As the New Year approaches, not only is it a time for traditional holidays, but also a season of joy and gift exchange. In the past, people used to buy gifts by going to brand stores to make purchases. However, a different consumption trend has emerged now – Americans, who are heavily impacted by inflation, are starting to budget carefully, focusing on discounts and value for money. Those cheaper yet high-quality private label brands are gaining favor among consumers, such as the heart-shaped gold earrings at Costco priced at $140 that was recommended by a user on social media.
Initially, various retail stores introduced their own product lines, selling private label goods with a low pricing strategy to differentiate themselves from name brands and well-established products. Initially, the quality of these private label products was lower, but that is no longer the case now.
According to reports from Bloomberg, this fall, Alyssa Monaye purchased a ring from Costco worth $700 for the first time, which closely resembled a ring from Van Cleef & Arpels worth $7,600, leaving her very satisfied.
Data from the renowned market research firm NielsenIQ (NIQ) shows that an increasing number of American consumers, regardless of income and age groups, believe that private label brands are just as good as established brands.
A survey conducted by McKinsey last fall also found that the primary reason customers purchase private label brands is that they can get the same quality as brand name products at a lower cost, with saving money being a secondary consideration.
Amid this trend, private label brands like Amazon Basics and Costco’s Kirkland Signature have become very popular. Kirkland offers a wide range of products including clothing, batteries, household items, and food, all of which receive high praise from members. Currently, Kirkland is the top-selling health brand in the United States.
Brian Leach, CEO of the consumer feedback app Ibotta Inc., stated that stores’ private label brands have been “doing well in enhancing reputation and have developed a group of passionate fans.”
This phenomenon of “upward movement of private label brands” can be seen as inevitable, as more and more retailers are starting to produce low-cost private label products, intensifying competition and forcing manufacturers to focus on differentiating products and improving quality.
In recent years, some of the largest retailers in the U.S. such as Walmart, Target, and Costco have invested significant amounts of money to expand production and improve their private label products.
For example, Walmart introduced Bettergoods in the spring. Scott Morris, the Senior Vice President responsible for creating private label brands, stated that Bettergoods aims to create trendy products rather than the common homogeneous products found in the market; currently, Bettergoods has attracted many Gen Z and affluent customers.
Morris mentioned that in order to develop the Bettergoods food series, Walmart sent product developers around the world to investigate people’s dietary cultures and determine what products to introduce based on their findings.
Currently, the Bettergoods lineup consists of approximately 300 products, with packaging that appears upscale and ingredients sourced from exotic locations. For example, their “Authentic French Macarons” come from a family bakery in France with a history dating back to 1936.
Furthermore, aside from good quality, about 70% of products in the Bettergoods series are priced below $5.
Similarly, Costco has also intensified the development of its private label brand Kirkland. Costco stated that their goal is to provide products of equal or even better quality than other brands in the market, with prices at least 20% cheaper.
Currently, Kirkland is a $50 billion brand, growing faster than Costco’s other businesses.
The trend of consumers turning to store private label brands is evident, causing established brands to feel the pressure. Currently, manufacturers such as Procter & Gamble, Kraft Heinz, and Danone are all reevaluating their product marketing strategies in response to the fierce market competition.