Independents urged to go high-end in face of home brands

A retail expert says independent food retailers need to create a market for high-end produce, as slow consumer spending leads to an increase in home brand sales.

According to new figures from research group The Nielson Company, home brands such as Woolworths Select, the Coles brand and multiple Aldi brands represented a 24.5% share of supermarket sales in the September quarter, up from 23.2% in the last quarter of 2009.

The average spend on house brands during the final three months of last year was $209.37, compared with $201.98 in the September quarter and $200.31 in the December 2009 quarter.

According to Nielsen executive director for retailer services Kosta Conomos, the higher figure is the result of rising interest rates and utility prices, and the relaunch of the Coles brand last year.

“It’s reasonable to expect an increased level of consumers switching from branded to private label brands because of the price activity occurring on staples such as milk and butter,” Conomos says.

According to Nielsen’s findings, one of the biggest increases was among “small-scale families”, which account for 9.5% of the total population, covering households in which the oldest child is aged between six and 11.

House brands accounted for 27% of their spending on groceries in the December quarter, up from 24.9% in the September quarter.

The only group of consumers who spent less on house brands in the December quarter was “young transitionals”, which refers to people under 35 with no children.

This group represents 10.8% of the population. Less than 19% of their grocery spending in the December quarter was on house brands, compared to 19.5% in the September quarter.

Brian Walker, managing director of retail consulting company The Retail Doctor, says independent food retailers must ensure they up the ante in order to compete with home brands’ low prices.

“It is very dangerous to be in the middle ground… Independent retailers don’t have the buying power so they really need to concentrate on the value-add,” Walker says.

Walker says in addition to offering a highly personalised service and catering their offerings to suit their customers, retailers should invest in a good location and engaging displays, and allow customers to sample produce.

“You don’t need to be price competitive but you do need to be price relevant, and location plays a big part in that. Having the right location, which is high on convenience and personalisation – they’re the key attributes of differentiation,” he says.

Walker says rather than lament over the lack of consumer spending, independent retailers should create demand for high-end offerings, citing London-based luxury retailer Harrods as an example.

“[Retailers such as Harrods] are founded on the principle of [offering] a very high level of service and giving people what they want,” he says.