Consumers are turning to private label brands to ease the impact of high prices this holiday season.
Executives from Target, Kohl’s and Walmart last week said in their earnings calls that more consumers are trading down to these value-driven brands as inflation rips across the U.S. Private label — or retailer owned — brands typically sit at a lower price point for shoppers and allow companies to achieve higher profit margins.
Target last week noted that shoppers are trading down to owned brands, which continue to outperform their national counterparts by growing twice as fast as total business in Q3. Sales of Target’s more than 45 owned brands generated over $30 billion in 2021, up 18% from 2020.
“Because of our unique industry-leading, in-house design and sourcing capabilities, Target’s exclusive owned brands provide tremendous quality at incredibly competitive prices, a great combination anytime but never more so than in an inflationary environment,” said Target chief growth officer Christina Hennington in a call with investors last week.
Walmart U.S. president John Furner said last week that more customers have “traded in” to private label brands than in previous years as well.
In addition to often being cheaper, private labels can also fill in product white space in underserved markets, such as women’s activewear. Walmart currently operates a slew of apparel and footwear private brands, including Time and Tru, Wonder Nation, No Boundaries, Love & Sports and Ozark Trail. In late March, Walmart announced that the Caleres-owned Sam & Libby brand as well as the Steve Madden-owned Madden NYC brands would now be sold exclusively at Walmart.
Walmart’s penetration in the private brand sector has been flat since 2019, but picked up in March of 2022. In food, private brand penetration increased about 130 basis points in Q3.
“We are there for customers in whatever situation that they’re in,” Furner said about private label offerings, adding that many customers, especially on the higher-end of the income spectrum, have continued to opt for premium brands at Walmart.
Kohl’s also noted more middle-income consumers trading down to its private label brands such as Sonoma, Croft & Barrow, Jumping Beans, Nine West, Tek Gear and Lauren Conrad.
Going into the holidays, Kohl’s CFO Jill Timm said the company will feature its private brands “more prominently” in its marketing and lead with a message of value to win over inflation-stricken consumers.