The Rise of Private Labels and How It Changed eCommerce Forever

2020 was not only the year of the COVID pandemic; it was the year of eCommerce. In April 2020, eCommerce retail sales in North America rose year over year by triple digits. This was a continuation of a trend that has been growing in the past few years. There is no sign of eCommerce slowing down in 2021, and the numbers should continue to be strong.

One of the biggest eCommerce trends in 2020 was D2C selling and as we go into 2021 private label brands are expected to boom as they hold greater value to the retailers and online platforms. As the pandemic raged one, more consumers avoided going to brick and mortar stores and shopped online for everything from apparel to groceries. Companies have been investing money in their websites and apps to reach customers on various platforms to meet this demand.

These habits of shopping online are likely to remain even beyond the pandemic. Many of these consumers enjoy the convenience of making online purchases but hadn’t bought things online before they had to. Others bought certain things online, such as movie streaming and ebooks, but only started doing their weekly grocery shopping online in 2020.

Another significant eCommerce change was the rise in private label products. This occurred as the result of significant disruption in supply chains as the pandemic closed factories and caused shortages. Many consumers who were loyal to specific brands found that they had to make the switch to other products as they had to purchase whatever was available.

Private label ushered in the transition from brand marketing to feature marketing. Consumers are no longer focused on brand names but want to make sure that the products they need with desired features will be readily available. They are willing to experiment with private label brands as long as they provide quality products with the right features.

Merchants, platforms, and marketers are increasingly selling their private label brands, having a private label offers retailers and merchants additional values:

They Can Gear Products to Customers’ Needs

Marketers make it their business to get to know customers. They collect data on customer activity, eCommerce data, and social media insights to create a map of their shopper’s habits and tastes. Platforms also capture data on what customers buy, what products they browse and put into their carts.

Merchants know their customers the best and can identify the kinds of products and features they are searching for. Why should they rely on other brands to fulfill their customers’ needs when they can market their private label brand?

Creating a private label provides the double advantage of appealing directly to customers and forming your niche to stand out in an increasingly competitive environment. Developing a personal label brand provides freedom and the ability to leverage consumer data to establishing a unique brand.

Improved Margins & Vertical Integration

Private label brands mean better margins because they cost less to produce than resale products. Margins measure the production costs compared to the profit level. There is no reason to pay more for resale items if customers are mainly concerned about finding the features they need and are not attached to specific brands.

Customer Loyalty

Once loyal to specific brands, customers may become devoted instead to private label options that answer their requests for new features. The strategy of offering specialized products to a large number of people at affordable prices can generate loyalty to a private label brand.

A private label brand allows more room for innovation than resale products. If customers provide customer feedback that certain features should be updated or if products need to be improved, it is easier to respond to their needs if a company controls its brand.

More Control Over Customer Support and User Retention

A company that has developed its products can provide more thorough knowledge to consumers. This improves the quality of customer support. Also, dealing directly with customer queries and feedback can provide data for upgrading products. This is the virtuous cycle of effective customer service and product development.

If customers feel that their feedback is useful in developing private label products, they may be more likely to continue purchasing these items. Customer retention is, therefore, another desirable effect of developing private label brands. For example, Amazon has a 93% retention rate for its private-label brands.

The Private Label Advantage

A striking logo and a recognizable brand name are no longer enough to sell an item. Because of the necessities caused by the pandemic and economic challenges, customers made the transition from focusing on brands to preferring products with the features they are looking for.

Private label brands have grown as brand dominance has declined. Marketers, merchants, and platforms reap numerous benefits from developing private label brands. Customer retention, higher margins, and greater control over product development and customer support are some advantages of private labels.

Developing a unique private label brand helps sellers distinguish themselves from the competition and create a niche.