The Internet has a lot to answer for when it comes to the changing shift in consumer demands. There was a time when ‘brand’ meant something, and while it is dangerous to generalise, brand is becoming less significant.
In the rush to remain relevant in the consumer’s mind, branding has become less about solving specific needs – and more about creating new revenue streams by promoting solutions to needs that currently don’t exist.
In the 70s, launching a brand would mean that it had a life cycle of between 17-20 years. In the 90s this dropped to 5-6 years, and in 2010 it was less than 12 months. The launch of the internet and the growth of social media has seen a dramatic drop in the time a product has to develop a relationship with today’s savvy consumer.
Consumers are no longer brand loyal - they are trend loyal
Consumers are no longer brand loyal - they are trend loyal, and it is arguable whether we will ever see another iconic brand establish itself in the market again. Consumers are only loyal to the engagement experience that a particular brand offers. Once the experiential elements of brand engagement disappear, (in many cases) so does the emotional connection consumers have with the brand that was providing them that unique experience.
Contributing to this position of brand loyalty are the supermarket giants and their push for own-label goods. The big two super-chains in this market have made no secret of their desire to grow their own-label brands, revamping and upgrading their image to a premium look, one that is aligned to the well-known market leaders. Add to the mix a concerted push against secondary product partners, and the lines of distinction between market leaders and own-label will become increasingly blurred.
Stephan Shakespeare, founder and global CEO of YouGov, highlighted this in his 2016 article: Supermarkets seem to be gearing up for a big push on their own-label products - should brands be concerned?
His research showed how shoppers at different supermarkets feel about own-brand goods. On average, 39% of British consumers believe that well-known brands are usually better than shops’ versions, and 65% think there isn’t much difference between branded goods and supermarkets’ own products.
Interestingly, the attitude of consumers changed significantly across the different banners with Aldi (76%) and Lidl (75%) customers feeling that there was not much difference between leading brands and supermarket brands (versus 40% of M&S customers).
These results highlight some interesting insights for the future of brands in this market. On face value it seems clear that as major chains gravitate to own-label brands, consumers will increasingly see little difference between leading brands and supermarket brands.
Shakespeare goes on to pose the key question arising from the data: Where does the push come from? Is it from consumers choosing certain supermarkets (because they like own-branded goods) and certain retailers that have a stronger proposition when it comes to these value products? Or does it come from retailers having a concerted push on own-label goods in an effort to persuade consumers to switch from branded alternatives?
If it is the former, then these attitudes may not affect brands too much. After all, if there is a clear share of consumers who favour branded goods over own-brand varieties, then there is a high chance that they will stick with their established habits. However, if it is the latter – and the thing that tips consumers from the branded to the unbranded column is simply exposure to the products – then brands could be facing a bit of a challenge.
But it’s not all doom and gloom for brands as the research seems to show that the closer aligned you are to a convenience offer, the greater perception there is from consumers that well known brands were better than a shops own-brand. History shows that convenience was founded on house brand names and market leaders, so perhaps this is just another case of going back to the future?
This could also be good news for convenience retailers and independents in general as they look to create points of difference between the supermarkets and themselves.
The fate of many brands and retailers, for that matter, could be in the likely collaboration of forces to create environments that surprise and delight, offering consumers a greater array of products and choices.
Greater in-store choice and a relaxing of traditional ranging dominance could be required for the survival of all parties… but this will not come easy!
If the current status quo and control of existing convenience is maintained, then it is more than likely that brands will have less opportunity in both the supermarket and convenience space. This could also be bad news for retailers.
Why? Because the evidence of brand-controlled environments is there for everyone to see; in the writing on the walls, windows and awnings of closed-down corner stores.
It sounds harsh, but it is something that every brand manager, marketer and CEO needs to hear. Over the past two years in establishing our program I have heard it all, every objection from “Thanks but we’re good”, to “It’s just not right for us” to “Happy to support if it is free”.
When I first started this project it was based on years of dealing with independents and hearing their stories, about the lack of information and service they were getting in relation to new products for their business.
