The Role of Store Image in Retail Internationalisation - Essay Example

?RETAIL BRANDS Table of Contents RETAIL BRANDS Table of Contents 2 Question 3 Question 2: 7 References 11 Question Critically evaluate the following statement: “Retail brands are about more than just putting your name on products.” Use examples from theory and practice to support your answer. Consumer retailing is one of the major aspects of marketing prevalent in the present age of growing competition. Modern day retailing has evolved from family run businesses to multinational organizations like Wal-Mart and TESCO which run operations across numerous regions of the globe. The statement “Retail brands are about more than just putting your name on products” has far reaching influence on the business prospects and strategies of retail organizations. The statement assumes greater importance in the wake of growing competition which has been characterised by the advent of globalisation where corporate organizations are trying to reach out to consumer breaching geographical boundaries. This has enhanced the nature of competition among the existing firms with regards to acquiring customers. Branding is one of the most important aspects that are considered by consumers while evaluating the stores with regards to the purchase of goods and services. Retailers are therefore making considerable efforts in building up a brand image of their products in the market. Branding has a large implication of the purchase decision of the consumers which has prompted corporate organizations to formulate policies so as to have a strong brand image to position their brands in the minds of the customers. A research report states that the brand value of a retail store is determined to a large extent by the brand image of the products available in the retail store. Private labels have also begun to play an important role in the brand image of the retail store (Cullen & Whelan, 1997, p.906-907). A report published in the International Journal of Retail & Distribution Management states the example of fashion retailers in UK where the market players have effectively used branding strategies to segregate themselves in the tough and competitive UK market. The report also states the role of private labels apart from the national brands as means to enhance the brand image of their stores in the minds of the consumers. Private labels have a greater impact on the brand image of the retail store as they bear the name of the retail store. This generates greater importance for these products with regards to branding. It is important for the retailers to ensure that the product mix of the private labels or the products bearing the brand name of the retail store matches with the branding strategies of the retail outlet. The report also lays down a set of criterions that must be taken into consideration by the retail outlets with regards to branding strategies. Firstly, the retailer should analyse whether the customer is able to dissociate the private label brand with the main competitors of the product. Secondly, the firm also has to analyse whether the brand has an image that can help it to command a premium market share or the value for money segment. Thirdly, marketers have to analyse whether the private label brand can be sold as a distinct product from the shelves of other retailers as well. Finally the firm must also be able to analyse whether the private label brand offers considerable brand value to the consumers. The report states that it is essential for organizations to effectively analyse the above stated sets of criterions before launching a private label brand (Birtwistle & Freathy, 1998, p.318, 319). According to a study conducted by Burt and Encinas (2000), the aspect of branding of individual products by the retailers also assumes considerable significance with regards to international expansion. The advent of globalisation and emergence of developing markets like India and China have made it highly profitable for retailers to set up shops in these nations. The authors point out that brand image of a retailer consists of both tangible and intangible dimensions and hence it becomes important for retailers to pay considerable importance to the aspect of branding as the new consumers may be unaware of the intangible aspects of the brand image of the retailer. Hence retailers must pay considerable attention before putting their name on individual products as it could have serious implications on the long term sustainability of the organization. The authors also state nine dimensions that affect the brand image of the organization. These dimensions include merchandise, service, client base, store facilities, promotional strategies, and ambience of the store, organizational factors and after sales service. These attributes play a major role in the brand image of a retailer in the minds of the consumer (Burt & Encinas, 2000, p.433, 437). Firms resorting to provide the brand name of their stores into individual products must take into account the product mix of the products that are to be sold under the brand name of the retail outlet. These products when sold under the brand name of the store would also contribute towards the consumer’s attitude and behaviour towards the particular store. Firms using their own private labels must also be particular while segmenting and targeting the potential consumers. It is important because the needs and wants of premium segment and value for money segment differ considerably in nature. The premium segment consumers do not mind paying up an extra amount for purchasing premium branded products while the value for money segment generally considers