Once the unglamorous workhorses of the apparel industry, private label brands have been in the spotlight recently as retailers use them to differentiate their businesses from their competitors’.
In the last year, Target has rolled out a dozen new owned collections, effectively revamping a slate of aging house brands that were stealing some of the luster from the company’s “Tar-zhay” cachet. Meanwhile, Amazon has been on a steady march into fashion apparel, armed with a slew of customer data and the status as the go-to shopping destination for Prime users everywhere.
At the Shoptalk retail tech convention in Las Vegas Tuesday, brands from across the consumer products spectrum shared how they tap into private label’s power and potential.
In the grocery space, Kroger has been offering its own products for decades, but what used to be generic chips and toiletries, in equally unimaginative packaging, has morphed into a slate of product lines under the Our Brands umbrella that is as thoughtfully crafted and curated as anything else in the store. And elevating the space beyond the formerly cheap, also-ran status has paid off.
“We treat our brands as brands, and we talk to our brands as if they’re brands,” said Gil Phipps, VP of branding, marketing and Our Brands for the grocery store chain. “And they are the brands we sell the most in our store by a really long shot.”
Phipps said Kroger moves 1.25 million Our Brands products an hour. Further, he added, households that shop these products spend 25 percent more than their counterparts.
In addition to giving private label an overhaul, the chain changed the way these goods are typically merchandised. Instead of getting the least desirable slots in the stores, Kroger created Treasure Empori-Yum areas in which it prominently chorals and promotes these items. By “unburying the treasure,” Kroger has seen a 57 percent lift in sales.
Product visibility has also been key for Tuft & Needle. The mattress company credits its success in part to distributing in channels where customers are already shopping, which has meant going headlong into a relationship others have shied away from.
“For us to grow, and being purely online, we have to go where customers are, so that means being on Amazon. Really, we just want to be where our customers are to take out the friction and pain points they might have,” said company co-founder JT Marino.
And the decision has proven a good one. Marino said Tuft & Needle commands the lion’s share of sales in the $500 or more mattress category on the site. And while that was good, the fact that it only represented a sliver of the overall mattress sales below that price point was troubling.
“We saw a lot of Chinese imports coming in causing price compression. We started seeing the disruptor being disrupted. So, we had to make a decision. Either stay put, stay focused and don’t worry about it or go downstream and launch a product ourselves,” Marino explained.
Ultimately, the company decided to launch a lower priced collection, The Nod by Tuft & Needle, exclusively on Amazon, but not without plenty of consideration—and some trepidation.
Among the issues the company worried about was confusing customers in the market by having two tiers of products, cannibalizing sales from the main collection and devaluing the brand overall.
Ultimately, The Nod, which launched toward the end of last year, “took off”—without any real negative impact to the Tuft & Needle brand. Marino credits his team’s due diligence in parsing the data, developing a product geared toward a specific demographic and remaining focused on Amazon exclusively.
For Marino, that last point was one of the most important decisions the company made.
“From our point view, as long as we don’t continue this with other distributors and unwind what we were disrupting in the first place, then we should be OK,” he said.
For Stitch Fix, which delivers boxes full of apparel and accessories to subscribers every month, diving into private label has been a natural extension of the brand’s business model.
The data-driven company is based on sophisticated algorithms paired with real-life stylists who determine the looks that get deployed to its subscribers. And the process is designed to get smarter and smarter the longer a customer sticks with the service. By carefully tracking what items shoppers accept and the pieces they reject, Stitch Fix amasses information about personal preferences, body types, price sensitivity and more.
And one of the main things the company has learned is that the label in the garment is one of the least important aspects of the sale. Rather than brands, Chris Phillips, GM of men’s, kids and exclusive brands, said shoppers are focused on fit, quality and style. And by delivering on these attributes, he said Stitch Fix takes on the trusted space that a brand might otherwise fill.
“For Stitch Fix, the brand is the experience,” Phillips said. “[Customers] know the items were curated, relevant and personalized for them.”
With that level of trust and armed with knowledge about what works best for its customers, the company has designed pieces aided by AI. The result is “some of the best performing styles we have,” according to Phillips.
He calls the process “client led” because unlike the typical brand model, which tries to get shoppers to adopt the looks it deems desirable, Stitch Fix creates into its shoppers’ tastes. And Phillips said the company’s brand partners could do the same.
Stitch Fix provides performance data to the companies it works with, adding a valuable dimension to the partnerships. “The power of our model is the data, and we know knowing our clients’ preferences makes us a great partner for brands,” Phillips said. “The brands who harness our data are making better products.”
Further, Phillips said one other thing makes Stitch Fix stand out: “We’re a completely regular price business, which in this day is rare, so brands find value in the quality of the sale.”