Sneakernomics: The Private Brand Defense
Matt Powell, Vice President, Senior Industry Advisor ;
This is turning out to be the most promotional year in U.S. sports retail that I have ever seen. Having too much of the wrong inventory forces brands to loosen the reins on minimum advertised price (MAP) policies, which has caused formerly aspirational and inspirational products to be on sale pretty much 24/7. The brands themselves have been the worst offenders.
While there is talk about restricting MAP policies next year, there is no way for brands to do that without taking a hit on sales. No one can afford to do that right now.
There is one area of growth to consider: private label brands. Let’s take activewear as an example. According to data from NPD’s Retail Tracking Service, the aggregate of all private brands represented about 20 percent share of the U.S. activewear market in the third quarter of 2017, making it the largest “brand” reported. Private brand sales grew more than 20 percent, well above the low single-digit growth seen in all of activewear combined.
Retailers are turning more and more to private brands in an attempt to get above this promotional quagmire and to drive greater sales and profits. With the never-ending promotional environment, retailers must take action to protect sales and profits.
As brands move more of their business to direct-to-consumer, retailers need to insulate themselves from the increased and formidable competition. Private brands can create that insulation.
Retailers should develop private brands that complement their assortments. Duplicative products will only confuse the customer and create more markdowns.
The concepts behind PUNY (premium, unique, new, and young) should inform private brand development. The goal of private brands should be to elevate assortments and the retailer’s own brand. The market doesn’t need more programs that must be promoted to move; traditional brands are giving us plenty of that.
Private brands don’t have to include all four principles of PUNY, but should include at least three. “Premium” is a subjective term that means something different to every retailer. “Unique” should reflect the personality of the retailer.
Private brands are much easier to execute in apparel than in footwear, due to footwear’s high development costs. But, given the non-tech modern runner trend we are seeing, new products are easier to develop. It would not surprise me to see a smaller, more entrepreneurial footwear brand connect with retailers to build private brand shoes for them.
There is no end in sight to the promotional death spiral we are in. Retailers must seize their own fortunes, and build out private brands.
Related Blog Posts
The retail experience has never been more complicated, or more important. NPD’s Matt Powell explores the critical components that make a great experience, and what sports retailers can do about it.
Overall for 2017, U.S. team sports equipment sales declined in the single digits, but below the surface it was a mixed bag, with notable pockets of growth.
In today’s retail landscape, industries cannot live strictly in their silos, but must learn from each other. Beauty is among the fastest-growing. Here are the top trends driving its success today, and what others like the sports industry can learn from it.
In my previous blog, I wrote about the ways in which retailers can revolutionize the in-store environment to survive the internet age.
- What Toys“R”Us Closing Means for the Toy Industry
- Global Toy Industry Opportunities Amid Toys“R”Us Closure
- Gen Zs Are Discerning Grocery Shoppers With An Eye For Organic And Real Foods
- Vegan boost to prestige beauty market
- What’s happening in the automotive aftermarket?