Desipite a global rise in private label sales, Heinz is still defending its market share with great effectiveness. By using an arsenal of five different weapons Heinz still manages to prosper where others fail.
Tighten the portfolio
Heinz was once famous for its 57 varieties. But that was long ago. On one of the toughest and most private label-saturated markets (UK), 15 brands stands for 70% of sales. By cutting slack it is possible to focus marketing budgets instead of spreading to thin and not beeing able to push through.
Build brand equity
Needless to say. Heinz has focused on a few extremely well known products to work as heroes for the brand as a whole and the advertising seem to work. Heinz Tomato Ketchup appears as the brand that British consumers least want to give up, followed by Heinz Beanz and Heinz Ketchup still maintains a 75 % market share in the category. What other brand can come close to that figure?
Focus on innovation
Private Label is a volume game. The more innovations that is built into packaging, recipe, the harder it is to copy it - simply as niches are to small to build volume in. Standing-on-its-head-bottle, spicy flavours, kids mystery colours, a 'trap cap' that eliminates watery ooze etc, makes it easy to differentiate as the definite market leader of the category.
Expand into new markets
Within a few years, Heinz will have 20% of its sales coming from emerging countries like Poland and India, where private label have a much longer way to go before reaching levels of Western Europe.
Manufacture for the supermarkets
Heinz has been producing private labels for supermarkets for years, thereby:
- Profiting from the growth of private labels. Someone is going to produce it if supermarkets want it. It could as well be you. - By producing private labels and beeing a partner to the retailers, bonds with the customers will be further strengthen. - Private label production makes it possible to use production line capacity to the limit, thereby getting a better overall economy.o
What will the role of the particular brand/product be in the assortment? What effect will be the consequence when adding it to the offer from a total branding perspective? Ingvar Kamprad demanded that the hot dogs in the snack bar at the end of an IKEA store should be priced at levels of 50% lower than expected in order to project a breathtaking offer, contributing to the low price image of the company. The economy staff screamed at the unresponsible action, meaning that this would take away any possibility of making the snack bar operation profitable. Needless to say, Kamprad won the discussion and the profits went sky high as volumes went the same way. This led to the definition of a "hot dog product" at IKEA. A product that the customer has a clear idea of what it should cost, and then priced at 50% of the expected price. Today, there should be a hot dog in each category to enforce the price position of IKEA. This is a great example of hoe product/price mix is translated into a branding tool.
Beeing a brand owner, it sometimes is hard to keep ones head cold when it comes to kill low performing brands, as well as seeing the potential of limited distribution for the real premium ones. An effective way is to categorize the brands and SKU according to brand strength, sales potential and the role in marketing, from a perspective where the brand fits in the retailers assortment. Borrowing the idea of Kamprads sausage, one could easily create other tactical tools by defining the role of the product brand, and then take appropriate actions.
- Category Icon
Description: This brand is a staple of the local/international market. Its history and reputation makes it a definition of the category itself. The category icon is a top level both in terms of brand strength and high volume and could sustain rough handling of its brand, since it defines the market.
Role: The category icons are the main weapon for any company with aspirations in being market lead-ing.
Actions: Defend/develop at all costs. Should be treated with care, but could due to its cult status be used with some force, also in terms of price aggres-siveness. This is possible as the market uses the brands as a definition of the category itself and would not disregard it at any time.
- Category Driver
Description: The category driver is a healthy and innovative newcomer, which brings vitality and new interest into the category, usually from a premium or top premium position. It attracts attention to the category from new target audiences and makes them stronger with the fans of today.
Without the category drivers a category could degenerate as a whole.
Role: The category icon is a tool that identifies the companies that is developing icons of tomorrow and drives the market in a forward direction.
Actions: Use with selected channels to build a premium image.
-Portfolio backbone
Description: B and C type of brands which brings width & depth to a portfolio.
Role: Creates volume as a whole and also show that their owner aspires to be a complete suppliers and a market leader.
Actions: Activate whenever possible in retailer campaigns. For certain brands it could be considered that it should be converted into a PL.
-After burners
Description: B or C brands that suffers from decreasing profit/volumes and are considered having a hard time to recover, despite moderate/high knowledge in the market.
