What Grocers Need to Know About Walmart’s Newest Private Label Groceries
It was announced as the biggest private label food launch in two decades.
And the media — not just the trade media — has treated the introduction of Warlmart’s new premium store brand, “bettergoods,” accordingly:
- The New York Times suggests the purpose behind these new store brand items is to attract Gen Z shoppers and “retain higher-income individuals.”
- In its analysis, the Wall Street Journal calls the private label “a big strategic bet for the retailer as it competes for customers with Costco Wholesale, Trader Joe’s and Amazon.com’s Whole Foods.”
- Meanwhile, the Washington Post compares bettergoods to Walmart’s other private label store brands, suggesting its higher-tier pricing and higher-quality ingredients “are intended to serve a different purpose.”
So, what exactly is that purpose?
With different outlets all emphasizing different focuses, one thing is clear: Walmart wants to expand and retain its share of the grocery market — in-store, online, and anywhere else it can.
The True Purpose of Walmart’s bettergoods
By introducing its new private brand, the big retailer is positioning itself for an even wider, longer-lasting consumer appeal, as it looks to retain both:
- The recently acquired customers whose flight to value recently brought them to Walmart; and
- The regular supermarket shoppers who also buy groceries from Walmart each month.
These are consumers — across all demographics and income levels — who have felt the economic pinch from inflation in one way or another and have either become regular Walmart shoppers or begun shopping from multiple retailers to stretch their grocery budget further.
With bettergoods, Walmart is extending its value proposition to these customers beyond mere affordability to include elements — such as high-quality ingredients and innovative culinary experiences — that until now have been traditionally associated with supermarket shopping.
For regional grocers and independents, already seeing the increased market share being taken by big retailers, this encroachment on areas of traditional strength should raise alarm — and provoke action.
To ensure that action is effective, this article will examine Walmart’s approach to private brands and outline how grocers should respond, including the development of their own innovative private label strategies and leveraging their unique strengths to enhance shopping experiences, improve customer loyalty, and ultimately drive greater growth for their grocery business.
Is Walmart’s New Store Brand a Game Changer?
To understand Walmart’s strategy in introducing this new private label, we don’t need to look much further than the press release announcing the launch of the bettergoods product line.
Two key terms appear again and again: affordability and quality.
Affordability
Walmart has been able to acquire an increased grocery market share by leaning into its inherent pricing advantage as an enormous retailer. Between inflation and general economic uncertainty, lower prices have attracted customers across all demographics.
They’ve used affordability to increase their market share. And the bettergoods private label appears to continue appealing to that consumer driver: According to Walmart, “bettergoods items range from under $2 to under $15, with most products available for under $5.”
Quality
After listing several prices on specific bettergoods products, the press release then speaks to the quality Walmart hopes to provide through bettergoods by identifying the private label’s three distinct category pillars:
- Culinary Experiences: Offers gourmet food experiences at home with products like specialty salts, premium pasta, and unique jar soups for restaurant-quality meals at affordable prices.
- Plant-Based: Caters to health-conscious and environmentally aware consumers with items like plant-based frozen desserts and cheese alternatives, combining taste and quality.
- Made Without: Provides products free from gluten, artificial additives, and other ingredients to meet the needs of shoppers with specific dietary preferences, including gluten-free and antibiotic-free.
Why Are Affordability and Quality Important?
Even though Walmart has used affordability to draw financially pinched customers away from supermarkets, a playbook of sorts has emerged for grocers looking to stem the tide and better retain their customers.
The main focus of this strategy has been to mimic the approach of the big retailers and lean into their own inherent advantages. Grocers can’t compete on per-product price points with Walmart, but they can promote their specific strengths.
One of the biggest areas of strength for grocers are quality, often locally sourced, products.
When this is combined with value from their own private label offerings, and included alongside other traditional areas of strength — high-touch customer service, convenient store locations, and genuine connections to the community — local grocers have been able to offer something the larger retailers could not match.
How bettergoods Impacts Regional Grocers and Independents
And now it seems that Walmart is trying with bettergoods.
We see the draw of affordability and quality best in one of the customer segments mentioned in the introduction: cross-shoppers.
If we look at the data from Brick Meets Click’s monthly eGrocery sales reports, we see that cross-shopping numbers increased significantly four years ago and have since stabilized at close to a third of all supermarket shoppers each month.
These are typically price-sensitive, yet quality-conscious consumers who turn to bigger retailers like Walmart for value purchases while relying on their local grocers for specialty items and high-quality products in addition to their regular shopping.
What bettergoods does is provide these shoppers with both value and quality from a single private label product line available through a single mass merchant retailer.
While the consumer’s initial attraction to Walmart might be based on value and affordability, the retailer is hoping to retain more of their business by offering that same value and affordability on the products they typically purchase from their grocer.
How Should Grocers Respond to bettergoods?
That’s why the introduction of Walmart’s bettergoods places even greater importance on customer retention for regional grocers and independents.
As Walmart continues to leverage its pricing power and expand its private label offerings, local grocers must find ways to hold on to their customers. We’ve already established how difficult it is to compete on price points with a giant like Walmart, but there are other critical areas where grocers can excel and retain their customer base.
One of the most important ways to do this moving forward is going to be through building and maintaining brand strength and recognition through five traditional strengths that grocers have possessed:
1. Local Products
- It’s always important to emphasize the quality of your products, but tying quality into products that are locally sourced or unique to your store enhances your brand beyond your competitors. Highlighting the origin of these products further retains customers who prioritize quality and community over price.
