The future of private labels: Towards a smart private label strategy

Modern day store brands (SB) or private labels (PL), now also popularly called private brands, are brands generally owned and marketed by
retailers. They have been active on the market for about 70 years. Over this time span, these brands have evolved from generic, cheap, low-quality
economy or budget private labels to lower-priced-than-national brand but acceptable-quality value or standard private labels. Over time, retailers
extended the value proposition to the consumer segment seeking higher quality by offering premium private labels. This strategy, called the tieredprivate label, comprises offering economy PL to the price-sensitive but not quality sensitive consumers, standard PL to mainstream consumers
seeking acceptable quality at lower prices, and premium PL to the quality-sensitive segment seeking value. Over the last 40 years (1980–2020),
these versions of private labels have witnessed substantial growth around the world, though the growth is said to be tapering in recent times.
As retailers chart the future strategy for their private labels in 2020 and beyond, a pertinent question they face is: Should they continue to offer
value or even tiered PL with the same formula that brought them success in the past, or should they morph and adopt new strategies in keeping with
current market trends? We support adopting a new strategy that we call the smart PL strategy. The value PL strategy and its manifestation as the
tiered PL strategy cater to different consumer segments but focus primarily on price and quality as attributes of choice. In the current marketplace,
consumers care not only about price and quality, but also about sustainability, ethics, social responsibility, image, so forth, perhaps more so than
earlier generations. They are also more tech-savvy in using digital tools for search and purchase. Retailers, on their part, are now endowed with
rich, extensive data that they can tap into to understand customers’ diverse needs, and they are able to harness technology for developing the right
product and communication. Thus, the smart PL strategy is a strategy by which retailers can leverage data and technology to market private labels
that meet diverse customer needs and achieve greater retail differentiation, store loyalty, margins, and profits. This thought piece provides a road
map for developing such a smart PL strategy and directions for future research.