Retailers looking to attract and retain price-conscious shoppers during the current bout of inflation may want to consider stocking more small- and medium-sized brands. Competing on price presents several challenges to margins, but offering smaller and newer products can help retailers build an assortment on attributes such as sustainability and quality. Data from NielsenIQ’s Brand Balancing Act study found that 47% of shoppers believe that small brands are usually more expensive (but they are prepared to pay a bit more), and 48% plan to buy more from smaller brands in the future because they’re better suited to the shopper’s needs.
“I am of the belief that it’s one of the best times in the last few years to be a small brand,” said Andrew Criezis, SVP and General Manager U.S., SMB at NielsenIQ in an interview with Retail TouchPoints. “Now that doesn’t mean that it’s easy. It’s still incredibly hard. You’re going up against mountains of capability from these large brands, but something that came out of this study is that 51% of global consumers said that they’re buying a greater variety of brands than they were before COVID-19.”
Another advantage small brands offer is that they “build trust incredibly well,” according to Criezis — NielsenIQ’s survey found that 51% of shoppers feel small brands are more authentic and trustworthy than their larger competitors. Newer small brands in particular are often reacting to a gap in available products to help meet unfulfilled needs, so retailers looking to entice shoppers with unique options can find candidates from smaller, local companies.
“There is a residual trust factor that’s built up with small brands, and some of these wellness components and sustainability components are at the forefront of it,” said Criezis. “That trust definitely helps with shoppers. They understand that these smaller brands are the starting point, and maybe there are more local and small brands that have advantages over the large brands.”
Smaller brands’ sustainability and other ethical claims also resonate better with consumers, and their ease in building trust can reflect well on retailers that carry them. Two of shoppers’ top reasons for choosing a brand are emotional qualities such as reputation (71%) and resonance with personal beliefs (66%).
NielsenIQ did find that 86% of global consumers felt that functional reasons like availability, quality and value for money are of utmost importance when making purchasing decisions. Retailers looking to tout these attributes in their assortments can get a head start with smaller brands that have gained shoppers’ trust. Sourcing from small local brands also can help retailers keep shelves full during times of supply chain stress.
Attracting shoppers who are already acquainted with small brands holds an additional opportunity for retailers as well. Exclusive small brand buyers, the 12% of shoppers who only buy smaller brands over larger brands, are more likely to choose a given retailer’s own private label brands (17%).
Price is still a concern for the vast majority of shoppers, with 93% ranking it as their top reason for choosing a brand. Small brands still hold potential despite being perceived as more expensive to many shoppers — but retailers need to focus on specific attributes that boost their value.
A plurality (41%) of respondents were dubbed “agnostic buyers” who don’t think too deeply about what brand is behind the products they buy. These shoppers were most likely to struggle financially (23%) and buy whatever brands are on promotion (also 23%). However, even these shoppers are interested in small brands if they offer attributes that resonate with their beliefs and needs.
“They do still care about the definition of the value,” said Criezis. “If you convince them that the value — whether it’s being sustainable, something that’s clean label or something unique about a product that puts that dollar-to-value ratio more in line — they’re more likely to repeat that purchase and become more loyal.”
It can be valuable for retailers and small brand partners to work together on this front. The right small brands can turn an agnostic shopper into an exclusive small brand shopper, who in turn may show greater interest in a retailer’s own private label goods.