The retail power war, part two: brand vs. retailer
Updated: Feb 15, 2019
- Mark Howell, Creative Director at Play
“Your methods of marketing and sales will eventually stop working, and you'll have to develop new sales, marketing and advertising approaches, offerings, and strategies.” Sage advice from a 2004 blog post by author, Brian Tracy.
He was writing about the Seven Ps of marketing (Product, Price, Promotion, Place, Packaging, Positioning, People), advising that they should be used “to continually evaluate and re-evaluate your business activities. As products, markets, customers and needs change rapidly, you must continually revisit these Seven Ps to make sure you're on track and achieving the maximum results possible for you in today's marketplace”.
E-commerce has had the biggest impact on Place strategies in recent years. Traditional ‘bricks and mortar’ stores are evolving to redefine their USPs to remain competitive with online offers, whilst online-only retailers are expanding to offer physical and experiential retail elements.
But as Place strategies evolve, we begin to see a knock-on impact on the balance of power between brands and retailers. Back in the early 20th century, store-managers held the ultimate balance of power. The average consumer would only have been able to purchase products that were available in their village store or local high street and the possibilities of Place were limited. Store owners were the gate-keepers to consumers and brands needed to keep them on side, as there were few alternative routes to market available.
In this dynamic, popular brands like Coca-Cola which had nearly 400 bottling plants across the U.S. by 1909 had greater power over smaller or emerging brands to influence these gate-keepers. Pure volume enabled big brands to negotiate the best terms with store-managers. For the stores, stocking well known brands was a hallmark of quality and service, just as it is today.
Fast forward to today and Place strategies are not quite so straight forward.
Car owners today far outnumber car-less households in the UK, giving consumers more capacity to travel outside their locality to shop. Postal and courier services are more far-reaching and affordable, which is a fundamental requirement for fulfilling ecommerce. And the explosion of dedicated shopping centres gives shoppers much more choice in one place at one time than was previously available. What’s more, an entire digital identity and multi-channel presence is now the norm for most brands and most UK adults are never ‘offline’ for long.
These changes are causing a seismic power shift. Although the theory of reduced overheads and positioning alongside complementary (and competitor) brands still applies, there are now more options than ever for brands to reach their audiences. The smallest independent brand can now reach huge audiences of online shoppers without working with mass-retailers, especially if they’re SEO savvy; have mastered social media, UI and UX; and offer fulfilment processes that suit shoppers.
This has created a market where brands can exert their influence and stipulate the terms that suit them best, without having to rely on shopping channel executives and department store decision makers. Brands selling direct to consumers have complete control over every element of how their products are received, from the promotion or price, to packaging and personnel. But those sold and distributed through a third party retailer have less power over each of these elements. And they are more likely to be positioned alongside their competitors, even including retailers’ own-brand products. So it makes sense for brands to carefully weigh up whether to prioritise brand stand-out by going it alone, or to work with retailers to reach wider audiences through well-established routes to market.
I think it’s clear that working with retailers still offers many opportunities. Nonetheless to make the most of these opportunities, the pressure is mounting on brands to be ever more creative. For instance, OPI reaches a wide audience by partnering with duty free retailers. But, in vying for share of voice in such a crowded and fast paced environment, OPI recognised the need to create a bespoke experience. We delivered this for them by developing the world’s first digital nail trial to delight shoppers with no mess, no fuss, and no wasted time or wasted product. OPI ensured that the investment made in partnering with duty free retailers would pay off for the brand.
Being slow to innovate and evolve in this changing market is causing the decline of traditional department stores like BHS and House of Fraser. One reason given for House of Fraser’s difficulty was the conditions it had agreed with supplier brands, which restricted the department store’s ability to tailor its offering in individual locations to suit its local market. If House of Fraser hadn’t secured these deals shoppers looking for those brands would have shopped elsewhere. So in this case, the brands wielded greater power than the retailer.
Yet, despite the failures of some of these established chains, supermarkets like Sainsbury’s and brands like Next are moving more towards a ‘mass-retail’ approach in a bid to drive revenues. Sainsbury’s recently announced that in-store beauty advisors would support sales of beauty products, and a new partnership with Oasis was unveiled to supplement Sainsbury’s own-brand fashion offering. This type of diversification is a clear strategy to increase revenue creating more opportunities for impulse buys and driving up individual basket prices.
Next’s take is interesting too. Brand-owned stores usually only offer their own products, but Next has opened a new store which houses a Costa coffee, Paperchase, Lipsy, and Hema, a Dutch discount chain. Sharing space with carefully selected complementary brands creates a destination for Next’s target market, similarly offering shoppers more reasons to visit and more opportunities to increase time and money spent in store.
Similarly, online giants are also adopting this approach, broadening their offerings to protect themselves from quickly changing shopper behaviour. Amazon recently launched Prime Wardrobe in the UK in a bid to take on successful online fashion retailers like ASOS. But again, Prime Wardrobe will only be as successful as the combination of high street and designer brands it manages to on-board.
Wallmart is so committed to dominance that it is willing to risk profit to remain at the forefront of shoppers’ minds. Its focus on growth ‘at any cost’ is intended to fortify its dominance offline and online, and is based on the idea that shoppers don’t mind where they buy from, as long as the price and convenience are right. The decisions marketers take today are substantially different to those of the early 20th century. But, as Tracy’s advice from 2004 continues to ring true, a second quote touted most recently by the Creative Chairman of McCann Worldgroup Rob Reilly makes the point more concisely for brands, retailers and everyone in between: “Creativity, is the only way to survive.”