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Recession Fears Drive Shoppers to Private Labels

It’s looking increasingly like a recession could be in the cards, and American consumer grips on pocketbooks are tightening accordingly.

In a perhaps welcome shift for retailers, though, the threat of an impending financial downturn is driving shoppers toward private labels.

A new report from data analytics firm IRI revealed that though more than half (57 percent) of consumers are confident in their financial health, they weren’t feeling quite as confident in their ability to spend during the third quarter of 2019. Many are looking to pad their savings to guard against economic headwinds, but they’re not ready to give up shopping entirely.

“While shoppers across generations and income groups in 2019 are undoubtedly more price conscious, they are turning to private label because of their positive perceptions of the value,” Joan Driggs, vice president of content and thought leadership at IRI, said.

“Shoppers are buying private brands because it makes them feel good to save money without sacrificing taste, selection or quality. The improved consumer perception of private label value is having a growing influence on store choice, with many leading retailers offering premium private-label selections,” she added.

The shift toward private-label brands is happening across generations and income levels. In fact, nearly all (99.9 percent) of consumers surveyed said that they shopped private brands regularly, though young, senior and low to middle-income consumers are prime targets for the category’s growth.

Millennials have shown the highest adoption rates, with consumption of private-label goods growing by 10 percent from 2018—outpacing even adoption of other national brands. As the group ages and develops increased spending power, the trend toward private labels stands to continue.

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Trust in retailers also plays a vital role in the category’s popularity, IRI said. When faced with a plethora of options, consumers can turn to store-label brands as a “go-to solution” from retail entities they’ve come to trust. Private-label popularity could spell opportunity for those that double down on their store brand strategy.

The category still faces its share of challenges, Driggs opined. Home care has so far shown the highest growth potential, while non-edible department growth is actually slowing.

That’s because there are customer experience improvements that need to be made, Driggs said.

“Packaging image has been found to be a purchase barrier among millennials and light buyers,” she explained. She also cautioned retailers against following the lead of national brands when it comes to trends, instead of doing the work to innovate on their own.

Shoppers are increasingly drawn to products that focus on function, health and wellness, she said, and those areas represent a gold mine for trusted retailers looking to curry favor with their consumer base.