Retail

Private Labels Have Their Roots In Coffee And Hats

Private Label

The most popular time of the day when people drink coffee isn’t just a factoid: It’s a viable marketing strategy.

When the iconic Great Atlantic & Pacific Tea Company (A&P) was looking to brand its bulk Brazilian coffee in 1919, it asked consumers when they drank coffee. Their answer was 8:00 A.M. and 8:00 P.M., so the A&P decided to name its house brand of coffee Eight O’Clock.

The name stuck — and served the retailer well. By 1929, A&P had become the world’s largest seller of coffee.

A few years later, the grocer showed that private label brands can attract celebrity endorsements too, as renowned singer Kate Smith would go on to promote Eight O’Clock at store openings and other events in the 1930s and 1940s.

While the coffee story might be entertaining, it’s not the full history of A&P’s private label strategy. In fact, the company started using private labels in earnest in 1870 for prepackaged tea and in 1888, when it hired a chemist to create the Great American Baking Powder brand.

With some heavy marketing, A&P was able to sell loads of baking soda at low prices — revealing that consumers were willing to purchase private label brands. But early American retailers weren’t always motivated by price when creating their own private label brands.

JCPenney Founder James Cash Penney, for example, started his own private label brand because some of his suppliers didn’t meet his quality standards. His first product? The Marathon Hats collection, a line of elegant fedoras.

As JCPenney grew, so did its private brands. Its roster of house brands would go on to include Big Mac shirts, Penco sheets and Waverly caps — even plaid shirts.

The strategy would prove to be timeless. In 2009, the private label brand entered the world of the mega eCommerce retailer when Amazon decided to create its own brand of electronics accessories called AmazonBasics.

“We saw an opportunity to create a line of consumer electronics basics that combine quality and low prices for an overall focus on value,” Paul Ryder, vice president of Consumer Electronics for Amazon.com said at the time in an announcement in 2009. And what an opportunity it was.

 

Today

Since 2009, AmazonBasics has sold well — very well. But Amazon has become a victim of its own success, as AmazonBasics has become the main competitor for Amazon’s other brands.

In a way, AmazonBasics is cannibalizing the eRetailer’s other private label brands. Amazon’s bedding and bath label Pinzon, for example, has seen its sales decline by 50 percent during 2017 as AmazonBasics has seen its own increase by 50 percent.

Following Amazon, Walmart’s Jet.com launched its own a private label brand. But unlike the eCommerce superstore, which had a broad audience, the eRetailer decided to gear its Uniquely J toward millennials.

Through Uniquely J, Jet.com sells a variety of products, such as toilet paper, coffee and laundry detergent. Showing that a private label brand can be cool, its products are designed with sustainability in mind, such as thyme basil cleaning wipes at $5.37 and a 14-ounce bottle of organic teriyaki sauce at $3.48.

 

Future

What’s next in private label retailing? Perhaps more online stores like Brandless, which launched in 2017 and offers private label consumer packaged goods (CPG) products, such as beauty, food and household supplies for a flat $3 each. Its tagline certainly has the potential to grab consumers’ attention: “Better Everything. For Everyone. For $3.”

With its value-oriented focus, the eCommerce retailer is positioned to capitalize on an emerging trend among consumers who have an increasing interest in spending less on private label goods. Millennials are less brand-loyal than their parents — though they tend to like quality — which means retailers like Brandless that let them tap and access those preferences have discovered a market looking for attention.

And, for those seeking a more traditional brick-and-mortar experience — yes, millennials, too — there’s also ALDI and Lidl, the no-frills German import grocers that are rapidly expanding in the U.S. due to the strength of their private label brands.

Retailers looking to expand might want to take a page out of their playbook, too, and invest in their own private label brands.

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