Retailers are making big bets that brands as we know them are dying
Retailers both new and old are rethinking the way consumers connect with the items they purchase.
In this brave new world, people may not care as much about buying Heinz ketchup or Dove soap if they know they can get similar-quality goods at a cheaper price with a brand that doesn't carry the same cachet.
One newcomer to the retail scene is making a major bet that this new attitude towards brands will hold true.
Brandless is an online retailer that, as its name implies, sells products with no name brands. Brandless' roster of private-label goods - what used to be called "generic" - includes everything from peanut butter and hand soap to kitchen tongs, all for $3.
Instead of having a big logo emblazoned on a product, the actual attributes are listed on the package instead. The food is all-natural, and often, it's organic. The products are purported to be high-quality and can be sold at these prices because they're not subject to a "brand tax," according to Brandless cofounder Tina Sharkey. The hope is that customers will try this private label, like it enough to keep buying it, and shift their preference away from name brands to Brandless itself.
The startup's founders say this is the next logical step for retail.
"The false narrative of modern consumption, that brands have created and products have created, was actually dying a fast and painful death," Sharkey told Business Insider.
Choosing value over a name
In a retail environment where customers are opting for value over name brands, private-label initiatives also seem to be a good move.
Amazon holds about 90% of the online battery market with its AmazonBasics battery line. The batteries are cheaper than comparable brands, and in the eyes of regular Amazon customers, they perform just as well. That has spelled trouble for Energizer, according to UBS.
Trader Joe's has also used this strategy to take on the traditional grocery business. Its stores full of private-label food - often with organic or non-GMO attributes - are generally considered to be a good value for the price.
As Business Insider's Kate Taylor reported in May, 80% of the products carried by Trader Joe's are in-house brands. The grocer buys those goods directly from suppliers, which cuts out the middlemen in the supply chain and ensures the retailer can keep the low prices its loyal customers have loved.
Filling a niche market
Private labels can also fill specific niches that name brands can't or don't see the point in filling.
Dick's Sporting Goods is going niche with a new private line of sports apparel aimed at high-intensity athletes. The line, called Second Skin, has high-tech and compression fabrics that are designed to keep athletes comfortable during high-intensity training like CrossFit. While this is a relatively small portion of all athletic apparel buyers, Dick's VP Ryan Eckel called it an underserved market and a void in the brand's stores.
It's part of Dick's overall strategy to increase its private-label business and give people a unique reason to shop its stores over competitors. Should Dick's keep finding niches in the sportswear market to fill with specialized new private labels like Second Skin, that could present an issue for brands like Nike and Under Armour, who currently occupy those spaces with their more general offerings and are still looking for room to grow.
