Recent years have seen the explosion of “house brands” in Singapore. Having started out in grocery stores, house brands now make an appearance in pharmacies, bookstores and even consumer electronics shops. With their widespread proliferation, let’s examine if they really offer valuable savings to the consumer.
According to reports from the Straits Times and Today, supermarkets like NTUC Fairprice and Cold Storage have more than 2,000 house-brand and private-label items each, while Giant has more than 1, 500.
Reasons People Buy House Brands
A “house brand” or “while label store brand” products are produced by a supplier but packaged and sold under the retailer’s own label or brand. When they were first introduced, the main (and perhaps only) benefit these house brand products offered was that they were a cheaper alternative to established brands.
With the mellow economic landscape, consumers are more willing to purchase house brand items in more product categories, and when they do, many find that there is little tangible difference in terms of quality. A Straits Times poll showed that even as early as two years ago, house brands no longer carry the stigma of being of inferior quality.
Retailers are able to sell house brands items more cheaply because they need not spend on marketing and product development costs. There is also very little risk in developing a product that consumers end up not wanting. Retailers just need to see what is already doing well, get a supplier to product it, and then place their house brand items alongside the incumbent brands with “Compare and Save!” signs drawing attention to price difference.
House Brands Moving Into the Middle Class
Looking back to the time when house brands first emerged on the scene in a big way, we actually see a price creep upwards.
A 2008 Straits Times article titled “House brands are flying off the shelves” reports “double-digit sales growth for cheaper, no-frills products” while “on average, such items are about 15 per cent cheaper than others, but the difference can be as much as 50 per cent.” If you recall, 2008 is when the global financial crisis, and house brands providing 15 to 50% in savings is a wonderful thing for struggling Singaporeans.
Six years later in 2014, in the article “Growing taste for supermarket house brands: Poll”, the Straits Times reports that sales of supermarket house brands “have risen by 6 per cent to more than 20 per cent year on year”. However, “items are usually between 5 and 20 percent cheaper than other labels”. In other words, prices for house brand products have gone up.
So, How About Prices Today?
Let’s look at a typical NTUC Fairprice supermarket. As you know, prices in a supermarket change faster Donald Trump’s opinion, so while the prices may have moved when you read this, taken as a whole are indicative of the bigger picture.
Cooking Oil (1 litre)
Hand Brand Cooking Oil: $4.50
Fairprice Premium Cooking Oil: $5.95
Knife Premium Cooking Oil: $6.65
Kaya Spread (250g)
TOP One Kaya Spread: $1.80
Fairprice Kaya Spread: $2.20
Wang Kaya Spread: $3.80
Fairprice Mayonnaise : $2.60
Heinz Mayonnaise: $4.30
Fairprice Pepper: $2.45
Crab Brand Pepper: $2.35
Fairprice Ketchup: $0.85
Delmonte Ketchup : $1.25
Heinz Ketchup: $1.25
Fairprice Salt: $0.45
Pagoda Brand Salt: $0.50
Canned Chilli Tuna
Ayam Brand: $2.45
Full Cream Milk
Dutch Lady: $2.50
Cow Head: $2.95
White Rice 5kg
Royal Umbrella: $14.80
Chilli Band: $1.20
As we can see, the price of house brand products have crept upwards so much that they even begun to be more expensive than other “name brand” items. House brand products are almost never the most expensive in their class of items, but they are not necessarily the cheapest as well.
We see this trend beyond groceries, in the consumer electronics realm. With the exception of some goods, Challenger’s Valore house brand items are typically not significantly cheaper than name brand competitors.
Why They Are Getting Away With It
So what happened to the cost savings, if they are not passed down to the consumers? One can imagine that house brand items are very lucrative for retailers.
Furthermore, retailers have another huge advantage over the individual name brands. With access to point-of-sales data, retailers have a treasure trove of information that spans product categories. With granular data, they can observe the effect of promotions, store displays (or lackthereof), and even spending habits of consumers.
With a perception that house brand goods are of comparable quality to name brands, retailers like NTUC have created “premium” house brand product lines that in some cases, cost more than their name brand competitors.
House brands are here to stay. But as retailers shifted their focus away from the budget end of the market, it also brought an end to the great savings we enjoyed in the past. Seems like the savvy consumer would just need to judge each product (house brands or other name brands) on their own merits and think harder on where to spent their precious dollars!