Own brand is closer to online – Newspaper Kommersant No. 188 (7389) dated 10/11/2022

The reduction in the range of international brands in Russia after the start of the military operation in Ukraine and the desire of Russians to save money forced retailers to sell more online goods under their own trademarks (PL). For some large networks, including Magnit and Azbuka Vkusa, the share of sales of such products via the Internet reaches 15–24%. Experts note that this is a way for retailers to maintain the profitability of their delivery services during the crisis.

In April-August 2022, every tenth product sold on the Internet by FMCG retailers operating both offline and online fell on private label products, follows from the NielsenIQ report, available to Kommersant. In the category of non-food products, their share in total purchases doubled year-on-year to 19%. In the grocery segment, the least pronounced growth is observed – by 1 percentage point (pp), up to 7%. Now private label sales are growing both offline and online, confirms Sergei Livshits, partner at B1 Group.

Shoppers seek to save money, so they are more likely to purchase retailer-branded products that are cheaper than branded counterparts. According to NielsenIQ, private label sales are growing faster in the regions than in Moscow. For example, the share of sales of such goods in online stores almost doubled in the regions of the Volga region (up to 7.2%) and in the south of the country (up to 5.9%), while in the capital the growth did not exceed 1 percentage point (up to 4 .7%).

In general, online private label sales from omnichannel retailers caught up with offline market indicators – up to 11.5%, according to NielsenIQ. Magnit confirms this trend. They say that the share of private labels in the network’s online sales has reached 15%, while offline – 20%.

The share of private labels in the turnover of the Pyaterochka chain has grown by 4 percentage points since the beginning of the year, to 25%, in Perekrestok stores – by 3 percentage points, to 18%, X5 Group notes. In Azbuka Vkusa, the share of private labels in online sales in April-September amounted to 24%. The network explains that goods under private label are found in every second check. Azbuka Vkusa sells about 11% of all commodity items under its own brands.

Metro notes that significant growth in private labels is observed in the categories of household goods, tableware, gastro equipment, groceries, poultry and canned food. At the same time, according to a NielsenIQ study, in the categories of alcohol, color cosmetics and baby food, lower prices for private labels often lose out to high levels of consumer loyalty to individual brands.

In Magnit, the growing popularity of retailers’ private label products is also explained by the desire of buyers for rational spending, as well as a decrease in the activity of some international brands in Russia. Private label products replace departed brands in many categories and are often on par with them in quality, Metro adds.

Elena Koroleva, Deputy Commercial Director for Private Label and Import Development at VseInstrumenty.ru, notes that the DIY retailer’s sales of goods under its own brands doubled in 2022. The share of such products offered by VseInstrumenty.ru increased by 30%. Private labels are replacing outgoing import brands in the DIY segment, adds Ms. Koroleva.

Metro, X5 Group, Magnit, Azbuka Vkusa, VseInstrumenty.ru talk about plans to expand product lines under their own brands. Thus, X5 Group plans to increase the share of private labels in the turnover of the Chizhik chain from 40% to 50% by the end of this year.

NielsenIQ believes that there are prerequisites for the further development of private labels in the e-commerce market, which are enhanced not only by the departure of a number of foreign brands, but also by consumers switching to local products. According to Mr. Livshits, for food retailers, expanding the share of private labels online is one of the few ways to improve the profitability of their delivery services.

Alina Savitskaya