Retail brands• Supermarkets are in this case known as Retailers• Retail brands are the products sold in the supermarket under the retail brand. Ex. Cargills washing powder, arpico papadam etc.• Retailers either manufacture themselves of get product manufacturers to manufacture on behalf of the retailer and then branded• Another name for retail brands is OWN LABEL
Own label brands• Globally own label brands have seen a significant increase in advertising and branding. In some instances own label brands have been seen growing as fast as great retail brands• Refer page 137 for examples
The use of generics by retailers• Generics have neither promotional backing nor any distinctive labeling ex. Sugar, white rice.• It is a strategic move to introduce generic brands by retailers along side the own label brands• The main reason to have own generic are to capture the market share of cheaper/weaker manufacture brands
The use of generics by retailers• Yet in some instances the generic brand will pose a threat to the own label brands when the customers find out that there is hardly any difference between Generics and own label brands.
The increased powerful nature of the retailer• During the last decade one can see the shift in customer behavior where customers prefer to shop at supermarkets due to convenience. This has given enormous bargaining power to the retailer and reduced it from the manufacture.
The increased powerful nature of the retailer• Reasons for shift in power (page 138) – Success of self service – Professional management – Cost advantage – Centralized purchasing – Greater discounts – In store promotions –ex. Bundled offers, offer on short expiry products
The Wheel of increasing multiple retailer dominance Growing strength of major retailers Large discounts from manufacturers Small retailers withdraw This attracts large number of customersStore expansion lead Healthy profits due to high to increase in market level of salesshare
Understanding the balance of power• Power is the ability of one party controlling the actions of the other. – Reward power. This form is based on the perceived ability to give positive consequences or remove negative ones. Ex. Reward by higher discounts by manufacturer to retailer – Coercive power. This is the perceived ability to punish those who not conform with your ideas or demands. Especially in monopoly markets or when the brand is really strong. Ex. Blacklisting customers who fail to pay in time.
– Legitimate power (organizational authority). This form is based on the perception that someone has the right to prescribe behavior due to election or appointment to a position of responsibility. Also called Normative Power. Ex. Hameedia agrees to run the adidas operation inline to specified standards. adidas will govern and evaluate standards– Expert power. This type is based on the retailer having distinctive knowledge, expertness, ability or skills. Ex. Sales training, stock control, visual merchandising
Response of weak manufacturer’s brands Manufacturer gives in to retailer demands for extra discount Manufacture brands supportLess investment to Cut while OLB investment maintain existing growsbrands & NPD Customers perceive lessManufacture see difference between brandsdecline in profits and OLB Choice based on price,Brand sales fall & availabilityOLB grows & display
Response of Strong brand Investment in existing brands & NPD Consumer communication Brand sales and campaigns supported profits improve Consumer recognized Wide distribution brand valuesRetailers want to be Consumer choice influencedassociated with strong by quality & brand personalitybrands
Whether a manufacture brand should become an own label supplier• Can they maintain quality standards• Are they financially sound• If there is excess production capacity, this can be outsourced to own label. If not the manufacturer cannot meet retailer targets• Sharing of technology with the OLB
Category Management• Due to the rapid increase in brand onto retailers shelves both retailers and manufactures are compelled to look at category management instead of managing individual products.
Category Management• Definition – “the joint strategic planning with retailers to build total category sales and profit for mutual benefit”• Reasons for practicing category management – Increasing number of new brands – Consumer sophistication and changing needs ex. Men using fair ad lovely, clear for men – Shrinking shelf space in retailers shelf’s
Category Management Reviewing the category ex. cosmetic Targeting consumers ex. Identifying mens segmentEvaluating results Implementing strategy Planning merchandising ex. In store POSM, Sales ex. Display images promotion, trial, sampling