This article is by Jeff Fromm, president of FutureCast, a millennial marketing consultancy, and co-author of “Marketing to Millennials: Reach the Largest and Most Influential Generations of Consumer Ever.”
The traditional stereotype of the millennial generation leads us to believe they are obsessed with brands, particularly premium brands. Yet research shows that few millennials are willing to part with the large amounts of cash that aspirational brands command. By contrast, millennials are now driving the growth of one the most humble of all “brands”—the private label, or store brand.
Private label brands in food, retail and CPG are taking over a significant market share—a growing trend that’s largely driven by millennials. In fact, some of the most successful private label brands have become, dare I say, cool.
Before we take a look at the potential opportunities and pratfalls for private label brands, let’s figure out why millennials are even interested.
Why Private Label?
Remember that millennials are on a budget: This generation remains underemployed, starting young families and settling down. They are perfectly willing to trade up and trade down, depending on the perceived brand value.
In addition to the economic trends, millennials also exhibit cultural trends that make them an ideal candidate for private label purchases. The millennial definition of cool does not correlate with high-end. This is a wildly important distinction that many marketers miss. In the millennial mindset, a cool brand can be both a $1 tube of Burt’s Bees, or a $50 face cream from Sephora—price is not the determining factor of a brand’s value. Extraordinary brand value is a combination of brand uniqueness, meaningfulness and the opportunity for millennials to participate or co-create.
Target’s Private Label Bet
So, where can we see these trends in action? Target has two private label brands that offer varied points of view for millennial consumers. First, Archer Farms, the retail giant’s private label food brand. When you take a look at the products, design and marketing for Archer Farms, nothing about it screams private label. The artisanal words and imagery appeals to millennials that demand a premium feel without the sticker shock. When millennials can justify affordable luxuries, they will come running back for more.
By contrast, Target’s Up and Up brand is doing an excellent job of tapping into millennial pragmatism. The CPG brand’s offerings include everything from diapers to luggage, all unapologetically stripped down. The label, the logo and the products themselves are all about utility and savings. When buying products that serve only a temporary need, millennials will be driven by one motivation above all others: saving money. Target is making a big bet on Up and Up, with the recent announcement that the brand will be the centerpiece of its largest single-time cause contribution ever. This back-to-school cause campaign is a smart move, considering millennials demand to know what a brand stands for beyond its bottom line.
Private Label: The trade up/trade down strategy
Even with the rapid growth of the private label market, there are many untapped opportunities. Our research shows that one of the most consistently desirable millennial brands is Nike. Whether millennials are young and single, or older and having children, they all favor the famous athletic brand. While I would never encourage a retailer to challenge Nike, Under Armour and Addidas’ rock-solid grip on sports apparel, there’s a huge untapped opportunity for private label sports equipment.
As I noted above, millennials are starting families. Each day, 10,000 millennial moms give birth. They are rapidly entering the world of youth sports and all of the fickleness that comes along with these seasonal activities. One day your daughter loves soccer, the next she’s all about softball. Where does that leave a millennial parent on a budget? Retailers that offer affordable private label sports equipment can help millennials feel they are giving their children every opportunity to grow—without breaking the bank.
For the first time in many decades, we have a generation of parents that’s willing to budget when it comes to their kids. A well-cultivated private label baby brand that offers basics like wipes, toys, pacifiers and activity centers would satisfy millennial pocketbooks. However, it’s important to note that brand names still matter for anything to do with feeding and safety. Car seats, formula and BPA-free bottles all require a strong R&D and innovation position—a model that proves difficult for private label challengers.
Lastly, let’s take a look at millennial beauty brands. At first blush, many retailers may shy away from launching a private label in this highly competitive category. However, one important millennial trend may change all that. When this generation is on the younger end of the spectrum (18-22), Sephora is listed as one of its favorite brands. Yet, when millennials grow older (23-34), Sephora not only drops on the list, it disappears.
Many drugstore beauty brands are reaping the rewards from this major change in millennial attitude. However, brands like L’Oréal, Maybelline and Cover Girl can still be pretty pricey. A well-designed private label beauty brand that gives a sense of luxury without the price tag to match, has the potential to do very well with this generation. As they start to shift more discretionary purchases towards their own children, millennials will be looking for small personal treats that make them feel good.
What can we learn from private label madness? The simple answer is that many old marketing models are dead. Millennials are the savviest generation of consumers ever—they will crowd-source information on even the most benign of purchases. In this new economic world, strong brands will win even bigger and weaker brands may be replaced by private label.
