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Brands are in trouble and Private Labels stand to win online

By Chris Dawson May 10, 2018 - 12:33 pm

At this week’s Catalyst Europe conference, ChannelAdvisor CEO David Spitz, echoed by many of the other speakers, spoke about the opportunity for small, new and niche brands and private labels online.

There is a seismic shift in the way that brands market themselves. Traditionally it was all about the ability to buy shelf space in a retailers physical store. Brands would rely on their wholesalers and reps to sell product into stores and often it would be the distributors who struck a deal for prime placement in the shop. Concessions in stores are another way that Brands position themselves up front and centre and of course traditional advertising on TV, Cinemas, billboards and printed publications all play a part.

80% of retail is still offline, but in the region of 20% of retail that’s online Brands will increasingly find it difficult to differentiate themselves. We see Amazon increasing their line of Amazon Basics products in addition to around 70 Private Label brands and David Spitz quoted that 51% of millennials have no real preference between brands vs private labels. Millennials don’t differentiate between traditional brand and brands that they see online and, while this will be causing established big name brands sleepless nights it opens the door to unknown brands and private label businesses to thrive online.

Of course there will always be shoppers who search specifically for their favourite labels, but increasingly on marketplace those labels will be displayed alongside listings for niche brands, private labels and unbranded goods and therein lies the opportunity for online merchants. Whilst you may not have the marketing bucks to get your products into highstreet department stores, getting your products in front of consumers on their computer, tablet and mobile screens is relatively cheap in comparison and most certainly affordable.

The really good news is that more than half of all millennials will not give preference to established brands compared to your private label products. They will be looking for quality, fashion, style and price, but not knowing your brand won’t necessarily put you at a disadvantage.

Traditional brands will have to re-evaluate how they market their products, it will no longer be sufficient to rely on distributors and retailers to market products instore. At Catalyst, David Spitz highlighted the difference between a multi-million dollar Superbowl TV advert costing perhaps $45 per viewer that saw the advert (if they weren’t at the fridge getting another beer in the ad break) compared to a $4,500 production cost Dollar Shave Club YouTube ad that, with 25 million views cost less than a cent per view… and you can be pretty sure if a YouTube clip is playing that someone is engaged and watching it!

You may not have the budget for even a $4,500 video shoot, but whatever you invest in video content (which is free to upload) will undoubtedly be more cost effective than a $45 per view Superbowl advert and there’s the rub – The Internet is not only a great leveller, but as an online retailer, you don’t have the problem that the large brands have which is marketing to the 80% of retail that’s still offline.

Brands are forced to market to their legacy customers who shop on the high street as well as those that shop online but as an online merchant you’re free to focus on what you do best. Build your Private Labels, market them online and they’ll be displayed alongside those from major brands on an equal footing.

One interesting takeaway from Catalyst is that the conference was full of high street brands and retailers and yet in all of the talks, even from marketplaces such as eBay and Amazon, there was barely a mention of brands. The marketplaces are already moving away from focussing their efforts on the big names from the past as they will see the sales figures and know that today’s online shopper is just as happy to buy a Private Label as an item from a known brand.

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