The benefits of private label and branded products for consumers and businesses

One thing supermarkets are very good at is pricing the products they have on display on their shelves.

Supermarkets seem to know exactly what to do to make consumers buy their products, and you have to be an expert in costing and pricing goods to understand whether what you buy is really cheap or not; in other words, it can be hard to spot a real bargain.

Supermarkets strive to become long-lived businesses by making a small profit on whatever they sell.

Although this profit may only be a few cents, ensuring a profit margin is essential for the sustainable operation of supermarkets.

In order to achieve this, supermarkets apply mixed pricing techniques through price deals, bargains and discounts, in an attempt to attract customers and make them buy more.

Therefore, you should stop wondering why your grocery bill is so high. The reason why you end up spending so much money on your food and other products that you buy from supermarkets is because these companies are real experts in shuffling and re-shuffling the cards, when it comes to pricing their goods; you cannot beat them in their own game.

That is not necessarily a bad thing, because supermarkets are businesses that want to make profit.

They also need to pay their suppliers and their staff, and their role, similarly to any other trading company, is to make available whatever goods their customers want to buy, so customers don’t grow or produce them themselves, or don’t have to go to get those products directly from suppliers, who might be faraway.

In the past, it was generally believed that the quality of private label products was inferior, since they were thought to be cheap alternatives and imitations of goods produced under the label of popular, established and therefore more expensive brands. The sheer use of a label justified the price difference between a private label and a branded product.

So, when you buy a pack of crisps that has a popular brand on it, you also receive many benefits, such as the implicit and explicit quality guarantee of the product.

In other words, the bigger and more respectable the company that produces a specific product, the higher the chances of getting high quality, and of course, paying a premium price.

Although supermarket private label products were introduced with the primary intention of attracting low-income consumers and offer a low-priced alternative to the already existing range of branded products, as well as beating competitors in terms of price, they finally evolved as products of improved quality.

The consumer public has changed its perception of private label products, and nowadays, when a big supermarket chain decides to puts its name on a product, this automatically means that it guarantees the quality of the product.

In this way, supermarkets have evolved from being merchandising companies to becoming providers of quality guarantee services.

A long time ago, the owner of a local corner store, where you could find literally anything that you wanted, would check the products he received from his suppliers by touching, smelling, and inspecting them.

Personal relationships and trust also played a big role.

Today, big supermarket chains are huge businesses that apply quality monitoring procedures throughout their operation, from receipt of goods to displaying them to the public.

Supermarkets soon realized that selling inferior quality private label products was not a wise and profitable tactic.

Although the price of those products was really low, the same usually applied to the level of their quality.

Would you be prepared to pay a low, symbolic price to get something of literally no value?

Of course, most consumers would answer (and they have answered indeed) a big “No” to the above question.

A rational consumer would like to enjoy quality and value in any product that he or she buys.

A rational consumer is also willing to pay a higher price when he or she realizes that this price difference is justified by a guaranteed superior level of product quality.

So what supermarkets essentially did was to stop selling any low-quality underperforming products.

In their place, they promoted private label products of increased quality and value.

This helped them achieve two goals:

1) Increase their profit per product sold

2) Improve their brand image through the display of private label products that are identified with the supermarket company itself

3) Improve the level of customer satisfaction and shopping experience, since the customer would be able to get higher quality products by paying the same amount of money.

Sources and further reading:

Do food labels really matter?

Brands versus private labels: Fighting to win

White label vs private label business opportunities - Which one to choose

The Advantages of Private Label Branding

Top 8 Benefits To Offering Private Label Products

What Is a Private Label? (With Advantages and Disadvantages)