top of page

DANGER AHEAD (Part 3): Why Big Box private-label Price Reductions Should Terrify Independent Grocers and What They Can Do About It

Updated: Jul 3


NOTE: This article is the third in a four-part series on the threat that big national supermarkets' recent price cuts pose to independent supermarkets and what independents can do about it. You can read Part 1 here and Part 2 here.


The Big Box Game: More Than Meets the Eye


AI-powered tools for Independent Grocers

The recent news that Walmart, Target, Aldi, and Kroger are slashing prices on their private-label products might seem like a welcome relief for shoppers battling inflation. But for independent grocers, this news is seriously worrying.


Year after year, independents have lost ground to these bigger players - around 1% of their shopper base annually. While independents might be able to match or even exceed the Big Boys on quality and customer service, staying competitive on price has been a constant uphill battle. Now, with these new price cuts – especially on private-label products – the threat is more significant than ever.


The Hidden Profit Power of Private-Label


Private-label products aren't just a way for supermarkets to offer cheaper alternatives. They're a secret weapon with two to three times higher profit margins than national brands. Hence, even with these price reductions, big box stores are likely making a killing on their private-label sales.

This is a double whammy for independent grocers. Not only are they at risk of losing even more customers to the allure of lower prices, but the Big Boys, by focusing on private-label value, are getting richer and stronger in the process. It's a recipe for disaster if independents don't adapt.


Fighting Back with Smarter Private-Label Pricing


So, is it game over for independents? Absolutely not. But winning this battle requires a strategic shift in how they approach private-label pricing.

At Puzl, we've helped independent supermarkets worldwide harness the power of AI to optimize their gross margins. One common mistake we see is independents failing to aggressively differentiate between branded and private-label prices.

Think about macaroni and cheese. Typical private-label versions might have a 40% margin, while the national brand sits around 15%. Unfortunately, most grocers leave this margin structure intact. The result?  Independents sell lower-margin national brands and miss out on potential profit.

In contrast, the real opportunity is to dramatically reduce the private-label margin to 20-25% and, in the process, demonstrably differentiate private-label from branded items on price.  This would lock in significantly more private-label sales while maintaining a much higher margin. 


How Puzl's AI Can Level the Playing Field


With Puzl's AI-powered tools, you can model the ideal private-label prices for each product and category. The goal is strategically shifting customers away from national brands to your more profitable private-label options. By doing this, you can not only compete with the big box stores while simultaneously boosting your overall gross margin.


The Bottom Line


The big box price cuts are a wake-up call for independent grocers. Don't get caught in the undertow. By rethinking your private-label strategy and leveraging tools like Puzl's AI, you can turn this threat into an opportunity for growth and profitability.


Let Puzl help you navigate these challenging waters and emerge stronger than ever, For more information contact us at info@puzl.ai



60 views0 comments

Comments


bottom of page