Given the pressure on the multiples arising from flatline demand and the increasing appeal of the discounters, any major customers’ growth has to come at the expense of the competition. For this reason, differentiation (own label) becomes an increasingly important factor in their marketing mix.
As you know, a key consequence of retail polarisation and the current power of the major retailers is their ability to concentrate or dilute the supplier’s brand message, depending upon the extent to which they see it reinforcing or conflicting with their own marketing aspirations…
As major retailers have traditionally benchmarked and conformed to the same standards, over time they have become indistinguishable, resulting in reductions in shopper loyalty. This, combined with price-war induced margin pressure, causes them to become increasingly in need of differentiation and more dependent upon margin improvement in order to promote shopper loyalty to the store. Increased use of own label obviously helps in making the store special and stimulates repeat visits, whilst own label margins help to fund communication of the appropriate message to consumer-shoppers.
As they thereby develop product marketing expertise, and increased ‘consumption-insight’, the shopper-orientated retailer becomes more sensitive to the consumer profile of their store traffic. This insight, combined with increasing awareness of the power of shopper marketing, causes them to attempt to reach deeper into the supply process in order to influence supplier branding and delivery, in an endeavour to align the combined offer more effectively with the needs of consumer-shoppers making up their prime store traffic.
This need to take on and influence supplier functions, coupled with the suppliers’ increasing interest in matters retail, can lead to positive integration. However, mutual profitability can depend upon each party’s real agenda and the resolution of potential conflicts therein.
For instance, it could be said that the retailer regards the supplier’s brand as a means of attracting the consumer to the store and thence to the aisle. Here the consumer-shopper is presented with the brand and a comparable (or better!) own label at a lower price. In effect, the retailer uses a ‘switch-sale’ to capitalise upon the output of supplier marketing activity. Fortunately, a combination of increasing cost pressures and their resistance to branded price increases is diluting the price advantage of own label over brand.
One answer for suppliers can be to walk away from such retailers and appeal directly to the brand’s consumer… However, a more productive approach might be to consider supplying own label and at least share in the results of the customer’s marketing initiatives.
In the event that the supplier’s cultural heritage prevents the supply of own label, then the only answer might be to attempt to market the brand all the way to the aisle and beyond. This requires getting to the fundamentals of the brand-consumer relationship, especially the dynamics of transition from consumer to shopper, understanding the retailer’s store-shopper relationship, including the degree of consumer-profile/shopper-profile match, and by incorporating consumer-shopper insights, aim for synergies that are of mutual benefit.
By fully acknowledging the consumer’s need to control their own shopping environment and appreciating that the in-store shopping experience can determine the consumer’s attitude to the entire retail organisation, it is important to ensure that the retailer’s brand proposition is consistent across the estate and within the store.
It also means understanding the basic store proposition, the retailer’s use of the 8-P retail marketing mix to express that offer, and then find ways of integrating it with the brand marketing mix, profitably.
Moving from understanding the consumer to influencing shopping behaviour, whilst at the same time attempting to switch the retailer’s focus from the purchasing process to improving consumer demand, can help in persuading the customer of the benefits of sharing insights in order to optimise shopper-visit productivity.
However, building store equity and brand equity in tandem requires full integration and total commitment to the supplier-retailer partnership by each party. Anything less brings with it the risk that the supplier merely succeeds in delivering the consumer to the aisle, only to lose out at point of purchase. In extreme cases, this can result in the brand’s message being diluted to the point of ineffectiveness, a position made worse by unfocused overspends on trade funding that merely build store equity at the expense of the brand…
It is perhaps more productive to concentrate on marketing to and through the store, so effectively that the retail trade partner turns to other, more ‘exploitable’ brands for profit enhancement….