Name brands no longer distinguish from store brands
February 6, 2014
Consumers see little difference between store brands and name brands and are therefore opting more and more often for the least expensive brands. This is evident from studies by research agency GfK and the TIAS School for Business and Society based on data from the GfK consumer panel.
The fact that consumers opt for a store brand increasingly more often is a trend that has been observed for some time now. The market share of store brands increased during the period 2003 to 2012 from 29% to 45%. Consumers take a different approach to shopping: they opt for cheaper products, have a stronger liking for discounters and make purchases less frequently, but purchase more at once. Some consumers cut back on costs by purchasing less. The economic crisis is one of the reasons for this, but another factor concerns the increasing switch behavior to less expensive brands and stores. The switch is mainly due to the fact that the quality difference between name brands and store brands is becoming increasingly smaller.
“The growing group of fans of store brands is more cost-conscious and only purchases name brands if these are offered at a special price. Due to the diminishing objective quality difference between name brands and store brands, this trend will only increase”, according to the authors Will Reijnders, professor Marketing at TIAS and Ton Luijten, Methodologist at GfK.
Producers of name brands – such as Unilever – face a decrease in sales. This is due, in part, to the high promotional pressure that name brands are burdened with. “Name brands are virtually always on special offer. Consumers anticipate this. The consequence is a continuous subsidization of the loyal customers of these brand names on the one hand, and stimulating switch behavior on the other, which diminishes the brand- and store loyalty.”
In order to be able to meet the competition with store brands, name brands should invest less in sales promotional activities, the authors recommend. “They should invest the savings that they realize in this way mainly in innovation and marketing. This is the only way that name brand suppliers can strengthen their market position.”