How To: Compete With Private Labels


Marketers worldwide may have choked on their cornflakes this weekend reading an article in the New York Times about Amazon’s increasing emphasis on their own private-label goods.

The market research piece, “Amazon The Brand Buster”, paints an uncomfortable picture for brand marketers, especially as it portrays the e-commerce and tech behemoth as waging war against branding in general. Amazon apparently views the entire concept as a rip-off, and considers the price premiums charged by brands to be unjustified.

Mix in Amazon’s ability to skew the results of Echo voice search in its favour and you have a hair-raising prospect.

At heart, though, private label brands are not a new problem for marketers. The private-label sector has been challenging established brands for decades, and the financial crisis made low-cost generic options far more attractive to consumers. Amazon is hardly the first retailer to pour resources into its own-brand goods.

In 2016, according to Nielsen, private-label goods accounted for 20% of sales in US retailers, leaving plenty of room for growth: the equivalent figure in the UK is over 40%.

What can brands do to fight back?


We’ve done branding work in several categories where Private Label brands are a threat. From a Fame, Feeling and Fluency perspective private label brands have particular advantages and disadvantages compared to their name-brand rivals.

Private label brands have relatively low Fame – they aren’t the first things that come to mind. In comparison, their Feeling (the sense that they’re a good choice) is closer to their branded competitors.

In other words, given the choice at shelf, private label can easily be a ‘good enough’ option where a brand isn’t far enough ahead on Feeling to justify its price premium.

But it’s Fluency – the speed with which consumers recognise and process a brand and its assets –  which serves as the real battleground between brands and private label goods.

Fluency, after all, is intimately related to that ability to charge a higher price. The easier brands are to recognise and process, the more automatic the decision to choose them is, and the easier it is for them to command a premium.

Private label goods don’t have that Fluency. Or so you might think. In fact, they disrupt brand Fluency in three distinct ways that require different approaches from marketers.


First are the private label brands like Amazon Basics, which as the NYT reveals has surged in the online batteries market, among others.

Here the Fluency comes from the parent brand – everyone knows Amazon. But to tap this Fluency, the private label goods need to be congruent with the parent brand. Batteries, cables and phone accessories are exactly the kind of products you’d expect Amazon, with its values of speed and efficiency, to be good at. Clothes and perfume, not so much.

Parent Brand private labels work like a brand extension – as such they’re more like a new brand competitor for existing brands than a generic product. Existing brands should respond as they would to any new competitor, by marketing to reinforce all the 3 Fs, but particularly Feeling, the best protection against share decline.

Second are private label products issued under pseudo-brands – like Amazon’s Wag and Rivet, or the fictional farms that adorn Tesco’s fresh produce in the UK. Here the point is not so much to build rival brands but to create a feeling of brand-iness, so consumers don’t feel turned off by the negative implications of private label.

Pseudo-Brand private labels are probably the easiest for marketers to deal with. They aren’t intended to amass Fluency, so brands should be able to build up a potent advantage in terms of quick recognition and positive association. A brand under threat from pseudo-brands should look to simplify and promote its core distinctive assets.

Finally, there are private label products which trade off the Fluency of the big brands in their category. When you go into a discount retailer, and you see a pack of frosted flakes with a grinning leopard instead of a smiling tiger, but with the colours and fonts exactly the same as the market leader… then you’re looking at a Fluency pirate!

Piracy is a loaded term, though – these brands aren’t necessarily illegal. You might call these Shanzhai private labels, after the Chinese term for these copycat doppelganger brands.

Shanzhai private labels are using a kind of marketing ju-jitsu, taking a brand’s distinctive assets and using them against it. They are tough to deal with via marketing means, though a silver lining is that a premium brand and a shanzhai brand will rarely find themselves in direct on-shelf competition. Marketers can at least reflect on the fact that shanzhai equivalents mean you have a strong set of distinctive assets to work with!


Finally, whatever kind of private label goods they’re competing with, brands have a resource those rivals rarely do. They can advertise. Emotional advertising builds Fame, Feeling and Fluency and a great campaign can be the best weapon to protect and grow share.

In fact, emotional advertising can be so effective it lands brands in trouble! Calpol is the UK’s top childhood medicine brand. Like any pharma brand it’s subject to competition from generic products. But its advertising and branding is so strong and emotional that it’s seen them off. With the result that last month it was Calpol, not its identical own-brand competitors, that was denounced as the “heroin of childhood” in UK papers.

Sometimes, marketers, you just can’t win.


At System1, we help the world’s largest advertisers make confident, creative decisions that lead to transformational business results. Our powerful ad testing platform (Test Your Ad) and our idea testing platform (Test Your Idea) help brands predict the commercial potential of ads and ideas. Complementing TYA and TYI is Test Your Brand, our brand monitoring tool which measures the impact of ads and ideas on brand health, ensuring long-term brand growth through predictive success.

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