Across all retail categories, private label is playing an increasingly critical role in product assortments. Private label now accounts for 30 percent of sales in some U.S. categories. This shift is revolutionizing the way retailers go to market in stores and online, and it will impact every company’s business, whether they market private-label products or not.
Private label is pervasive across a range of industries, as we’ve seen through our Retail Tracking Service point-of-sale data. It is making up an increasingly substantial chunk of total channel sales in the technology, accessories, housewares and apparel industries. As far as apparel is concerned, nearly a third of total apparel dollar share is spent on private label, and just over a third of the units sold are private label. Our data also shows that private label’s dollar share of apparel grew 1 percentage point while unit share increased 3 points since 2016. Both unit and dollar growth for private-label apparel grew at a higher rate than for national brands.
To find out who’s shopping private label, we consulted with our Checkout E-commerce Tracking service, which measures the entire e-commerce retail landscape, including marketplaces, direct-to-consumer entities, top industry-specific retailers, and emerging players. Looking at a longitudinal panel of over 3 million online shoppers, we focused on four popular, online-native direct-to-consumer private-label players: Warby Parker, Casper, Mack Weldon and Bonobos.
These brands have all become respectable players in their categories. We estimate that even the smallest of the four retailers studied — Mack Weldon — achieved over $50 million in online sales in 2017.
The Data on Private-Label Brands Doesn’t Lie
In order to understand buyer demographics and to follow their purchase behavior, we looked at online shoppers who shopped at these four private-label brands in 2017. We found, first, that while the 18 to 24 age group has been a key focus area for many brand managers, it would be a mistake to assume that online direct-to-consumer private labels should be exclusively designed for this segment. In fact, three out of the four direct-to-consumer private-label brands we studied under-indexed among the 18 to 24 age segment, while all four of the retailers over-indexed among the 25 to 34 segment.
Three of the four, except Warby Parker, also over-indexed among 35- to 44-year-olds. One of the retailers, Mack Weldon, actually over-indexed with shoppers over 45 years old — a group that was around before the dawn of the internet, if not of time. All of this points to the idea that direct-to-consumer private-label brands hoping to launch in the digital space can be successful, regardless of the age group they’re targeting.
Buyers of all four brands tend to over-index among bachelor and graduate degree holders. For example, while 17 percent of all online apparel buyers have graduate degrees, the percentage of Warby Parker, Casper and Mack Weldon buyers who have graduate degrees ranges from the mid to high 20s. And for Bonobos that figure stands at above 30 percent. Buyers of the four brands also tend to have higher incomes than the average category buyer. While 31 percent of online apparel buyers have household incomes of over $100K, the percentage of shoppers across the four brands with incomes over $100,000 ranges from the high 30s to the mid 40s.
Do heavy private-label buyers in one category also buy private label in other categories? Our Checkout research shows that indeed, direct-to-consumer private-label buyers shop private label across industries and price points. For example, both Bonobos and Mack Weldon are among the top apparel brands in terms of the percent of buyers they share with Warby Parker and Casper. While Warby Parker buyers represented approximately 5 percent of total online apparel buyers in 2017, they represented approximately 24 percent of Bonobos buyers and 17 percent of Mack Weldon buyers that year. This 24 percent figure is especially interesting, given the fact that Warby Parker and Bonobos are far apart on the pricing spectrum — a pair of prescription glasses from Warby Parker can cost half as much as a pair of pants from Bonobos.
Given the high penetration of private-label sales in industries like home and apparel and of both e-commerce and private labels, we believe there is much growth ahead for private-label brands in the U.S. that can promote innovation online. Industries like apparel and home are further along than tech or accessories, where things are just starting to heat up with private label. Our research reveals that there is a lucrative segment of shoppers who are actively engaged with direct-to-consumer private-label brands online.
Looking at a few winners in the space, Target has been very successful with its private labels, from its children’s clothing brand Cat & Jack to its women’s apparel brand A New Day, men’s apparel brand Goodfellow & Co., ath-leisure brands Joy Lab and C9, and home brand Project 62.
To expand its consumer base, of course Amazon has gotten in the game, too. Its Amazon Elements and AmazonBasics lines offer a range of high-quality products for customers to enjoy at value pricing. Recently, the online giant has partnered with the same vendors used by major athletic brands including Nike, Under Armour and Lululemon. This brings to light a key component of the next wave of private label: quality.
Don’t Turn Your Back on Private Label
Remember that regardless of the label, today’s consumers expect exceptional products. Cultivating a private-label brand is more than just slapping a label on a generic product. It must introduce shoppers to new and innovative experiences while meeting a fundamental need. Private-label brands that answer to consumer needs are finding themselves well positioned to drive sales and loyalty — and that’s evidenced by the growth of private label across a range of industries, including apparel. As national brands lose share across categories, the writing is on the wall: private label is far from finished growing.