2. Brand Storytelling
- Use storytelling to create an emotional connection with your customers. Share the story behind your brand, your values, and the local producers you support. This can help build a loyal customer base that feels a personal connection to your store.
3. High-Touch Customer Service
- Continue to offer exceptional customer service that makes shoppers feel valued and appreciated. Train in-store staff to provide personalized recommendations and assist customers in a friendly and knowledgeable manner — and ensure your online shopping channels match this approach. This level of service can differentiate your store from larger retailers.
4. Community Engagement
- Engage with your community through events, sponsorships, and local partnerships. Show that you are an integral part of the community and that you care about its well-being. This fosters loyalty to your brand and encourages customers to support your store.
5. Convenient Locations
- Tying into the community engagement is an emphasis on the convenience of your store locations. Highlight the ease of access, proximity to residential areas, quick shopping experiences, and locations within specific communities. For many customers, convenience can be a significant factor in choosing where to shop.
What each of the tactics listed above have in common is an emphasis on what makes a local grocer unique. That’s what strengthening your brand is all about. By focusing on local products, compelling storytelling, high-touch customer service, and strong community ties, grocers can create a distinct identity that resonates with customers.
This uniqueness is also where a grocer’s own private label products can play a pivotal role.
Innovative Strategies for Private Label Brands
Private labels allow grocers to further highlight the unique qualities of a banner. Just as Walmart is emphasizing value and quality in their new private brand, grocers need to identify what they can offer that the larger retailers and other competitors can’t match.
Whether it’s locally sourced goods, artisanal products, or items that align with your brand’s values, private store brands can enhance a store’s identity and give customers a compelling reason to choose their local grocer over larger retailers.
There’s also another distinct advantage for grocers when it comes to private labels: While Walmart has 14 private label brands, eight of which fall into consumable categories, grocers don’t have to spread the focus of their marketing across multiple private labels or worry about inter-label competition.
Instead, they can concentrate their efforts on one strong private label and leverage it through the following strategies:
Quality and Differentiation
Your private label products should reflect the high standards and unique attributes of your store. Focus on premium ingredients, local production, and unique flavors or features that set them apart from national brands and competitors’ offerings.
Brand Story Integration
Integrate your brand’s story into your private label products. Use packaging and marketing materials to communicate your origins, values, and locations — as well as the special qualities of these products. This deepens the emotional connection customers have with your store.
Exclusive Offerings
Lean further into the advantage you have with one strong private brand rather than multiple private labels by creating exclusive products that can only be found at your store. This exclusivity can drive traffic and repeat business, as customers know they can only get their favorite items from you.
Customer Feedback
Engage with your customers to continuously improve and expand your private label offerings, ensuring they remain relevant and appealing. Grocers have a unique advantage in the one-to-one relationships they have with their customers. This close connection allows for direct and personalized feedback, helping to tailor products more precisely to meet customer demands.
Leaning Into Inherent Advantages
Leveraging that relationship with customers to improve private brands is an example of grocers utilizing their strengths to better compete. But the application extends far beyond private brands or even directly countering Walmart’s private label sales.
It might sound oxymoronic to say that grocers should do what big retailers do, and be unique. However, just as Walmart is leveraging its own existing strengths — by combining value and quality in the newest of its private labels — grocers need to take advantage of what makes their service offering, their value proposition distinct.
We’ve already identified many of these strengths when discussing how to respond to bettergoods — high-touch customer service, convenient locations, community connections, etc. — but to compete with larger retailers, grocers have to bring these traditional advantages from in-store to online.
Leveraging Technology to Better Compete
That means utilizing technology to extend the personal relationships that have traditionally driven customer loyalty into the eGrocery shopping experience.
At Mercatus, we like to use the term contextualized commerce to describe the seamless integration of digital and physical retail experiences necessary to provide the personalized, high-touch service described above.
Contextualized commerce uses first-party data, operational insights, and advanced personalization techniques to engage shoppers from initial impression to transaction, both online and in-store, ensuring a connected and relevant experience across all channels.
But more than just personalization technology, it ensures that the inherent values of regional grocers are amplified, making digital channels as compelling and as customer-centric as physical stores.
AisleOne is the Way to Win Back Your Market Share
This is what the all-new AisleOne provides.
While focusing on private label products and store brand sales can be part of an effective strategy, grocers need to do more to stay competitive and retain customers in the face of Walmart’s bettergoods and other mass merchant initiatives.
They need a contextualized commerce solution that enhances their unique strengths and delivers a personalized shopping experience that will retain customers. AisleOne provides this by collecting and consolidating first-party data to automatically deliver targeted savings, product recommendations, and highly relevant offers — all based on each individual customer’s shopping habits and timed to their purchase cycle.
Although AisleOne is a standalone solution, when integrated with the Mercatus all-in-one eCommerce platform, grocers can easily elevate their private labels or store brands to rank higher in search queries and in product displays.
The results of AisleOne speak for themselves.
Regional grocers have generated up to a 14:1 return on their digital engagement investment through AisleOne’s targeted promotions, personalized offers, automated marketing campaigns, and loyalty program activation.
Stop losing customers to Walmart and start winning back your market share.
Reach out to Mercatus today to learn how AisleOne can increase your monthly active users, average order value, and customer lifetime value.
