Altimeter group missing store-brand appeal

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.

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  1. drteine

     /  February 16, 2010

    In China interestingly the middle class prefers overseas brand names rather than local brands due to the perception of quality, and in more cases though, because of actual quality.

    Here is the US you have so many big brands that cut corners keep their profit margins going, but they cut that quality so much that the generics eventually become better in cost and quality because they don’t have the high overhead of the big brands. I’ve seen this in small chemical company products vs. big company products. You’d think one chemical would be just like another in regards to chemical structure, but in terms of purity, packaging, and good costs, sometimes economies of scale are not all they are cracked up to be. Also being such a consumer nation we are, I think for the most part we (the US) are fairly savvy on what’s a good buy and what isn’t and this story I think reflects that. Brand loyalty only lasts as long as your brand is worth something, otherwise we’ll all switch in a heartbeat. I do worry though that with many of the generic products being made overseas that the lower cost generics are a route into a nasty surprise. For example – something is “high quality” and cheaper because it was made elsewhere with ingredients now outlawed here. Sometimes the old technology now outlawed due to being toxic or harmful in some other way really did make the product superior. So I’m glad generics exist as an option, but I sometimes wonder about their actual quality.

  2. happycrow

     /  February 16, 2010

    Sure. And I’m a damned picky shopper — I was one of the guys bitching about corn syrup in everything, for instance, way back in ’90 or so. If it’s quality, I’ll try it. If it’s ACTUAL quality… I’ll buy it twice.

  3. drteine

     /  February 17, 2010

    Exactly what I was getting at. Sometimes the generics really are better than the big brands, and sure enough, if it’s really good people buy it twice and more. Once you get impressed, you remember and you’ll reach for it again.


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