When I was consulting I remember going to a café to observe their operation and what peaked my interest was a small space in the corner of their business dedicated to convenience products. As I walked around the small space I noticed that all of the products were brands that I had never heard of before. There were no house brand names or market leaders, and in my 30 something years of dealing with these very brands, I questioned why have I not heard of these new lines before.
This one chance encounter has paved the way for what is now Stock Box, as I set out to truly understand why 95% of all new products fail. If the statistic is to be believed, then are we really saying that 95% of all new products are duds, and if this is, the case then why would you bother investing in new product development in the face of this overwhelming statistic?
How can new product fail when consumer research indicates that more product choice in-store is what customers are looking for, and our very own member feedback continually encourages us to keep up the good work, to keep sending new and interesting products to range, and to just keep going.
I have seen it all, from the generation of leads from the program that suppliers have never followed-up on, to poorly managed product launches, to distributors saying that there is just not enough volume for us to warrant ranging, to suppliers openly telling me that this just created more work for them.
So much effort goes into the development of brands yet once it goes to market there is almost a hand’s off approach when it comes to the greater independent marketplace. So we decided to put this to the test recently, and selected twenty of the top ranked companies within the FMCG sector, asking our members one simple question.
“How often would you hear from these companies or their representatives?”
This was a voluntary survey of our retail members across P&C, Mixed Business, Café & Takeaway, Newsagents and Independent Grocery, with damming results.
Across the board more than half of respondents indicated that they had never heard from these companies or their representatives in the past 12 months, and almost a third of respondents indicated that they did not carry any of their products at all. Only 20% of respondents indicated that they ranged these brands and had received some remote level of service and support.
Yet the justification from these companies remains defiant, with comments like “Well this is no surprise as we do not focus on these businesses”
“Stop falling in love with your brands, because the market does not care!”
At a recent trade event, I had a conversation with the owner of an amazing product the only problem was that they thought it was amazing too! After a brief discussion and explanation about what we do, they responded with “We also have our own field force, so we would not want to create cross-over” Really!
In the face of damming evidence from our survey of major brands with vastly greater field teams that theirs, they were under the impression that “Things were all good, thanks!”
People in your organisation who are in love with your brands or who think that everything is good, will ultimately be your downfall, because happy people change nothing and challenge nothing. No one leaves a job because they are happy, so it stands to reason that change can only occur if there is a level of unhappiness with someone or something.
Nothing changes, if nothing changes and in an industry where change is the only constant you better hope you have people in your business willing to change.
In my experience, the reason new product fails is less about the product, and more about the people who are reluctant to change, unwilling to upset the status quo, and uncertain of doing anything new for fear of how it may impact on them personally. I have come to realise that product fails because of people.
With imminent change and new competition on the horizon, I have no doubt that those same people will point to these factors as reasons for declining sales, when in reality there is no such thing as competition, until YOU create it either through ignorance, arrogance or neglect.
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Online home delivery, click and collect and now pick-up services like Amazon Fresh are all considered as true innovation, when in actual fact they have been around for decades.
I recall my very first job in retail as a casual shop assistant in my local supermarket. In those days we were called bag packers and yes, behind every register was some young 16 year-old ready to pack your groceries into brown paper bags. Those were the days when shops were closed on Sundays, Thursday night shopping was until 9pm, and supermarkets closed at midday on Saturdays.
There were no self-scanning registers: products had to be price marked and tins were stamped with ink stampers. If you grew up in this era of retail then you know the pain of price changes and the removal of sticky price tickets, or ink from tins every week to reflect the new promo pricing.
At the front of the store was a row of trolleys that had either bags of groceries marked for home delivery by some local guy in his station wagon, or bags marked for parcel pick-up ready to be taken to the back of the supermarket for a staff member to place into the customers car.
Today’s retailing is all about the marriage of old-fashioned values and modern technology.
The reality of retail is that everything new is just new again, brought back from the past and adopted with current efficiencies and technology to make it relevant again. Today’s retailing is all about the marriage of old-fashioned values and modern technology.