price above quality while making a purchase decision. Since these two sets of consumers have different demands and purchase behaviour hence it is important for the retailer to ensure that there is no confusion among the consumers with regards to the segmentation strategy of the retailer as it could have long term effects on the profitability and sustainability of the retail store. Figure 1: Effect of Anchor store on the Brand Image of the Retail Store (Source: Finn & Louviere, 1996, p.245) The figure shown above displays the effect of the anchor stores on the perception of the consumer about a retail outlet. The figure indicates that aspects like quality, product mix and price apart from location and other related aspects have a key role in defining the brand image of the retail store. The aspect of anchor stores assumes considerable importance in case of shopping malls where a large number of stores are operational within a given space. It has been observed that the brand image of the shopping centre is largely affected by the anchor stores which command a larger influence on the brand image of the shopping centre. Hence it becomes important for retailers to consider these aspects as the brand image of the anchor stores shows greater reflection on the brand image of the retail outlet (Finn & Louviere, 1996, p.245). The analysis of the question and the statement reveals considerable importance of brand image in the positioning of a retail outlet. The present age of competition has also seen retailers resorting to aspects like private labels. These products help in generating greater profit margins but it also demands a careful analysis of the product mix of the products to be sold under the brand name of the retail outlet. Hence retailers must carefully analyse the different aspects before putting their name on individual products which would help generate sustainable competitive advantage for the organization in the long run. Question 2: When you walk into any multiple grocery store in the UK or US you will be confronted with a cast number of own-label or own-branded products. Why this and what is might be the benefits and problems of such a development. The advent of globalisation has also been associated with large scale competition among the market players to grab a piece of this market. Retail industry particularly organised retailing in developed markets like USA and UK has been associated with large scale competition among the market players, the market is also characterised by the presence of large supermarket chain like Wal-Mart, TESCO etc. These major retailers lately have been involved in large scale use of private labels in their stores. Private labels are defined as the brands which are owned, distributed and sold by the retailer in the market. Private labels normally include each and every product that is being sold under the brand name of a retail outlet. The aspect of private labels has not only been used by multi product stores like Wal-Mart and Tesco but also by standalone retail outlets like H&M and IKEA (Lincoln & Thomassen, 2008, p.6). Private labels are being increasingly used by major retailers to enhance their customer base. It has been generally observed that a certain segment of the consumer is highly price conscious. It has also been observed that the price conscious consumer segment would normally select a cheaper brand if it has a similar product feature with the national brand which is available at a greater price. The popularity of private label brands with the consumers can be analysed from the fact that the private label brands accounted for approximately 20 percent of the total sales of the multi branded retail stores in 1971, this figure increased to 36 percent in 1994 (Hoch, 1996, p.89). The large supermarket chains have capitalised on this aspect to introduce private labels which are normally available at cheaper rates as compared to the national brands. The supermarket chains also derive greater cost advantage by selling private labels as it does not have any intermediaries hence profit and revenue margins are comparatively higher. This margin is ultimately passed on to the consumer in the form of lower prices. The consumers on their part are also satisfied as the retailer which has a good brand image puts its name on the product which serves as an assurance to the customer with regards to the quality aspect of the product (Garretson, Fisher & Burton, 2002, p.91-93). Pricing is a major aspect considered by consumers while making a purchase decision. This fact could be ascertained from the example of Kellogg’s and food products manufacturer Post and Nabisco who reportedly posted higher revenues and market share after they resorted to price cuts on their products. This strategy was mainly taken to ward of the threats posed by the entry of private label brands which had immensely become popular among customers owing to their low price. The success of private labels in supermarkets has been proved to have a negative effect on the national brands present in the market (Cotterill, Putsis & Dhar, 2000, p.109-111, 134). Retailers selling private label brands also have an advantage as the marketers are in direct contact with the consumers, this allows them to analyse quick customer feedbacks and make necessary changes faster than the national brands. This puts the private label brands at an advantage over the national brands who normally take longer time to modify their product lines (Hoch, 1996, p.89). In addition to the above stated aspects the growth of private label brands have also been traced to the competition in the distribution channels of products. The retailers who actually play the part