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January 19th, 2010

Report: Store-Brand Items Should Cost More

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Would you continue to buy store-brand items if they increased in price?

The recession has prompted all of us to sacrifice some things in the name of fiscal responsibility. For some, one of those “sacrifices” may have been switching to store brands in lieu of name brands. However, the cheaper prices and improving quality of store brands have made these transitions easier.

According to a recent report by the Nielsen Company, U.S. retailers should take advantage of the favoritism consumers are showing to store brands by raising prices:

Consider this: an increase of just one cent in store brand prices translates to roughly $400 million dollars in sales across all departments measured by Nielsen. In departments and categories with extreme price gaps, the potential to enhance category sales can be significant. With the ongoing price compression in the industry causing declining category and same-store-sales, retailers would be wise to think about shifting focus on raising prices on some of their own brands.

Retailers shouldn’t fear these increases, suggests the Nielsen Co., for the reasons consumers shop at a particular store over another has a lot more to do with than just prices:

Prices alone are not the key to shoppers’ hearts. Price is top of mind for all retailers right now, but Nielsen’s annual Shopper Trends study reports that strong shopper relationships are built on at least four other factors that are equally important to driving commitment. When the purse-strings relax as the economy improves, those other factors will separate the strongest grocery retailers even further from the pack.

The survey found that the most successful retailers are the ones who are complementing current pricing strategies with a strong commitment to other shopper needs and building a stronger platform for long-term success. The five over-arching areas that the study identified contributing relatively equally to shoppers’ emotive equity in the U.S. are:

  1. Store accessibility
  2. Store format and wide selection
  3. Pricing and value for money
  4. Stocking quality products
  5. Efficiency and loyalty program

The importance of these other factors also explains why every shopper is not doing their weekly grocery stock-up in a discount chain, despite the pressure of a recession. Consumers still want to have a pleasant experience and there is tremendous value in making that process convenient and easy for them.

While this may be the ultimate anti-consumer report, we feel that it’s part of our job to let you know when changes that could affect your ”purse-strings” may be coming.

Does this report make a valid point? If the store brands at your favorite retailer increased by just one cent (as the Nielsen Co. suggests), or perhaps increased by as much as 15-30 cents, would you continue to buy the store-brand items at that retailer?

(hat tip: ConsumerWorld.org)

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3 Responses to “Report: Store-Brand Items Should Cost More”

  1. Tim Manni Says: January 19th, 2010 at 1:37 pm

    Allow me to start off the comments on this post…This report makes some sense (it’s important to emphasize “some”) to me. Here’s why:

    An example:

    I always try to buy Target’s store-brand multi-purpose solution for my contacts. Two, 12 oz bottles goes for about $5.00. At my local drugstore (CVS), a single, 12 oz bottle goes for about $8.00 (I don’t have receipts in front of me, so these prices are approximates).

    Even though CVS is only two blocks from my house, I’ll drive the 15 minutes to Target so I can stock up on the cheap solution. If both retailers were to raise the price of their store-brand solution, I would a)continue to buy their store-brand products; b)still go the extra distance to Target since their product would still be the cheapest.

    I also think Nielsen is onto something when they say that choosing a store has a lot more to do with than just prices. Does anyone else agree?

    -Tim

  2. Mitch Says: January 19th, 2010 at 9:28 pm

    I think the store really does have more to do with things for some people, which includes me, but the economy is still not doing well and many people will drive where they can find better deals. Personally, I also don’t buy store brands, as I know what I like already, but even a small increase that’s still lower than everyone else shouldn’t hurt anyone.

  3. Tim Manni Says: January 20th, 2010 at 9:58 am

    Hey Mitch,

    Of course in my comment I failed to mention that when I need something last minute, of course I don’t drive to the store that’s 15 minutes away, you go to the store right around the corner — even if the prices are more (convenience is huge). I’ve done my fair share of comparing store and name-brand food items, and only besides a few select products, the name brand stuff usually taste better. I agree, a small price increase shouldn’t do too much damage.

    Thanks for commenting,
    Tim

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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