The Rise of the New House Labels Is Reshaping Retail

(Bloomberg Businessweek) -- Store brands have come a long way from blah boxes of knockoff Cheerios: Americans are increasingly piling their virtual and IRL shopping carts with in-store brands of everything, whether coffee, batteries, suit jackets, or midcentury modern sofas. Because stores don't have to hand over part of each purchase price to Coca-Cola Co. or Levi Strauss & Co., they're often able to sell their own brands for less—and make more money.

House brands in the U.S. date to at least the 19th century, but their popularity has ebbed and flowed. To the surprise of many, a number of store brands have managed to build loyal followings of their own in the last decade. What's more, they've managed to do so even while the economy was strong, which would seem to remove price as a factor and may mark a more significant change in what Americans buy and how companies sell us stuff.

Traditionally, the draw of a store brand was low prices, not style or quality. The new generics playbook is working, in part, because young, web-first companies such as Dollar Shave Club Inc. and Casper Sleep Inc. have made people feel more comfortable reaching beyond the handful of tried-and-true brands. Amazon.com Inc. has attempted every tactic possible to push its house brands, including appeals purely on value and starting an organic food line and a clothing brand for the fashion-conscious bro. Not all have been successful, but the e-commerce king has paved the way in applying consumer data to create new products and nudge people to try them.

This isn't merely an “internet changed everything” story—even if, OK, that's part of it. The same set of tactics has also worked for traditional retailers. Walmart, Costco Wholesale, Target, and others have focused on private-label products to which they can give an identity and appeal beyond price. Costco's Kirkland Signature line is positioned as less expensive, delicious food that people can't buy anywhere else. And Nordstrom Inc. linked up with a social media star on a line of store-brand clothes that was popular enough to crash the retailer's website.

Your favorite brands from childhood probably won't go away. But they're going to have to work a lot harder to get shoppers' attention. And it's going to get uncomfortable for products that are stuck in the middle ground between the iconic and the cheap chic. —Ovide is a tech columnist for Bloomberg Opinion.

To contact the editor responsible for this story: Eric Gelman at egelman3@bloomberg.net, Jillian Goodman

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