CNN has a post up on why people tend to be moving to generics, and why retail giants like Wal-Mart may be encouraging this by dropping brand products.
Altimeter Group’s Cecera believes consumers stand to win from the retailers’ moves.
“In this recession, consumers have certainly become less discriminating with what they buy,” said Cecera. “Consumers have rushed to value prices, and they are buying generic brands.”
I think they’re slightly off base here. While some bargain shopping definitely fits the bill if there’s no perceived increase in value — for instance, is a bag of brand-name dried beans more likely to be higher-quality than a bag of store-brand dried beans? — there are other circumstances where that falls down.
Our case in point involves diapers. Our local store brand produces a cheaper, superior diaper than any of the major brand-labels we’ve tried. And every time we’ve travelled and been away from our local chain, oh have we tried them. The simple fact is that the down-scale product is the demonstrably superior product. Is that because there’s less money going into branding? Or did this one product just happen to score?
Either way, the appeal of a brand is that it makes a claim to superior quality. If there’s nothing backing that claim except a fancier box, or else obvious “add-on” gimmicks designed to sucker the unwary, that brand is likely to be in trouble. (e.g., all the hoo-ha that goes on with multiple-blade men’s razors, when anybody can tell you that a single sharp blade, be it safety-razor or cheapo disposable, does a vastly better job without getting clogged up, thus physically forcing the cutting edge away from where it’s supposed to cut).
Some may posit that this is a short-term trend, but given what I see as fundamental structural changes to our economy and looming stealth-inflation, I think this is likely to be a long-term reality instead.