As Ocado unveils its own brand , Laura Haynes, chairman of Appetite gives the lowdown on whether retailers are maximising the opportunities for own brand products.
Is anyone out there concerned that retailer brands may now be so ubiquitous that their initial advantages of offering choice, value and innovation may be lost? Or are they now creating whole new categories and product opportunities in response to consuming demand?
The impact of retail own brand
Now, I am not against own brand. Far from it. I think that retailers in this country are to be applauded as they have helped to open our eyes to new opportunities and new products across a variety of sectors.
Indeed, in many cases, the retailer has worked hard for the consumer pushing innovation, creating choice and adding competition to manufacturers who previously owned categories to the detriment of the consumer.
Additionally, there are now many small, independent manufacturers who have grown off the back of retailer own brand, supported (at least in some cases) by retail partners.
The retail brand is an amazing phenomenon. After all, with the obvious exception of M&S, the retailer’s role used to be to simply provide a place where the consumer could meet the manufacturer – the intermediary between the factory or warehouse and the home. We chose one over another primarily, we are told, because of location, location, location.
All that began to change as retailers recognised that they were in fact brands in their own right. They identified that they could encourage consumers to shop with them if they offered something different, if they stood for something, if their environment, service, display, etc. “engaged” (to use that awful marketing word) consumers.
And then came the recognition that with their own products – products that you could not get anywhere except in their stores – they could truly differentiate and become a consumer destination.
Surprisingly, one of the best and earliest examples of this was in Canada, not a country usually associated with advanced own brand. Some 30 years ago, President’s Choice brand was launched by Dave Nichol, the then president of Loblaws. The original ’Own Brand’ had products that were chosen by Loblaws’ President (hence the name) and could be trusted to be as good (or better) than the branded equivalent at a better price – the original own brand premise.
The jewel in the crown was the Decadent chocolate chip cookie. At one time, it was available in only 17% of Loblaw stores, and yet it was the best selling cookie in Canada and people sought out Loblaw stores to find the product that was legendary for its rich, decadent flavour.
It is true that retailer brands have changed the way we think about stores. No longer simply the shop windows for manufacturers’ goods, we are asked to make a conscious choice between retailers not just because they are conveniently located, have a better environment or are cheaper, but because they have the best Indian recipe dish (Waitrose Goan fish curry gets my vote), the cat food that Tigger prefers (Sainsbury) or the deepest filled sandwich (Spar). We are able to experience the retail brand in a real and physical way as we enter the stores and meet the people behind the brand.
Closer to consumers
The retailer has the advantage of being closer to customers than any manufacturer can be. They meet their customers on a daily basis and learn their likes and dislikes first hand and in real time. Indeed many retailers are asking their customers precisely what products they want to see in store, promising to source and stock them. Asda’s much publicised customer panel offers the retailer a great advantage. They listen, they talk and they act, and their customers believe that they care.
Customers feel an affinity and perhaps a greater trust for retail brands. So, when they are tiered by quality and price, we understand what is being offered and believe that it is being done in our best interest.
The Consumers Champion
Retailers are using their brands to respond quickly to social and market trends, often positioning the retail brand as a champion of the people. As we’ve become suspicious of financial institutions, in come Tesco, Sainsbury and others to offer us financial products that we can trust. Times are hard, so they offer us a ’value’ alternative.
Recognising consumers’ concern with food safety, they have found butchers we can trust, put their pictures on the packs and named the farms from which they have come. The trend towards local has led to a local product sourcing strategy for truly local brands such as Spar as well as national and international players Tesco and Waitrose.
And ethical behaviour, corporate social responsibility and fair trade all have voice through own brand. And now Walmart is offering an own brand mobile phone brand as a reaction to public complaint about poor value from wireless carriers in the US. And this is a good thing, so let’s see further innovation and choice for consumers.
Protecting Brand Assets
With the growing recognition that the own brand has truly become a brand itself, so its positioning and reputation must be protected in the same way that a manufacturer’s brand would be. Hence we have begun to see the introduction of new value brands, with names unrelated to their retail owners, allowing retailers to respond tactically to the consumer need for extra value without eroding the brand position.
This is just one example of how retail brands are finding ways to grow market share. Looking forward, I predict that we will see retailers begin to flex their muscle as category leaders in their own right. Indeed, own brand is being used as the lever to enter new markets. Boots Number 7 is now seen in major drug stores in North America, a brand in its own right. Does this represent a new opportunity for expanding across borders? Will we start to see Waitrose ready meals popping up in Carrefour?
Facing New Challenges
It seems that the opportunities for retail own brand will continue to grow. New approaches to tiering coupled with ongoing trust in the retail brand has meant that consumers are giving permission to the retailers to edit choice and create whole new categories.
But retailers should be aware of a couple of possible clouds on the horizon. We may begin to see increasing conflict with brands as space in stores becomes scarce. And, as they become bigger and bigger, can the retail brands still maintain their role as the emotional antidote to the global masterbrand or will their experience a new backlash against the big few?