So with that in mind, and faced with the uncertainty of the current retail climate, what do retailers need to do? Well, like we have seen with the above examples, the answer to your future in retailing lies in the past.
During the same era, corner stores flourished, in part due to limited trading hours, but in the main because of their range and assortment. The corner store was the go-to place for those interesting products.
Who can remember cracker night, before it was banned, and your local corner store with their big displays of Tomb Thumbs, Penny Bungers and Thunders. The range assortment, bright colours and smell of powder still resonates’ with those of us who can still remember.
Retailing needs to be a place of discovery, where new and interesting products are found. Today’s shopper isn’t looking for generic experiences in their everyday life — and they don’t want to buy bland products from you either.
In a recent report by AMP Capital report on Recommended Retail Practice (RRP) they found that there is a shift back to shopping in-store by Gen Z, the shoppers of the future.
Mark Kirkland, managing director of AMP Capital Shopping Centres, said: “The findings of the 2017 RRP report are significant as it confirms that the future of retail is bright, with a range of new opportunities at our fingertips”.
Findings from the same research identified four key themes that are trending:
As much as we want to believe that things are soooo different from the past, the fact of the matter is that they’re not. Big box retailers, promotions and price discounting were still key considerations for any independent retailer in the past; the difference was that the corner store was the go-to place for new and interesting products that you could not get from the supermarket.
Diversity of range will be a key strength for independent retailers in the future, and I will leave you with this to ponder…
A recent conversation I had brought up a good analogy to illustrate this point, when the drinks category was compared to the parliament of the day.
Essentially you have two major parties running the country, which is not unlike the drinks category, yet the balance of power and greatest influence lies not with the major parties but with the minor parties. It is these minor parties, or in retail terms the greater array of interesting and innovating suppliers and their products, that will hold the balance of power with our future shoppers.
Everybody expects you to have the main stayers in your store, but what they will remember you for are those products that they were not expecting which surprised and delighted them.
Think about it!
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BP is set to become one of Australia's largest fuel and convenience retailers with the recent announcement of a $1.79 billion deal to buy Woolworths' petrol stations business. It is reported that under the deal, Woolworths will offload 527 Woolworths-owned fuel convenience sites and 16 development sites to BP. Both parties will equally fund the current “Woolworths Rewards” 4c per litre fuel discount for a minimum of 10 years, with plans to expand the discount to other BP sites.
BP Australia President Andy Holmes said “This new partnership is great news for all Australian consumers, who will in future be able to enjoy the combination of BP’s premium fuels, a world class convenience food offer and an enhanced loyalty program”.
While all reports to-date have focused on the 4c per litre fuel discounting and the impacts on competition, there are still a lot of unanswered questions about who will be controlling BP’s retail offer pending approvals of the deal by the ACCC. While just speculation at this point, you only need to look at the M&S Simply Food UK tie-up with BP, to get some insights into the future direction that BP and Woolworths will be taking in this market.
As reported by the UK’s Telegraph on the 26th December 2016, BP is in talks with grocery retailers in three new countries about launching convenience stores on petrol forecourts, as it seeks to emulate the success of its M&S Simply Food tie-up in the UK. Tufan Erginbilgic, BP’s chief executive of refining and marketing, said it was pushing the model as a “global strategy” for it’s convenience offer, selling branded goods and BP’s Wild Bean Café brand alongside M&S products.
So what does this mean for distributors and product partners in this market? Well for a start you would have to say that any current ranging and supply arrangements with BP are temporary at best. Currently Metcash services the BP network with many of their product needs, however given the integration of the “Woolworths Rewards” program allowing customers to both redeem and earn discounts on in-store purchases, I cannot see Woolworths agreeing to support this arrangement long-term.
While BP has stated an enhanced loyalty program, they have provided little insights into how this will work and if this will include their current Velocity Rewards program or not. Current suppliers feeling the axe of Coles and Woolworths range rationalisation must also be wishing that this year would end, as this latest announcement potentially flags further erosion of a suppliers opportunity to stay on-shelf within the organised convenience channel. And suppliers lucky enough to remain on-shelf are not going to have a picnic either, paying a premium to remain on-shelf, and now faced with the very real prospect of competing against Woolworths branded goods within the Grocery and Convenience channels.
