By: Leslie Chan
As bleak reports continue to emerge about the recession, Galen Weston, CEO of Loblaws, has brightened our day by offering us ‘no-nonsense ways to stretch [our] dollar’[i]. What he’s really doing is pushing his low priced ‘No Name’ private label and hoping to gain a larger share of our smaller wallets. Like Galen, most people would assume that consumption of national brands during a recession would decrease as people trade down to more affordable private label brands. Working on this assumption, Loblaws has recently launched a new marketing campaign focused on comparing the price difference between a cart full of their No Name private label products to a cart full of national brand products.[ii]
So how able is Loblaws to compete on price, now that Wal-Mart has entered the grocery market? Loblaws has a compelling retail value proposition for most things, except price. They’re convenient because they’re everywhere with more than 1,000 corporate and franchised stores from coast to coast.[iii] They have great selection of products and are among the best for carrying the majority of national brands. While Loblaws may not emphasize a tailored shopping experience, neither do its largest competitors (i.e. Metro & Wal-Mart). Even though Loblaws is winning on all these factors, it is failing to meet consumer expectations on price. How will Loblaws change consumer perceptions of price?
Enter bright yellow signs! In its original black-on-yellow packaging, the low priced No Name line is more prominently featured and hard to miss.
You can’t go into a Loblaws store, website or read a flyer without seeing the yellow No Name logo. Because of this aggressive placement of the No Name brand, and more prominently placed No Name products on store shelves, Loblaws has begun to change consumer price perceptions. The No Name private label allows Loblaws the opportunity to provide competitive prices while still generating high margins given that they eliminate a layer of suppliers from the value chain. Let’s be real, Loblaws knows it can’t beat Wal-Mart on national brand pricing, but by pushing consumers towards their high-margin, low-price No Name label, Loblaws is attempting to retain their more price conscious clientele.
Another advantage for Loblaws is its convenient locations in almost all prime locations across the country. Making the No Name label readily available will help its private label market share as retail concentration is a good predictor of private label success. For these reasons, Loblaws has created a strong price proposition not only offering a lower price but doing so with a wide distribution network through its large number of stores.
To further its new price orientation, Loblaws has strengthened their new price proposition by complimenting its low price private label strategy with price freezes on some of its national brand products. The retailer has lowered and locked prices on certain everyday consumer purchases to enhance its image as a price competitive retailer. By bringing in traffic with No Name prices, Loblaws is also exposing consumers to the lowered prices on specific national brand products. This will start to change consumers’ price perception of Loblaws as a whole.
What I think will really influence and change consumers’ behaviour is Loblaws’ guarantee. Loblaws eliminates any hesitation in switching by saying, if you’re not satisfied with the No Name version, Loblaws will give you your money back.
Now, there’s a real value proposition if I’ve ever seen one! What do you have to lose to try No Name? I know Galen’s quest for my dollar has been successful.