A less-known effect of the so-called "great recession" that began last year is the major shift in Canadian consumers' buying habits. They have switched some of their purchases from brand-name items to private-label goods.
Consumer goods once were believed to be as recession-proof as any industry can be. Shoppers might not wish to buy diamond jewelery or other expensive items during a period of business contraction, but still they have to buy such staples as soap and toilet paper. Yet recent events have refuted that belief, largely because of competition from stores' own brands or so-called "private labels." The latter are far less expensive, frequently costing about a quarter less than branded ones. This fact is appealing to consumers in this era when most are trying to be careful and husband their resources as much as possible.
Consumers also seem to have decided to forego branded staples such as air fresheners or special detergents for those with sensitive skin. These trends were accentuated by the ill-timed price increases of brand-name goods in response to rising commodity prices.
Then too, retailers have been giving more shelf space to their own products, which have better profit margins than big brands. One marketing expert, Jan-Benedict Steenkamp in the United States, has estimated that the share of private-label goods is now about 30 per cent of brand-name items.
Over the past 12 months, private-label sales have been expanding at close to 10 per cent per year. One retailer has been quoted as saying that middle-market brands, measured by price or sales, now amount to approximately half of all related sales, although the most expensive items have well-maintained their sales volume.
Many now believe that the switch to private labels will continue, even after the business recession ends. The quality of private-label goods has improved significantly, making it almost impossible for consumers to see any difference between a private-store label product and the more expensive rival. This is particularly true for such items as milk or many paper products.
Some consumer goods have been immune to this trend. Unique household cleaning supplies have been able to retain their popularity, partly the result of management-marketing techniques, and the fact that regional marketing managers have direct access to the companies involved. This means that price and sales decisions can be made much more rapidly, and changes take place more promptly than with big brand companies.
Big-brand companies believe/hope that consumers can be persuaded to buy the more expensive, branded goods by changing the product to a "new and improved" one.
This is a remote possibility, hence, the switch to private labels seems likely to persist.
