Retail Branding - Essay Example

?Retail Branding Explain the concept of retail branding. In doing so, indentify the advantages to retailers of having their own brand goods. In addition, analyse why many retailers choose to stock both their own brand and manufacturers’ brands in their stores. The current interest in retail branding is scarcely to be wondered at, given that, as Ailawadi and Keller acknowledged, ‘’With the growing realization that brands are one of a firm’s most intangible assets, branding has emerged as a top management priority in the last decade’ (p.1). If one looks at a breakdown of the revenue of a major retailer, one will usually find that a large proportion of that revenue comes from the sale of manufacturer’s goods. However, this poses problems for retailers given the incredibly competitive nature of the marketplace – many stores might stock exactly the same goods, and quite probably at similar prices. They thus have to focus on developing marketing strategies which will encourage consumers, when faced with a choice of stores, all of which sell what they want, to choose one over another. As Ailawadi and Keller note, ‘building their [retailers] own equity is a particularly challenging problem, but one with big potential rewards. Such equity insulates them from competing retailers’ (p.1). The definition of retail branding offered by the Canadian Marketing Blog supports this, stating that it ‘is about differentiating, a unique personality, a true point of difference’. If a retailer is successful in building up this sort of brand equity, the primary benefit will be an almost guaranteed increase in their profit margins, as consumers are able to associate their brand with a particular level of price, service or quality, and so choose them above others. However, such success also has the result of strengthening the retailer’s potential leverage in its dealings with manufacturers. We should now examine the nature of a retail brand in some more detail. Far more than product brands, retail brands rely on the construction and delivery of what Ailawadi and Keller call ‘rich consumer experiences’ (p.2). The consumer’s opinion of the retailer, and any decisions over whether they will use that retailer in the future, will be based on an incredibly wide range of factors, from the assortment of goods on offer in the store, to the level of customer service and comfort they experienced while shopping there, to their pricing and credit policies, and of course the quality of the goods sold. This stands in contrast to a consumer’s opinion of a product brand, which is more likely to have been constructed mostly from their opinions on that product’s marketing campaigns, and any experiences they’ve had of that brand’s goods. Identifying the manifold elements that strongly influence the construction and perception of a retailers’ brand image, we might conclude that the general atmosphere in the store, the prices and presence or absence of attractive promotions or reductions, and the range of products are perhaps the most important. One might think that price is always the most important factor in decisions made by consumers, but Brown highlighted long ago that price perception is more important that actual prices. In short, if a retailer intends to market its brand based principally on its price, Brown found that for consumers, what was important was that they believed a store’s prices to be low, rather than whether they actually were. Therefore, a retailer has to work on getting all of these elements right in order to create the best possible experience for consumers frequenting their stores, in order to build up networks of loyalty and patronage among consumers. The key is winning over large numbers of consumers who believe that a particular retailer offers a superior shopping experience, and will recommend that retailer to their friend and family networks, as well a visiting it again themselves. Of course, manufacturer brands, as Ailawadi and Keller acknowledge, can be useful in creating a retail brand, as they ‘help to create an image and establish a positioning for the store’ (p.2). For a retailer trying to reach out to an ever larger number of consumers, stocking well-known manufacturer brands with which many consumers are familiar, and which perhaps they trust, could be a way to attract new customers. Nevertheless, at the same time as stocking manufacturer brands and to a great extent using them to build up their own brand integrity, there is a basic conflict between retail and manufacturer brands, in that retailers are constantly seeking to maximize their share of the profits. This is where retailers’ own brand goods come in. To a great extent, retailers are extremely limited in the price variations they can offer customers on manufacturer brands. However, by selling products from their own brand, they can control costs at every stage from production through to marketing. Indeed, in some sectors, such as retail, one can easily find many examples of retailers who only sell goods of their own brand. Moving on to the issue of why a retailer might choose to stock both their own brand products and manufacturers’ products in their stores, we might explore the advantages and disadvantages of stocking both. In terms of the advantages, it is clear that by having a much greater range of products and range within product types, there will presumably be a much larger range of situations in which a consumer will consider using that retailer to meet their shopping needs. Furthermore, by having greater variety in store, and especially if a retailer has many different types of products, it will offer a more convenient shopping option for the modern, time-constrained consumer. Messinger and Narasimha found that such one-stop shopping convenience is becoming ever more important. At the same time, there can be some disadvantages for a retailer of stocking both its’ brand and manufacturers’ brands, and of stocking an increasingly large range of products. It would usually entail much higher costs for the retailer, given that they cannot control production and marketing costs of manufacturers’ goods, but are instead forced to purchase them at the price deemed appropriate by that manufacturer. Secondly, if a store associated with one type of good tries to stock manufacturers’ goods which belong to a different category e.g. a supermarket branching out to pharmaceutical and healthcare products, it may face difficulties in encouraging consumers to shop for a type of product they do not associate with that store. However, it is possible to introduce associations with new product types over time and with successful advertising campaigns. It is worth looking at the recent shift in the balance of power between manufacturers and retailers in favour of the latter. For Thomassen et al., we ‘have moved from the age of the [manufacturer] brand to the age of the retailer’, and goes so far as to claim that ‘The sheer scale, concentration and power of retailers has left the world of brands breathless and scared’ (p.1-2). There is some evidence for such dramatic statements. It is arguable that manufacturer brands, so dominant in the last century, have been eclipsed in many markets by retail brands which have successfully built up large networks of loyal consumers, and have been able to offer the latter a superior shopping experience. In the United Kingdom, for example, just four chains control a staggering 75% of the grocery market, and nearly an eighth of all consumer spending takes place at Tesco. Even in China, the retail market is dominated by four major chains (Thomassen et al., p.2). Not only have such successful retail brands been able to carve for themselves a dominant position in the market, and to gain the trust of consumers in selling a wide variety of products, but they are also, to some extent, now able to dictate terms to manufacturer brands. An example from the UK’s Pret A Manger food chain serves to illustrate this trend. It sells mostly its own food products, but also stocks some soft drinks from well-known beverage brands. Next to the Coca-cola cans on the shelf are cans of its own lemon barley drink, which bear the text: ‘We’ve wanted to create a preservative free, chemical free alternative to cola for ages…Let’s see if we can do away with cola once and for all’ (Thomassen et al., p.2). It would be difficult to find a stronger example of the growing power of retailers in dealing with manufacturers. As Pirakatheeswar notes, a brand ‘is essentially a seller’s promise to deliver a specific set of features, benefits and services consistently’. Retailers have, in recent decades, been able to build up powerful brands of their own, with their own product ranges, and have, in many sectors, eclipsed manufacturer brands as the dominant power. References K. L. Ailawadi and R. L. Keller, “Understanding Retail Branding: Conceptual Insights and Research Priorities” (Dartmouth College, NH, 2004). F. E. Brown, “Price Image Versus Price Reality”, Journal of Marketing Research 6 (1969), 185-198. N. Klein, No Space, No Choice, No Jobs, No Logo (London: Alfred A. Knopf, 2000). P. R. Messinger and C. Narasimha, “A Model of Retail Formats Based on Consumers’ Economizing on Shopping Time”, Marketing Science 16.1 (1997), 1-23. L. Thomassen, K. Lincoln and A. Aconis, Retailization: Brand Survival in the Age of Retailer Power (London: Kagan Page, 2006). P. Pirakatheewar, “Retail Brands”, saching.com [Accessed 17/01/2011]. “Retail Branding: The Concept Defined”, Canadian Marketing Blog, 2006 [Accessed 17/01/2011]. Read More