of an intermediary in the distribution channel normally look out for producers and manufacturers who can produce goods at cheaper rates. Private labels also have lower promotional expenses. All this aspects generate greater profit margins for the retailer as they have a continuous flow of consumers. Aspects like shelf space and pricing are more convenient for private label products as the retailers are the owners of the private label brands and do not have to incur expenses of these nature for promoting their products (Parker & Kim, 1997, p.222). Private labels offer certain distinct advantages to the retailers; firstly, they help the retailer to improve their bottom line margins. Every product passes through a distribution channel, this channel is characterised by the presence of a large number of intermediaries who do not add any value to the product but only reduce the profit margins of the retailers and the manufacturers. In case of private label brands the retailers directly deal with the end consumer’s thus eliminating intermediaries and enhancing their revenue and profit margins. Secondly, the private label brands provide greater and enhanced exclusiveness, differentiation and also enhance the loyalty of the consumers towards a particular retail outlet. This is mainly because of the fact that private labels are only available with a particular retailer which is in sharp contrast with the national brands which are available across different retailers. In this manner a retailer generates exclusiveness for the products under the private label which enhances the loyalty of the consumers. IKEA is a suitable example in this regard; the firm has over the years built upon its image as a quality manufacturer and retailer of furniture by exclusively using private label brands. Thirdly private labels also help the retailer to reduce the gaps present in the consumer market. It has normally been observed that private labels are generally popular in markets where there are few national brands. This aspect is more common across the developing consumer markets where there are fewer national brands. Fourthly, retailers selling private labels also have greater control towards aspects like pricing and other related aspects as compared to the national brands available in the market. Since the entire distribution channel is being majorly controlled by the retailer, hence it provides considerable power to the retailer in the supply chain with regards to dictating terms of pricing and delivery which is not possible in case of national brands which normally have a distribution channel which have numerous intermediaries thus providing limited negotiation powers. Finally last but not the least the growth of private label brands helps retailers of multi branded products to have a greater bargaining power with the owners of the national brands. This instance normally occurs in retail outlets which have highly popular private label brands which act as substitutes for the products of the national brand. In these cases the retailer can better negotiate terms with the national brands with regards to aspects like revenue margins etc (Ray, 2010, p.103). In spite of the large scale advantages private labels are also associated with certain demerits. Firstly the success of private label brands requires huge initial investments by the retailer with regards to research and development, quality and control aspects etc. Secondly, retailers in developed markets normally produce most of the private label brands in developing nations where the cost of production is significantly lower that the developed markets, this may lead to certain issues regarding compliance and government norms (Ray, 2010, p.103). The analysis of private label brands reveals large scale advantages for the retailers particularly multi branded outlets with regards to the profitability. But it also represents risks in the form of confused positioning and branding issues which must be carefully analysed by the strategists of the retail outlets so as to generate long term sustainable advantage for the firm in the long run. References Birtwistle, G. & Freathy, P. 1998. More than just a name above the shop: a comparison of the branding strategies of two UK fashion retailers. International Journal of Retail & Distribution Management Volume 26 • Number 8 • 1998 • pp. 318–323. Burt, S & Encinas, J.C. 2000. The role of store image in retail internationalisation. International Marketing Review, Vol. 17 No. 4/5, 2000, pp. 433-453. Cotterill, R.W. Putsis, W.P. & Dhar, R. 2000. Assessing the Competitive Interaction between Private Labels and National Brands. Journal of Business, 2000, vol.73, no 1. Cullen, B. & Whelan, A. 1997. Concentration of the Retail Sector and Trapped Brands. Long Range Planning, Vol 30, No 6, pp.906-916. Finn, A. & Louviere, J.J. 1996. Shopping Center Image, Consideration, and Choice: Anchor Store Contribution. Journal of Business Research 35, 241-251. Elsevier Science Inc. Garretson, J.A. Fisher, D & Burton, S. 2002. Antecedents of private label attitude and national brand promotion attitude: similarities and differences. Journal of Retailing 78 (2002) 91–99. Hoch, S.J. 1996. How Should National Brands Think about Private labels? Sloan Management Review; Winter 1996; 37, 2; ABI/INFORM Global pg. 89. Lincoln, K & Thomassen, L. 2008. Private label: turning the retail brand threat into your biggest opportunity. Kogan Page Publishers. Parker, P. & Kim, N. 1997. Private Labels: An empirical Study of Competition, Advertising and collusion. European Management Journal Vol. I? No. 3, pp. 220-235, 1997. Ray, R. 2010. Supply Chain Management For Retailing. Tata McGraw-Hill. Read More