Role: To add to total volumes as long as listed in the portfolio by harvesting any brand value in the public.
Example: Various sub brands in all categories.
Actions: Activate in discount segments if possible, without any considerations taken to future branding issues or traditions. The only consideration whatsoever is volume today.o
This new report on the 2010 Most Valuable U.S. Retail Brands was just relieved from Interbrand Design Forum.
The effect of the recession in the U.S. is shown in the divergence of value growth in the top half compared to the bottom half: "This year, the most striking shift in the 50 Most Valuable Retail Brands is the overall increase in the value of the top 25, and the descent of the bottom 25. Proof that you can't just manage a brand. You have to defend it."
Cutting prices as the only tool to win over customers clearly wasn´t a solution. Companies investing in brand equity has clearly benefited from this according to the report, available here.o
Specsaver recently made a spoof of the Lynx body spray ad - showing that a sympathetic retailer can be re-use ads by another company and still get away with it...
Range presentation is a crucial tool of visual communication and often a missing piece in the communication strategy. The visual experience and interaction with the product is the brand come true in a very practical way.
Range presentation can be used to solve the following tasks:
1. Create interest, engage and inspire the visitors 2. Induce impulse sales 3. Support mechanical or personal sales 4. Project the relevant brand values 5. Lay the foundation for future sales 6. Bring knowledge and advice 7. Create the impression of an innovative store 8. Help customers in choosing the right product
Needless to say, this does not happen by accident, but through careful analysis, positioning decisions and hard work.
Visual communication means getting involved in very basic functions of the brain, often below the concious level, for exampel by using lightning to steer the attention to lightened areas, thereby bypassing any logical filter. The interpretation of the store´s brand promise goes beyond reason when using visual communication at it´s best.
Example of messages to project through range presentation is listed below:
"There are a lot of options here" - an open store layout gives an overview of the range an the offerings and makes it possible to digest a major part of the range in a single eyeglance. The more the customer is able to watch at once the wider will the range seem. The experienced width of the range is easily increased by 25% by means of correct merchandising, thereby easing purchasing and inventory management, keeping down costs.
"There are a lot of offers here" - large merchandise density implies a low price image.
"There is a range that fits together here, I get a coordinated offer" - Well selected and coordinated products, shown together in a way that invite the customer to pick a whole bunch of products that fits.
"They really seem to have the latest in my favourite category" - New products on display early and frequently all around in the store.
"This store really communicates expertise" - the customers should be shown a well structured assortment with an idea for whom/what the different items are targeted to. Structure in merchandising also helps building an expert image.
"This store is for the whole family" - everything is children safe and if needed, parents can change diapers or have a snack without having to end the shopping tour.
"This store sells products with high quality" - selected products are shown as jewelry on display and with information about the quality features. The lesser the merchandise density, the more quality appeal.
"This store helps me to find what I need" - Top 10-lists and displays of top sellers/most wanted products making buying decisions easy. Logical navigation is a must.
Branding, out of store communication, concept development must be done in coordination with range presentation in order to bring the brand alive.o
In a world of global retail supersharks roaming the earth it could be comforting to learn that there are small companies that still manage to create there own identities will small means. Beeing a Butt doesn´t have to be a bad thing as shown i the commercial below for Butt Drugs pharmacy of Corydon, Indiana.
Also watch the behind the scenes video showing why and how the clip was made by Rhett & Link.
"The organizational changes we are making will help us streamline a culture of market-altering customer focus." This and more corporate bullshit could be produced by a mouseclick at the Bullshit Generator.
Agency bullshit sometimes sounds the same. Campbell uses two years of research how to redesign the packaging by, among another things, using a "team clipped small video cameras to the testers at eye level and had them later watch tape of themselves shopping for soup. Special vests captured skin-moisture levels, heart rate, depth and pace of breathing, and posture. Sensors tracked eye movements and pupil width." The result of this neuro-marketing study conducted by Innerscope Research Inc, then led to the new labeling and package design. The result of this study led to the conclusion that steam was emotional, while spoon was not.
