start to phase out its Everyday Value label and replaced it with Farms brands and other exclusive brands. But while these may have matched Aldi and Lidl on price, random checks we conducted suggest the quality isn’t always there.
There is every reason for UK retailers to take the threat from discounter ‘supermarketification’ more seriously and learn lessons from the Continent. The grocery market is changing at a phenomenal pace as value-focused younger shoppers are becoming less loyal to brands. This is a huge opportunity for own label, but without a strategy to respond to Aldi and Lidl’s value proposition, traditional grocers will fail to make the most of it.
Today’s savvy shoppers won’t be fooled by cheap products that don’t deliver. They demand low prices and good quality – and right now they are more likely to get both at the discounters.
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