RetailWire Plugged In
The retail community sounds off on industry events.
Each business morning on RetailWire.com, retail industry execs get plugged in to the latest industry news and issues with key insights from a “BrainTrust” of retail industry experts. Here is a synopsis of one of RetailWire’s recent online Discussions, along with results from the associated Instant Poll.
Long Live the Brands (But Which Ones?)
By George Anderson, editor-in-chief, RetailWire
As the soon-to-be-released book, “Private Label Strategy: How to Meet the Store Brand Challenge” (Harvard Business School Press, Feb. 2007), points out, national brands had their “golden age” in the United States around the middle of the 20th century.
But as happens with all golden ages, the crowning period of the national brands came to an end. The vacuum created as brands began to wane came to be filled by a number of emerging retailers. Some chains such as Wal-Mart and Home Depot did not even exist at the zenith of national brand popularity. These and others were to become the true powerbrokers in the consumer marketplace and, in the process, lead to what co-authors Nirmalya Kumar and Jan-Benedict E.M. Steenkamp have called the “private label revolution.”
Kumar and Steenkamp recently took part in an e-interview with RetailWire, and below are a few excerpts from the discussion.
RW: What is the premise of your work and what does it mean for brand marketers?
Kumar: [Our] recommendation for brand manufacturers is four-fold:
• Fight selectively where they can win against private labels and add value for consumers, retailers, and shareholders. This is typically where the brand is one or two in the category or occupying a premium niche position.
• Partner effectively by seeking win-win relationships with retailers through strategies that complement the retailer’s private labels.
• Innovate brilliantly with new products to help beat private labels. Continuously launching incremental new products keeps the manufacturer brands looking fresh but this must be punctuated by periodically launching radical new products.
• Create winning value propositions by imbuing brands with symbolic imagery as well as functional quality that beats private labels. Too many manufacturer brands have let private label equal and sometimes better them on functional quality. In addition, to have a winning value proposition the pricing needs to be monitored closely to ensure that perceived benefits are equal to price premium.
RW: Have branded items been mishandled by retailers in some ways?
Steenkamp: Retailers regard (strong) manufacturer brands as a must-have; customers expect it. However, carrying Coke, Budweiser or Pampers is not going to differentiate one retailer from the other. As such, retailers have little incentive to engage in (extensive) marketing/merchandising of branded items. Branded items do not make a consumer loyal to their chain (unless the retailer offers them at much lower prices than other retailers), private labels do...
RetailWire Instant Poll Results:
Is the popularity of national brands or store brands a cyclical phenomenon with one rising and the other falling at various stages over time?
Not sure/no opinion ......5%
What do you see as the most significant development and/or issue in the national and store brand story?
“Over the past 10 or 15 years, many manufacturers neglected to consider private label as a competitor. Some retailers split their private label into two: one low-price tier brand and one high-price tier brand. And in some cases, they even marketed the premium brand as a point of differentiation in their stores.
National brands have their place in retail and will continue to do so. But marketing departments need to better understand private label, and the interaction with both current brands and segments within a category, as well as with new product launches.”- Sue Nicholls, President, DATA Solutions by Design
“Clearly, one of the main forces eroding the power of a manufacturer’s label is private label. But do retailers really do a good job testing consumer response to their brands? If you look at a typical retailer’s business intelligence, buyers cannot conveniently set up a controlled test. It is too cumbersome and time is too short. Instead, they devote their energies to developing pricing and visual merchandise advantages over manufactured brands. When sales are sluggish, they’ll promote their own brand because they are more personally accountable. You can’t get markdown money from a private label.”
- Bill Robinson, Senior Executive, QuantiSense
“The retailer trend toward own brands will continue in this country for several reasons.
1) This is an effective way to support the “branding” of your stores with equivalent quality and premium store brands.
2) There are many underdeveloped categories in U.S.-retail that should contribute significant growth in the future just as they have done in Europe.
3) Savvy retailers are staffing their marketing departments with experienced marketing people; many of them from branded companies. These people are focusing on store brands and applying many of the same principles that the branded companies have done to successfully build businesses.”
- J. Peter Deeb, Partner, Deeb MacDonald & Associates L.L.C.