Ongoing competition between retailers’ private label product and brand manufacturers has been portrayed as a “winner take all” battle for control of the shelf. However, a collaborative approach with shared shopper, goal alignment and a renewed focus on relevance is more likely to produce success. This blog looks at why that is so, and what brand manufacturers can do about this.
The globalization of retailers and brand manufacturers, the rise of value merchants and the recent economic downturn have all contributed to the emergence of new issues. Faced with more choice than ever, shoppers are overwhelmed and are looking for ways to simplify their shopping. Retailers and brand manufacturers are trying to address economic inefficiencies that have resulted from unbridled growth of assortments and product portfolios. Range rationalization, delisting of products, product portfolio rationalizations, and evolving new product development processes are the result. To understand these trends and how to survive, we look at the shopper and the retailer.
Shopper
The recent recession served as a catalyst for shoppers to re-evaluate the way they consume and shop. Shoppers have reassessed and re-prioritized their needs, become more planful in their shopping and have altered shopping habits — consolidating shopping trips, shifting to value merchants and turning to more store brand solutions — to cope. The recession has forced consumers/shoppers to examine and change their behaviors in a way that no amount of marketing could have.
The nature of loyalty and ways in which shoppers bestow their loyalty today have changed. Product proliferation has made it more difficult for consumers to assess the differences among them. Shoppers are looking for help, looking for choice editors or advocates. With shoppers making in the range of 150 shopping trips a year, retailers are perfectly poised for such a role. Shoppers have come to rely on and trust retailers as shopper advocates, while branded manufacturers have become somewhat dis-intermediated from shoppers. Retailers are taking on the role of brand intermediaries.
Retailers
Much of retailers’ behavior can be understood by knowing that they are concerned with two key goals—efficiency in the short-term and the long-term profitability of loyal shoppers.
Efficiency— Efficiency is a problem shared by retailers and branded manufacturers. Retailers have begun to reduce the number of SKUs and prioritize categories in their stores. Despite a proliferation of products, there has been no accompanying increase in sales. By reducing the number of SKUs in their stores they have not seen a reduction in sales.
Shopper loyalty—By offering exclusive private label products with value and relevance to different shopper segments, retailers are better able to retain shoppers. Retailers have realized that they cannot rely on branded products alone to draw shoppers to the store and sustain shopper loyalty. Private Label products provide exclusivity and unique relevance to shopper segments (e.g., Tesco, Walmart and Carrefour). Private Label helps retailers prevent trade-down to value retailers and serves unique needs of their shopper segments, contributing to their perception as “shopper advocate.”
In the next article the author will speak about understanding the point of view of the Brand Manufacturers and what can be done from the Manufacturers on how to collaborate and co-create shopper marketing solutions.
About The Author
Jim Lucas - Guest Blogger for Phenomena
Jim Lucas is a director of shopper marketing at Draftfcb, Jim helps retailers, manufacturers, and service providers to motivate shoppers through value-added experiences. The acknowledged founder of the science of retail ecology, he is internationally recognized as an experienced marketer and leading retail expert.
During his more than 20 years in the marketing industry, he has served as director of strategic planning and research at Draft Chicago, director of planning and research at Frankel in Chicago, and director of analytics and modeling at Krumm & Associates LLC. His clients have included, among others, Burger King, Frito-Lay, Kellogg, Kmart, Kroger, McDonald’s, Mervyns, Procter & Gamble, Quaker Oats, Sears, Target, USPS, and Walgreens.
Jim Lucas
Director of shopper marketing at Draftfcb.
Jim.Lucas@draftfcb.com
http://www.draftfcb.com
