What are Brands Doing to Compete with Private Labels?

The economic landscape is always in a state of flux.

Right now, we’re looking at a massive shift as digital brands pick up steam while traditional big brands, such as Louis Vuitton, struggle.

Amazon has driven this shift to a large extent. And instead of resting on their past continuous takeover, they’re double downing. At the start of 2018, the eCommerce giant launched Amazon Go, their first fully-automated grocery and convenience store.

2018 is also expected to be the year that Amazon’s private labels break out, which means that Amazon is coming after big brands’ slice of the pie.

Why? As the biggest eCommerce business on the planet, Amazon has access to more customer data most other companies. It uses that data to establish consumer intent, before providing them with private label products they’ll want to buy.

On the face of it, this is very hard for brands to compete against. In this article, we’ll show you what big brands need to do to stay relevant. But first …

Private Labels and The Economy

Private labels have been around for a long, long time. As the Harvard Business Review points out, private labels tend to thrive during downtimes in the economy when people turn to cheaper products. However, over the years they have grown in acceptance to the point where there’s no longer a stigma attached to buying them during upturns in the economy. Customers are now buying them anytime.

Worse still, big brands have never had to compete with Amazon private labels in the past. This is a whole new ball game, and it’s bad news for brands who are competing directly with an Amazon private label product – which is pretty much all of us. Indeed, consumer apathy towards big brands is increasing, so much so that Barclay says there is a “sphere of despair” for established brands like Nestle.

In the face of this tidal wave, what can brands do to compete with private labels? Let’s take a look.

Establishing a Direct Relationship with Their Customers

Private labels are super agile and it’s hard for brands to stay relevant when, according to studies, over 51% of millennials claim to have no preference between big brands and private labels.

More worryingly for brands, millennials are dominating the economy. They’re the biggest generation in America, which means that companies can’t just ignore them.

Millennials grew up with different advertising to the baby boomers. The way they consume media is entirely different, and this is opening doors for private labels. To win back millennials, brands need to recalibrate their marketing efforts to focus on building relationships with their customers.

As Forbes point out, low price is not the only reason millennials and everyone else purchases private label goods. They purchase them out of retail loyalty. And retail loyalty is built because a store means something to the customer.

In contrast, one of the reasons Amazon’s private labels sell so well is because of Amazon’s huge budget that goes towards promoting and marketing their products. This is a world away from the traditional store brand model. Moreover, private labels changed the distribution model.

However, there’s hope.

98% of millennials say they’ll make a purchase if a marketer immerses them in a marketing campaign. Millennials also don’t want to be sold to. In other words, brands can no longer rely on traditional advertising methods, and, if your brand sells in brick and mortar stores only, you’re not giving yourself the chance to immerse your customers in a proper marketing experience. By going direct to the customer in a digital way and cutting out the middleman, you can establish a connection with your customers.

Even Tesla sells directly to their customers.

This means offering customers lots of value. It means interacting with them online and creating a proper brand experience. If you build a brand that people recognize, you can build trust that becomes almost impossible to break.

Millennials also crave personalization. Stitch Fix is one brand that’s realized this, and created an algorithm that gathers data about what are the right products for the right shoppers. Brands need to stop relying on old software and instead embrace machine learning so that they can personalize the shopping and marketing experience.

Have a look at Stitch Fix’s algorithm tour:

In doing so, customers will be offered products they’ll actually be interested in. If you don’t personalize your marketing, consumers will assume you don’t care – and in 2018, this is a massive turn-off.

If you don’t focus on building relationships, you need to ask yourself – “is this brand going to survive?”

How To Go On The Offensive On Amazon

With private labels starting to emerge and – to an extent – dominate online, some brands might be thinking that competing with them is totally pointless at this stage. The statistics don’t lie, with Amazon’s batteries growing 93% each year, for example. And in traditional grocery stores, private labels account for 18% of sales.

The thing is, shoppers want to shop on Amazon. And not having your big brand on Amazon will lose you sales, so it’s not really an option.

To compete with private labels, brands can choose to go on the offensive on Amazon. This means following Amazon’s mindset, being aggressive and more agile – and using Amazon as just one part of your sales strategy.

Amazon’s mindset is worth following. As Loose Threads put it, their model is “built to thrive in the Internet-era.” This is down to their agility.Amazon goes wherever the customer is going. They think ahead. And this is a major reason why they launched Amazon Go in a bid to eliminate queues at grocery stores.

eCommerce retailers are following the customer too, with 2018 expected to be the year when retailers double down on their omnichannel sales strategies. For you, this means selling on Amazon and off it. Shopify recently introduced a feature that lets merchants sell on both platforms without any hassle. It’s essential for the growth of any brand.

Customers should be able to shop on a brand’s website. So having your own standalone website is another great option. It’s simply a matter of good customer experience.

Customers want an omnichannel sales experience, too. They like to be able to research products online before picking them up in store. They like to be able to pop into brick and mortar stores and compare deals with other stores there and then on their mobile devices.

Brands need to be where the customers are, whether this be Amazon, Shopify, eBay, their website or in the towns and cities.

How To Go On The Defensive On Amazon

Amazon sell in their own marketplace, and this gives them a few clear advantages. For one thing, it means they’ve got access to your data that they can then use to create their own strategy. They know exactly what customers are buying. They watch what people are buying, make a note of the intent and work backwards, putting together a private label product they know people will want.

Starting with demand gives Amazon a massive advantage, but there’s no need to jump ship from Amazon because of their access to data and their private labels. In order to compete, brands need to take care of their defense, too. They can do this by telling their stories.

Burt’s Bees is just one brand that has a brand story, and telling it helped them increase awareness of their brand. They immersed their customers in a proper marketing experience and made their commitment to natural ingredients known.

Tell your story, involve people in a marketing campaign until eventually when customers want a product in your niche, they’ll type the name of your brand into Amazon’s search bar – as opposed to a generic term such as “lip balm.”

If your brand is already on Amazon, you might be facing a pricing challenge. Optimizing your listings (use keywords) becomes important so that customers can find them. Spend an appropriate portion of your budget on advertising on Amazon, too. Of course, Amazon also make sure their products are seen first, but brands can use Amazon’s PPC advertising platform to run better ads.

It’s also a good idea to invest in software that will help with your supply chain operations too, such as Skubana. Skubana brings all your marketplaces together under one roof, which is ideal and saves you time. Too many brands are using built-out processes that can be slow and cumbersome because they’re afraid to change. But as you sell on Amazon and off it, you’ll need software that can support you in an omnichannel world.

Conclusion

All in all, it’s important that brands don’t feel defeated by the emergence of private labels. Big brands are always competing against someone and companies such as Amazon are – once – again just another competitor.

They’re a big competitor, sure.

But if brands focus on building relationships with consumers, immersing them in proper marketing experiences and whittling Amazon down to just one part of their sales strategy, they can come out on top again.