Retailers killing off brands.

How can retailers like Coles, Aldi or Bunnings achieve this nirvana of being a brand destination, rather than the 'carrier' of a favourite brand?

Dr Herbert G J Hermens

Chief Executive Officer

Keech Castings Australia Pty Ltd

Large retailers appear to be taking more and more control of the brand space previously occupied by manufacturer’s brands – and consumers are letting this happen.

Why?

Because the consumer’s preference for a particular brand has been usurped by their preference for retailers.

Not so long ago, every winter would see half an aisle of a supermarket, such as Coles, given over to a comprehensive range of soup brands to choose from. Now, the shopper is lucky to find a couple of independent brands. And a great deal of the space is given over to the supermarket’s private or exclusive labels. Both Coles, Woolworth and others are increasingly building their private label/exclusive offerings.

According to Roy Morgan analysis, Coles and Woolworths have a market share of 72.5 per cent (39 per cent Woolworth and Coles 33.5 per cent) between them of the $82 billion grocery sector. Total sales of Coles’ private labels have now reached more than 25% of its sales. At Aldi, 95% of the products are private label. Many of the DIY tools at Bunnings, Mitre 10 and Home stores are private or exclusive label brands. In all parts of the retail industry, manufacturers’ brands are being squeezed out or commandeered by the retailer.

How can retailers like Coles, Aldi or Bunnings achieve this nirvana of being a brand destination, rather than the carrier of a favourite brand?

An answer to this may lie in what has happened in the home improvement market. Where the range of products within categories are very limited. Why can they do that? Why aren’t customers saying, “Where’s my favourite brand?” Because shopping in today’s marketplace is all about reducing effort and by extension risk. Consumers would rather go into a retail store they trust, which carries many (perceived) brands (but not as many as it used to), and choose from what’s offered, rather than follow a manufacturer’s brand elsewhere.

Customers are transferring their risk from the product brand to the retailer. Brands used to be a differentiator of quality but not to the same degree any more. The convenience of the purchasing experience has usurped the pull of the manufacturer’s brand.

Thirty years ago a consumer would chase down DIY tools of a certain brand but these days they are more likely to just go to a large retailer like Bunnings, Mitre 10 or Home and choose from the range on offer.

Consumers are narrowing down their shopping choices to a list of retailers to avoid being overwhelmed. They form preference for retailers through a consideration set that simplifies retail, product or service decisions by reducing the risk inherent in making those decisions.

In 2012/13/14/15, Bunnings was named Australia’s most iconic brand as well as our most trusted retailer. When a retailer like Bunnings is trusted more than other iconic brands like AEG, Bosch, Stanley, and Wattyl, our independent brands have a lot to worry about.

 

This article courtesy of Dr Herbert G J Hermens. For more articles by Dr Hermens click here.


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