The One Thing Retailers & Wholesalers Can Do To Compete With Amazon And Win
Private brands are definitely NOT a new concept. Every major retailer has them and they run the gamut in terms of products, crossing basically every major retail category that exists. From apparel and home goods to consumer goods, they can be found in national retailers and even small boutiques across the country. Private brands have been around for a long time and continue to remain very relevant to the consumer.
Traditionally private brands were established as in-house brands that competed against national retail brands and provided the customer with a differentiated product, a lower price point, and increased profit margin for the retailer. Longer term, with strong marketing and branding to support it, private brands could even incur brand loyalty among customers that would rival national brands.
Recently, private brands have experienced a renaissance. Many businesses today are using them as a strategy to differentiate their retail experience against the biggest competitor of them all, Amazon. With around 80 private brands itself, Amazon has up’d its private brand game – placing the entire retail industry on notice. Major retailers are rolling out significant brand launches to the masses to compete. Just last month Walmart rolled out four new brands across the women’s, men’s, and children’s apparel categories and Target has unveiled over a dozen new apparel and home décor brands in the past 12 months.
The Big 3 continue positioning and investing in private brands, but this isn’t the same game it was even a mere 5 years ago. With major stakes in the game, they continue launching and growing significant new private brands – which signifies the increasing importance of:
brands
brand development
the consumer's interaction with the brand when making purchasing decisions
Today’s private brands are no longer the basic, low priced substitute for national brands. Instead they are an investment in your future via your own brand, with a story to be told, and a customer to be developed. This week’s Insights examines the evolution of private brands and the necessary strategic changes that need to be made to keep your private brand competitive and relevant, while increasing your customer’s brand loyalty.
PRICE POSITIONING IS NOW VALUE POSITIONING
In the past, most private brands hedged their bets on winning against national brands because of price. They leveraged factory relationships to cut out the branded middleman and pushed for lower manufacturing pricing in exchange for higher factory quantities. This strategy pushed the manufacturer to rock bottom costs and the private brand was able to undercut retail prices of national brands with similar material, styling, and quality giving the customer the lower priced version of their favorite national brand. Pushing the price to its lowest point was the key to winning sales, gaining customers, and growing your private brand.
With the Big 3 focused on price, it may feel impossible for your private brand to compete with them - mostly because it is. Of course price is still very important to the customer, and plays a role in their purchasing decision, but it isn’t the only reason they buy. They are looking for a price value relationship, and one of the simplest ways to create price value is by offering product that they can’t find anywhere else.
Today’s customer has changed, even in the last few years, and is looking to stand out, (not blend in). They want to create their own personal statement, rather than look like everyone else does or have what everyone else has. It’s important to develop their personal style and distinguish themselves from their peers. This is much easier said than done when ecommerce and social media make everything available to buy on demand.
However one of the biggest assets of private brands is the ability to position your brand as a differentiator for your customers. Retailers who develop their private brands with merchandise that can’t be found elsewhere are providing their customer with exceptional value. In turn, you can worry less about rock bottom pricing and instead focus on the wants and needs of your customer and your unique brand product and positioning.
DIRECT TO RETAIL IS NOW DIRECT TO CONSUMER
The relationship between wholesalers and retailers in private brands remains very traditional, but this is not a traditional retail environment. In the past, and still today, retailers partner with wholesalers, including nationally branded wholesalers, to repackage their product with minor tweaks to create new private brand product. It was a win/win for both the wholesaler and retailers - wholesalers gained retail exposure (sometimes even double exposure) while giving retailers the private brand product its customers wanted. This model is still relevant for today’s private brands, with potentially huge opportunities for wholesalers hidden within this traditional partnership – but it’s dependent on both the product category and each business partner’s needs.
Most wholesalers already have a website – why not use it to launch an ecommerce distribution channel, directly to your consumer? This allows you to leverage your product lines and develop your own private brands that can go direct to consumers, - cutting out the traditional retail middleman. Build your own line by filling in the gaps of your current product line and strengthen your own brand portfolio. Zero in on your customer and serve their needs and watch increased profit margins roll even with self supplied marketing and customer service.
PRESCRIPTIVE BRAND ROLLOUTS ARE NOW CUSTOMIZED BRAND EVOLUTIONS
Traditional retailers take a very formulated approach to launching and rolling out private brands. The development of the brand typically starts in a niche apparel area, usually in a women’s category in traditional retailers, and then proceed to rollout accessories categories like handbags, fashion accessories & jewelry, and footwear (in that order) and then start considering brand rollouts within other niche’s in women’s apparel or moving into a like minded men’s apparel category, where the rollouts continue. If the brand really has legs, it will get expanded to the home category thus rounding out the creation of a “lifestyle” brand and usually at that point the private brand is delegated as a critical anchor brand to the retailer.
That strategy had a lot of flaws even in the past because the formulation was so prescriptive that it didn’t always make sense. Over the course of my career I saw many brand rollouts struggle because they launched to soon, focused on the wrong category, misaligned the pricing structure, or decided to push forward with private brand rollouts that didn’t make sense for the brand or the customer just for the sake of the rollout timeframe.
The days of prescriptive brand rollouts are long gone. Today’s successful private brands focus on creating strategies for their brands that are both customized in and dedicated to evolving the brand forward in a meaningful way for their customers. Private brands are breaking the old rules and paving their own way through unconventional categories and product evolutions, streamlined supply chains and vendor relationships, unique partnership collaborations through cross branding, and shrewd marketing tactics leveraging social media and influencers. In fact that only rule there is when it comes to your private brand is to serve your customer’s needs. Private brands that focus on the customer are paving the way for customer retention and new customer growth.
INSIGHTS
Retailers continue to be bullish about private brands and the benefits that they can bring to the bottom line. However private brands of the past were based in structured and inflexible strategies and are no longer cutting it when competing against the Big 3. The retail environment today is nurturing the future of private brands because it is forcing private brands to restructure their strategies and operations to become more nimble, flexible, and dynamic. To be successful private brands must focus on the customer and at the same time put the power of the brand back in the hands of the individual retailers and wholesalers to create adapted strategies that are brand right and customer relevant.
Still struggling to get your private brand strategy and merchandise mix aligned to compete and win against Amazon and deliver to your customer's expectations? Check out our Merchandising Teardown Service for help HERE.
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