Report turns spotlight on retailers' private label strategy (from KPMG)

Citation

(2001), "Report turns spotlight on retailers' private label strategy (from KPMG)", International Journal of Retail & Distribution Management, Vol. 29 No. 7. https://doi.org/10.1108/ijrdm.2001.08929gab.002

Report turns spotlight on retailers' private label strategy (from KPMG)

Report turns spotlight on retailers' private label strategy (from KPMG)

Retailers must rethink their use of private labels if they are to achieve customer loyalty in the e-commerce retail market, according to a new report launched recently. The publication, Customer Loyalty and Private Label Products examines the most effective way for retailers to use private labels to reinforce customer loyalty. It argues that successful retailers are those that ensure a good "fit" between their private label and overall marketing strategies, avoiding any potential conflict of message. The report was produced in association with the University of Oxford's Institute of Retail Management (OXIRM) based at Templeton College. The research covers top European retailers including Aldi, Asda, Boots, Marks & Spencer and Migros.

Commenting on the report, Emyr Williams, a partner at KPMG's Global Consumer Markets group, said:

Private labels are a critical tool in building customer loyalty. This is extremely important in the light of the growing e-tail market, in which traditional barriers to customer "disloyalty", such as store location, are swept away. Just as online marketing strategies must differ from those used by physical stores, so Internet private label strategies need to be adapted from the "bricks and mortar" approach to reflect the particular requirements of online customers.

The report provides retailers with a model designed to check the alignment of their private label and overall marketing strategies across all retail environments. Richard Cuthbertson, of OXIRM, commented:

The most serious mistake retailers can make is to approach their private label strategies in a haphazard way. Our private label model provides retailers with the means to assess private label strategy in terms of the proportion of private label to branded goods and the control exercised by the retailer over the production of non-branded products. The relative importance of factors such as price, control over the supply chain, and so on will vary with the company's overall strategy. For example, a firm that is committed to an exclusive, high quality product range, with a high proportion of private label goods, must exercise rigorous control over its supply chain to guarantee the quality upon which its marketing and brand image depend and its customers demand. For this company, competitive pricing will be an issue.

Table II Top 40 companies based on analysts' ratings across all 11 criteria measured

The Internet, however, may change the dimensions of the model. Richard Cuthbertson continued:

While mass-market retailers may adopt price-competitive strategies for one range of private label goods such as the Tesco's "Value" range in conjunction with higher priced, more luxurious private label strands, the Internet may limit these options. This will occur if typical Internet-based consumers are, on average, in a higher income bracket where price will be less important than other factors in choice. On the other hand, service levels, delivery reliability, product design and so on will all be important. Since retailers are already dealing with a new environment – the Internet – they cannot afford to overlook how much the fit between their private label strategy and the overall online brand can help or discourage customers from transferring loyalty from the high street to the computer screen. When another retailer is only a click away, mass-produced budget products, offered by all competitors, may give little incentive to customer loyalty. More tailored and innovative products are likely to be far more effective.