Imagine that instead of a being a retailer you are a consumer brand. How would you react to the rapid growth of own brand products in retailers’ stores? One route is to go with the flow and make the “own brand” products for retailers but that turns them into manufacturers not brands. There are other options.
Brands of all types could choose to move to the dark side, or in other words Amazon. Many have. It’s given them the advantage of protecting and promoting their brands in a space where there are currently few own brands to compete with. Of course the disadvantage is that Amazon end up knowing as much as retailers about the brand’s customers. In reality they would know even more than retailers. This information could also encourage Amazon to set up their own brand versions. Existing retailer channels might not be too happy either.
The ultimate solution
This is how P&G are responding to the challenge, in addition to working with Amazon. They plan to “dramatically innovate the way we supply our customers,” and “respond to customers and our consumers in a way we have never done before.” In other words they are going to beef up their own existing website and sell more direct to customers. This will be a significant additional channel to market. Currently in the US they are making large investments in Amazon style distribution centres to offer customers a place where their products will always be available and competing products will not. Check out www.pgshop.com to see what could be coming to the UK and Australia.
What can retailers do?
As brands adopt these types of strategies the balance of power shifts away from retailers so they need to find ways to respond to the threat. The solution is to do what the brands cannot do. Stock brands and own brands to give customers choice and explain the benefits and differences between the options that they offer. In other words provide a value added service to customers so that they can make the right buying decision to meet their current needs.
It may be possible to do this with store staff for big ticket items but it’s not possible to provide this service across the wide range of products in a supermarket. The primary solution has to be smart in-store signage. The primary role of signage changes from just telling customers the price to providing enough information to help shoppers make the best buying decision for them.
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