Retailers selling own product lines – a new challenge for retail marketers
One of the strongest trends in retail for the last 20 years has been retailers launching their own private lines. From department stores to grocery chains we see the retailers’ own branded goods join the offerings of well-known consumer brands.
The explosive rise in e-commerce will likely make even more retailers develop their own private lines of goods. Which means that very soon marketers working in retail around the world will be facing the challenges of running different tracks, depending on if they are marketing private lines or goods from other brands.
This trend, however, brings major change to marketing managers in everything from strategy and priorities to tools and execution. This is our take on how marketing departments are impacted.
Adding value and increasing profits
There are a number of reasons why retailers are choosing to “compete” with their suppliers. Some of the more common being:
Better margins – With retailers buying directly from producers rather than from brands, a markup layer is removed. And since private line goods are priced lower relative to other brands’ comparable goods, they may sell in greater volumes, meaning even more margin for the retailer.
Closing gaps – Retailers may want to offer a more complete line of goods. This might be particularly important to retailers who wants to boost customer loyalty and capture more share of total wallet.
Build a stronger brand – With more control over inventories, pricing, and its overall financial picture relative to only selling other brands’ goods, the retailer can build a stronger brand position in the minds of customers and other stakeholders.
There are clearly many advantages for retailers to launch their own private lines, but it also requires a major shift for the marketing department (among others) that impacts everything from mindset and planning to tools and processes. Essentially, retail marketers are having to adopt two different marketing strategies at the same time.
Increasing business risk
A traditional retailer, selling only goods from other suppliers, has always been able to shift risk onto their suppliers. Not sure how much a product will sell – order smaller quantities. Lack of storage – negotiate more frequent deliveries. And so on.
But when the retailer extends its brand into own product lines, advantages like that disappears and risk increases. If you have ordered a large collection of clothing to sell in your stores, you had better make sure that sales happen.
Marketing departments need to adopt a new strategy
For the marketing department this means it becomes absolutely necessary to be able to quickly change, update or shift the focus of campaigns. Rather than working with one campaign after the other as seasons and other factors shift, you now need to constantly adjust to what is happening with the company’s own private lines. A decision to push a planned campaign forward and instead extend or increase an ongoing campaign might be made in minutes – triggering a series of activities that have to happen just as quickly. Often across more than one country or region.
At the same time the retailer is still selling goods from brands, just like before. Which means that the marketing department has to be able to plan, execute and measure co-funded campaigns and activities around other brands as well as the company’s private lines.
Transforming retail marketing
This reinforces the point that the marketing department in essence has two plan and execute two parallel strategies. One for the brands that traditionally has been the focus, and a second for the private lines.
This brings a number of consequences for the marketing department. First and foremost, it will require two parallel workflows, with separate planning, budgeting and follow-ups. That in turn will put new demands on organization, roles and responsibilities, which marketing technology is used and so on.
Secondly it will have an impact on resource planning and there will be a need for greater efficiency here to avoid bottle necks or delays. A major subset of this is also looking at what agencies to work with – in advertising, for media buys, in social media and so on
Thirdly, it will have an impact on how external media and channels are viewed and used. More agile channels, those with a quicker turn-around and where adjustments can easily be made, will become more important for boosting sales and providing contextual offers. This may mean that they will be used predominantly for private line marketing. Whereas marketing efforts built around consumer brands and co-branding efforts might be allocated solely to channels that require a longer planning and execution cycle.
The right tech
To make this work, retail companies will have to invest in new marketing technology.
This is especially true for marketing performance tools. To enable marketing department to function and execute in a more complex reality, an improved planning and production system is required. Since the different workflows run at different speed and require different reporting the main challenge is setting up a system that can handle both, as well as involving stakeholders and users in different markets.