Crossing Culture with Private Brands
Private Brands (PBs) have enjoyed much success, particularly in the west. They exist in over 90% of CPG categories and have transformed from low price/low-quality products to compete with National Brands (NBs)1.
Given the economic turmoil that Covid-19 has thrust upon the world, PB sales are likely to increase as recession bites7. When faced with tighter budgets, it would make sense for PBs to increase in sales. Indeed, a dunnhumby Consumer Pulse survey found nearly 1 in 4 global consumers claimed they would “buy PBs if available”17.
Variation in Private Brand market share
PB success varies quite considerably in the world. Western Europe leads the way with 35% value market share, followed by the USA with 23%2. However, other regions lag far behind such as eastern Europe (7%) and Latin America (2%)2. Parts of east Asia are even further behind, for example Vietnam stands at around 1% market share2.
However, even western Europe is not homogenous, and volume market share ranges from 22% in Italy to 50% in Spain and Switzerland3. There are also likely to be further variations within a nation.
Predicting increases in PB market share is a tricky business. In 2013, Rabobank predicted that within 15 years the main Asian markets, such as India and China, would see PB market shares similar to that of Western Europe19. Compare that to Euromonitor who in 2014 predicted emerging markets would yield only a gradual increase if any19. Whilst cultural revolutions may occur in the future, PB market share is unlikely to undergo an overnight revolution in emerging markets.
Despite offering good value for money, with many costing 21% less than NBs on average16, PBs clearly enjoy less success in some parts of the world. This even occurs in countries with lower disposable income where customers would benefit more. So what could explain this paradox?
There are underlying commercial reasons for these differences, for example retail distribution (i.e. economies of scale, low costs, high margins); logistics structure (i.e. distribution efficiencies) and retail typology (i.e. quality, familiarity of PBs, risk perception), are all thought to play a pivotal role1. This is not an exhaustive list but the fundamental commercial reasons as to why PB market share varies. There are likely to be other customer-centric variables too, such as the degree of price consciousness4.
Whilst these and other commercial reasons play their part; the usual socio-economic variables such as age, gender and income are thought to play a limited role18. For this reason, cross-cultural psychology should be highlighted.
There are several cross-cultural variables, which overlap to some extent. WEIRD (Western, Educated, Industrial, Rich, and Democratic10), Analytical12, Loose11 or Individualist5 cultures such as the west tend to focus on the detail of the individual. Whereas most other cultures such as east Asia tend to focus on a wider in-group or the greater whole, rather than the sum of its parts.
This generic concept and others have all manner of implications. A correlation has been found between PB market share and Individualism5. However, east Asian cultures buy not just for “I” but for “we”. It is comparable to entertaining a guest; who wants to entertain with PB products? -it is perceived as too risky. Furthermore, western cultures are more analytical and in relative terms see price as a separate variable in its own right; whereas other cultures such as in east Asia are more likely to equate price with quality6. Therefore, PBs in East Asia and other nations may be perceived as poorer quality than in the west.
East Asian cultures build relationships slowly but surely, whereas in the west relationships can come and go more easily. This implies east Asian cultures may prefer the older and trusted NB compared to the newer PB which disrupts harmony5. Indeed, a negative correlation has been found between PB market share and long-term oriented cultures5.
The importance of culture in relation to PBs has once again resurfaced in a recent priming study8. Assuming a context of low product desirability, it was found that less acceptance of social inequality combined with a high status led to a preference for PBs. However, more acceptance of social inequality combined with a low status led to a preference for NBs.
The dunnhumby Consumer Pulse statistic mentioned earlier can be broken down to support this cross-cultural proposition too. Western consumers such as the UK stated they would “buy PB if available” stood at 38%, whereas for an east Asian nation such as South Korea was at 12%17. Cross-cultural factors are likely to be playing a role in any global survey too, regardless of the context.
Despite PBs being able to help cash-strapped customers wherever they are in the world, PBs have not yet been equally accepted in all parts of the global village. Given the cross-cultural reasons cited above, there are some implications that may aid the sale of PBs:
- Dispel customers concerns with quality and risk by providing in-store tasters or demonstrations
- Disguise PBs with venture brands (i.e. a non-retailer name)
- Provide more marketing communications15 emphasising quality, trust and satisfaction
- Close the gap with price and quality through premiumisation
- Use dynamic social norms messaging (i.e. the relative increase in PBs sales) to nudge PBs
- Increase the usage of trademarks that may ease concerns with quality (e.g. UK “lion eggs” imply good health and safety standards)14
- Focus on categories where there is less perceived risk16
There are also some implications that may not work. For example, providing a return policy may not work in some cultures (e.g. east Asia) as customers may not want to disrupt social harmony and make a complaint. Those complaints are more likely to be taken to social media instead.
Retailers cannot simply hit the repeat button from their home nation and assume PBs will be just as successful in other parts of the global village. An awareness of cross-cultural psychology can help avoid such assumptions and others. Whilst the reasons for inconsistent market shares for PBs are deep and complex, cultural explanations are an important factor that are often ignored and may then supress market share. The degree of success of PBs is likely be deeper ingrained in our collective psyche than retailers may assume.
1 Cuneo, A. et al (2015). The Growth of Private Brands: A Worldwide Phenomenon? Journal of International Marketing, Vol. 23, No. 1 (2015), pp. 72-90
2 https://www.kantar.com/inspiration/retail/value-for-money-retail-models-in-asia-discounters-or-private/ (accessed November 2020)
3 https://www.plmainternational.com/industry-news/private-label-today (accessed November 2020)
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9 Steenkamp et al (2010)
10 Henrich, J. (2020). The Weirdest people in the world. Allen Lane.
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12 Choi, I. et al (2007). Individual Differences in Analytic Versus Holistic Thinking. Personality and Social Psychology Bulletin 33: 691-705
14 https://www.egginfo.co.uk/british-lion-eggs (accessed November 2020)
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16 Batra, R. and Sinha, I. (2000). Consumer-level factors moderating the success of private label brands. Journal of Retailing 76 (2): 175–191.
17 https://www.dunnhumby.com/resources/blog/results/en/six-months-on-how-have-consumer-behaviours-changed-as-a-result-of-covid-19/ (accessed November 2020)
18 Larson, R.B. (2018) Profiling prospective private-label buyers. The International Review of Retail, Distribution and Consumer Research 28 (5): 516-530.
19 Dekimpe M.G. (2019) Retailing and retailing research in the age of big data analytics. International Journal of Research in Marketing. 37:3–14.