September 27, 2022

FDI Forum

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The Supply Side: Walmart ups private brand investment for home, fashion

Shoppers have never been more open to trying private brands for consumer staples after the supply chain disruption that forced changes in shopping behavior amid the pandemic. Market research firm eMarketer reports that consumer attitudes about private brands have done an about-face in the past few years.

The eMarketer survey found that consumers look for values against rising product costs and out-of-stocks. More shoppers see private brands as a viable option in categories like fashion and home decor. Retailers from Walmart to Dollar General and Bed Bath & Beyond are investing more into private brands in higher-margin categories like apparel and home decor.

“Retailers have been ramping up quality, creating enticing packaging, and enhancing marketing for their in-house brands. Together, these developments make private label offerings a more important part of retailers’ strategies,” the report notes.

Charles Redfield, the chief merchandising officer at Walmart U.S., recently said the retail giant’s foray into more chic fashion private label offerings is different from past efforts.

“Walmart will always be a place where shoppers can buy basics, but we believe Walmart can also provide fashion at a value whether it’s for date night or a home makeover,” Redfield said during a recent media tour during the company’s shareholder week.

He said this time, Walmart surveyed customers and took their feedback to heart. Then the retailer sought the best partners to help achieve top-notch private brands that resonate with today’s value-conscious consumers. At Walmart Store No. 4108 in Springdale, Walmart is showcasing the new Love & Sports active brand for women and a new home decor brand called Thyme & Table.

Redfield said the brands are sold exclusively at Store No. 4108 and on Walmart.com for now. He said the private brands were designed to offer a value with comparable quality to more expensive items in the same category. He also said Walmart will always have a low opening price point, but there is more the retailer can do to attract sales from today’s value-conscious shoppers who also want trendy fashion in apparel and home decor.

Redfield said private brands play an essential role in Walmart’s merchandising strategy. He said Walmart has added national brands like Reebok and Levi in women’s apparel, Justice for girls, and will continue to have celebrity-inspired brands like Sophia jeans. He said that working with New York designer Brandon Maxwell, Walmart also launched the Scoop private fashion brand for women, which is selling well.

“We believe Walmart can offer a variety of fashion options for women regardless of age and size, and this is best accomplished through a blend of national and store brands,” Redfield said.

CONSUMER INSIGHTS, TIMING
The eMarketer report found that store brands have traditionally accelerated during times of recession or inflation as consumers begin to spend more conservatively. The survey found that nearly 80% of respondents had purchased or were willing to try private label products in apparel, pantry items, personal care, and household cleaning supplies.

The survey also found that one-third of respondents who had not yet purchased private label accessories, electronics, and footwear were open to doing so. In the home furnishing category, 46% were willing to try private brands.

As more retailers launch private label apparel lines, the notion that consumers are only open to more basic SKUs (items) is debunked in the eMarketer research. A survey conducted in December found denim/jeans was the No. 1 category where consumers would buy private label. Other hot categories include basics at 41.2%, underwear 36.6%, socks 31.5%, sleepwear 23.8%, and leggings at 18.7%.

Carol Spieckerman, CEO of Spieckerman Retail, said that although Walmart revisiting home and fashion is arguably overdue, the timing is good. Private and proprietary brands accomplish several goals for all retailers, and Walmart is no exception.

“These brands blur price comparisons since they are exclusive to Walmart,” Spieckerman said. “They allow Walmart to tap into celebrity’s social media followings and, in the case of Miranda Lambert, live event promotions. And private brands like those overseen by Brandon Maxwell generally offer higher margins than national brands.”

She said, like many multi-category retailers, Walmart has been margin-challenged lately. Focusing on private brands, and doing so in non-grocery categories, is a one-two punch that should pay off. Walmart appears to have hit the sweet spot between affordability and exclusivity. She said that’s an excellent combination for consumers as inflation takes a bite out of household budgets.

Analysts at McKinsey & Co. report that the consumer shift toward private brands benefits retailers because they are typically more profitable. Also, high-quality private brands can gain a devoted following and become a powerful driver of customer loyalty to the retailer.

Scott Benedict, an executive at marketing agency WhyteSpyder in Rogers and a former Walmart merchant, said private brands play an essential role in Walmart’s ability to maintain margin and differentiate product offerings that can drive long-term consumer loyalty. He said Walmart seems to be listening to the customer with the recent private brand launch, which has not always been the case. Private brands also allow the retailer to control quality while letting customers help dictate the final product design.

“It’s important that a private brand address what the consumer wants at a value they can’t dispute with comparable quality to the national brand or fill a niche where there is not a comparable national brand,” Benedict said.

Benedict also applauds Walmart for its test and learning actions with the two recent private brands launch of Love & Sports and Thyme & Table. He said the brands are value-priced, on-trend and look more upscale. He said the prior mistakes Walmart has made in its private brand fashion efforts were likely because the product did not address what the customer wanted.

He said it’s important for Walmart to look for fashion items that fit consumers’ everyday lives in a post-pandemic world.

“I am not sure consumers will ever think of Walmart for a three-piece men’s suit or a cocktail dress, but there is still plenty of area for Walmart to play in the fashion sandbox,” Benedict added.

He said higher-margin categories like fashion and home decor could also be critical to Walmart being able to hold the line longer on consumable price increases in a high inflationary period.

“It looks as if Walmart’s buyers have upped their game for bringing in customer input, which is serving them well,” he added. “Walmart had some headroom to improve its fashion offerings, and it looks like they are off to a good start.”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.