Are you brand blocking your private label or doing the compare and save strategy? With price optimization we tend to encourage a frequent review of base pricing, and in particular, a heavy scrutiny on private label versus national brand price relationships.
How does this impact merchandising decisions? For example, in the past, best practices dictated that private label should be merchandised immediately to the right of the leading national brand. This is typically done during the category review process on a bi-annual or annual basis. Some retailers are now recommending that a private label should follow the national brand with the lowest base retail to set a price gap. Does this force the retailer to change his schematic as often as he changes those relationships or are the old merchandising rules obsolete? Are the old merchandising rules becoming obsolete?
For example, does it not make better sense to link the private label to multiple national brands? Items such as private label chocolate chips to both Hershey’s and Nestles’ or private label batteries to Energizer and Duracell are examples of the modification to the rule retailers and merchants need to answer for pricing considerations as well as merchandising strategies. In this case, the decision needs to be made to select ‘the’ most relevant item to merchandise against. I think the merchant needs to determine which brand is the most recognizable to that customer base for pricing relationships if you are still using the “to the right” positioning of private label.
Some of the most successful retailers in private label have not merchandised to “the right” for years. They have BUILT their private label into its own BRAND and can have it stand alone in many instances. (Lady Lee – Presidents choice – etc). Some other giants like Target are still using the compare and save approach. Which is the best strategy for the future?
I’m interested in receiving your comments. What do you see with retail in private label pricing relationships and merchandising? Any feedback as to best practices you are seeing? Is it an all or nothing strategy? Are there cutting edge strategies you are seeing or tests you are doing yourself that you can share?