There is no doubt that this is a good deal for both BP and Woolworths, and anyone who thinks that this is just a shuffling of the deck chairs by Woolworths from Caltex to BP is wrong. BP have a proven model in the UK with M&S, and Woolworths will bring to the table a wealth of expertise from their “Metro” program, that will give a much needed boost to BP’s tired foodservice offer.
So once again we see another example of consolidation that will have huge impacts within the convenience channel, and a further warning to suppliers, manufacturers and distributors of the dangers of placing all your efforts into a select few rather than diversifying and spreading your risk.
Suppliers are already starting to feel the effects of the supermarkets range rationalisation (see article Supermarkets big wake-up-call) and now the potential consolidation of convenience volume into the supermarket channel, has significant impacts on a suppliers ability to remain relevant in an ever-changing marketplace.
The only certainty for 2017 is more uncertainty, and this latest announcement should serve as a further warning to suppliers, manufacturers and distributors, large and small, that nothing in this market is guaranteed.
In Australia, supermarkets have been very vocal about their ongoing range rationalisation lately, announcing up to 15% range reductions, and now there are calls by suppliers and manufacturers for the Australian Competition and Consumer Commission (ACCC) to step in and hold supermarket giants Aldi, Coles and Woolworths accountable under the code of conduct. Under the code, which came into full effect this year, supermarkets can only delist a supplier’s product for genuine commercial reasons and must give reasonable written notice.
While I empathise with suppliers and manufacturers over the way the supermarkets may be going about this, I also think that this is not unlike what has happened in the taxi industry with UBER. Like the taxi industry, the market has decided that change is necessary and the incumbents have failed to recognise this or have ignored it for too long, electing to continue with the status quo.
I have little or no sympathy for any supplier or manufacturer who has concern about what is happening in the supermarket channel, when they have ignored the opportunities in other channels or failed to implement an ongoing new business strategy to insulate themselves against these very situations. It is too late to start crying over changes in an industry or business that you have invested all of your sales and marketing activities around, because you thought they were the market, and then when the axe falls, expect regulators to step in and protect you. Sound familiar?
Our business works with suppliers looking to develop solid ongoing new business acquisition strategies, and it is stunning the way some suppliers and manufacturers view and treat the greater independent channels. In the past two years I have been an advocate for giving suppliers a voice and retailers a choice when it comes to new products for their business. I have talked to many suppliers at trade shows about our program only to be met with typical objections about how niche their product was while we were standing in an event that had anybody and everybody passing by, or boasting about how they had taken large orders from their existing clients, in effect mortgaging the next 3 months sales with that client, or to suppliers who freely admitted that they had only talked to 12 retailers in the past 2 days, who had previously knocked back the opportunity to put their product into the hands of over 400 of our genuinely interested retail members.
The reality is that for far too long suppliers have had this attitude of dealing with the 20% of the market that makes up 80% of the sales, and ignore the greater majority. These same suppliers have over-invested in these sectors, year in and year out because it was easy, and they planned their entire business growth strategies around them, at the expense of the greater majority, and now they are faced with the prospect of loosing large chunks of volume and sales with no long-term strategy around how to attract new sustainable and diverse business.
In my experience, and after two years of listening to the objections, I have come to realise that while most suppliers and manufacturers are great at servicing existing business, they have little or no strategy around new business acquisition. If it happens it is generally because of good luck rather than good strategy.
We are living in a world of people power and majorities that are sick and tired of how they are being treated by the establishment… just look at what happened in the recent US elections. So if suppliers and manufacturers want to rely on industry bodies to protect them when they should have been investing in new business opportunities at a time when business was good rather than bad, good luck!
Craig Matthews is the MD of Stock Box, with over 30 years industry experience in retail development, specialising in independent retail programs.