The reason for the success of Ikea is not down to the price and size of its meatballs. It is down to its range of unique, exclusive products that have given it the ability to massively differentiate itself from the rest of the market.
At the World Retail Congress in Berlin this week, Anders Dahlvig, former chief executive of Ikea, suggested the game was becoming increasingly tough for retailers who relied entirely on the branded goods of the FMCG companies.
The disconnect between the branded goods and the retail channel is making it increasingly hard for merchants to eek out a decent margin when they are simply selling the same goods as everybody else.
This is why Dahlvig reckons there will be a trend towards more private label goods. This view was echoed by Sir Martin Sorrell, chief executive of WPP Group, who suggests such products will play an “even more significant” role in the future than they have done in the past.
The major supermarkets have long recognised that private label has a massive role to play. Only last week on a visit to Sainsbury’s HQ in Holborn Retailinsider.com visited the group’s beer buyer who revealed its ‘Taste the Difference’ range of ales was expanding from three to seven varieties.
The decision he had to make was which branded beers would have to be removed in order to make way for these private label brews.
This is just a very small example of the growth of private label but it is representative of an industry-wide trend that looks set to accelerate as differentiation moves up the agenda of all retailers as they fight for relevance in a tough global market.