Store in-store models for retail expansion of local brands

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In this presentation we share approaches to store-in-store, models and their advantages, best practices for local brands to pursue store-in-store for national expansion.

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Store in-store models for retail expansion of local brands

  1. 1. Browne & Mohan Store-in-store strategy to expand into national markets All photographs used in the presentation are owned by their respective copyright holders.© Browne & Mohan, 2013, Limited use
  2. 2. Regional brands and their growth Regional brands command a significant part of markets in many sectors such as fashion, food, aerated drinks, wines, etc Their USP 1. Strong local reputation 2. Childhood association 3. Familiarity 4. Ethnic association 5. Meet unique needs (for example, sophisticated clothing in smaller sizes) Foxon Park, Vernor’s or Maxie (all regional soda brands in USA), or Campa and Kali soda (local brands of India), Bateel or Just Falafel (local brands of UAE) Potato Corner or Max (brands from Philippines) they have all been expanding into closer markets at home and then to international markets. All regional brands have five major challenges: Expansion, Control costs, Customer experience, Prices and sales © Browne & Mohan, 2013 Limited use only
  3. 3. Major factors underlying locals going national go bust!! 35% 31% 30% 25% 20% 18% 15% 15% 14% 12% 10% 10% 5% 0% Capital related Inadequate Lack of systems Promotion Brand launches Others management management structure Judy’s Inc, Bakemans Industries, Laura Ashley, Wickey Furniture and many local brands that were quite profitable and competed with the big box stores or MNC failed for management related and operational control reasons. © Browne & Mohan, 2013 Limited use only
  4. 4. Growth Channels for local brands: Supplier to large retailer Advantages: Quickly widen user base, improve market presence, ride on the market pull of retailer Disadvantages: low bargaining power , receivables cycles, inventory management © Browne & Mohan, 2013 Limited use only
  5. 5. Growth Channels for local brands: Direct retail presence Advantages: Total control of expansion, customer experience, prices, sales Disadvantages: high investments and risk, coordination issues © Browne & Mohan, 2013 Limited use only
  6. 6. Growth Channels for local brands: Store-in-store (large retail) Advantages: Increase user base, expand with control over brand and sales Disadvantages: training & attrition, receivables management, inventory © Browne & Mohan, 2013 Limited use only
  7. 7. Growth Channels for local brands: Store-in-store (independent) Advantages: low cost expansion, complete control of product to consumption cycle Disadvantages:: Trust building with partners, IT investment, revenue sharing conflicts © Browne & Mohan, 2013 Limited use only
  8. 8. Why retailers prefer Store-in-Store Large retail formats and aggregators recognize that allowing partners to directly manage their offering, inventory, price and customer services, they would be pursue asset light market making activities. For example, $47 Billion of Amazon revenues comes from other vendors who directly manage their products, inventory, prices and customer order management. Retailers and aggregators realize by allowing partners to invest in highly specialized or trained manpower to educate and influence customers, they benefit from right pull to get shoppers to their marketplaces. Macy store-in-stores of Sunglass Hut, Lush or Destination Maternity bring the targeted customers and their families to spend time and shop. Edwin Watts Golf, Work N Gear and Whole food stores at Sears or Jimmy Chao and Reiss stores at Bloomingdale for attracting the right mix of customers. Retailers also realize they could benefit from extended presence of specialized skill sets of the partners (for example, Target benefits from mobile technology experience of Radio-shack store-in-store) Stand alone retailers find this is an asset light model to offer comprehensive product experience and maximize their space rentals as they can earn predictable rents than seek profits from sales. (Kemp Fort or Saks stores). © Browne & Mohan, 2013 Limited use only
  9. 9. Expansion economics of local brands going direct 10% 5% 11% 58% 16% cost of finished goods Property store labor transport & distribution Others Based on a national expansion in 6 cities of India, property and store labor are the two major costs the smaller local brands need to consider when choosing between the large format retailer lead model or smaller independent store led models. © Browne & Mohan, 2013 Limited use only
  10. 10. Store-in-store models and product fit 12 10 8 6 4 2 0 Large retail Independent Consumer preferences indicate Shoes, Children apparels, organic food, men and women apparels can be explored in independent store models. © Browne & Mohan, 2013 Limited use only
  11. 11. Taking local to National: Key Store-in-Store principles Adopt Evolutionary growth: whether large retail format or independent route expose yourself to manageable growth. Learn from the experience, fine tune your engagement model and invest in required controls. Control costs: managing inventory and receivables is a big challenge. Adopt IT solutions to benefit from higher visibility, better SKU management and payments. S M apparels, which pursues a independent store-in-store has invested in reliable IT backbone to completely manage the independent store-in-store expansion. Focus on Product quality : whether large format or independent model, invest in product standards and quality process. Measure & Control TCE: customer connect is important to stay “non-commodity”, invest in CRM tools and approaches. Protect your uniqueness: Protect uniqueness and stay closer to Home! In product and experience, that is where the growth is. Learn to say no: Local brands loose advantage by diversifying into unrelated expansions or unrelated alliances. Learn to say no to large retail partners. Promote and invest in communities: The biggest advantage you have is the loyal community. Invest in communities, use both social media and other PR approaches. © Browne & Mohan, 2013 Limited use only
  12. 12. Thank YouFor any queries, please contact :Srinivas Sawkar157/A, II floor, 10th A MainJayanagar, 1st BlockBangalore. 560011PH: 91-80-2656 5164, 40951170ssawkar@browneandmohan.com © Browne & Mohan, 2013 Limited use only 57

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