Another wellknown reference to agency bullshit is the Pepsi story covered in Gawker wrote about the new Pepsi logo a year ago implying that all agencies sometimes have to make up evidence in order to sell their ideas. The Pepsi document takes this to a new level.
The pseudo science angle will not help the ad agency industry in the long run unless the results of campaign will continue to deteriorate. On the contrary, until agencies stop behaving like communication and branding is rocket science, people like Dave Knockles in the I am the client have a point in their polemic writings about the relevance of agency set up and movies like this will continue to roam cyberspace:
How Customers Think, by author and Harvard Scholar Gerald Zaltman, a Harvard scholar says that only 5% of consumer purchasing behavior is based on rational thought processes, while the major part is due to subconscious motivation by means of design or other references to feelings or other basic instincts like fear or sex.
And what part do companies focus on? Thinking about how time agencies and advertising companies use in order to find yet another rational argument, picture or other piece of information to put into an ad or on a package makes one think.
A classic reference to this problem is the "what if Microsoft would redesign IPod"-movie:
The happiness machine, was a campaign launched by a tweet and an update of a Facebook profile, ie no media spending what so ever. It shows a Coke-machine that was actually placed at a cafeteria in Queens, New York. It dispenses free drinks to everyone, and after a while it starts to spit out pizza, flowers and other things, as a part av the brands "Open Happiness"-initiative. The reactions are authentic.
Uploaded on Youtube on Jan 12, and two weeks later it had more than one millions views. As of today more than 1,6 millions have watched the clip, showing that content creates traffic. Also covered by Mediapost.o
Innovation starts with a perceived problem or shortcoming of any existing product, or by presenting a solution for a problem not yet solved or even one that the consumer did not know he or she had. Consumer oriented product and package develop-ment starts by analysing the different situations and reasons for buying from a certain category or a specific brand.
Whether these situations are situations defined as a certain time during the day or during ones life, or if the buying is triggered or influenced by certain values or feelings gives endless possibilities for innovation and consumer oriented development, that goes hand in hand with the retailers strive to be at hand in those situations.
Package/product/brand/service development could include, but are not limited to the following:
-Focus on the buying situation
Is the buyer alone or together with children, family or friends? Is he or she on the way to or from work, walking or travelling in a car or public transportation? Is time a factor?
-Focus on buying/storage problems
This includes easy-to-carry multi-packs (with a built in handle) which also may serve as a serving container at a party. It could also mean packages that make storage in fridges easier.
-Focus on the moment of consumption
In which environment does the consuption take place? In the livingroom, car or during a picnic? By oneself, during a childrens birthday party or a football on TV?
How does this affect brand personality, package, communication?
-Focus on the mood of customers
Is the consumtion meant as a "mind changer" ie to make the consumer more awake, relax, rewind or consumed in order to reward oneself?
-Focus on the needs of large target audiences with a common taste or values.
The question of healthy life style is a major issue throughout the world. How can people feel more healthy? Is ecology an issue?o
Austrian Oggau Wine Estate produces nine different wines and have assigned drawings picturing humans in differerent state of maturity to the botteles, reflecting the age of the wine inside. Faces of children, parents and grandparents make room for most tastes and combination with food. Each face has a human name, making it even more personal.o
Apart from price and assortment, service has been a key competetive factor in any retail concept. The question is; how much energy do retailers of today innovate their service offer, or even define what good service is? Up until a few years ago, service could be defined by the picture above - a wide assortment to suit any taste, and a top of that, a sales person ready to please.
Is this a universal definition that could last for all times? Most probably not. How many sales persons have you met in your life that really delivered something above the ordinary? How many retailers have categorized the range so that it is easy to find and choose among the merchandise? In a time where a lot of customers do not want to be bothered by a sales person at all, but make his or hers buying decision alone is time to redefine and widen the defintion remarkably.
People are still important, but cannot and should not compensate for bad store planning or signage. The store should be arrange to speak by itself, enabling consumer to choose if and when to interact with sales person.
1. Visualize the service offer
Making it possible to get an understanding of the complete offer saves time, both for the consumer and the staff, as well as it is strengthens the image of giving a wide array of possibilies.
2. Let discount offers speak for themselves
This makes it possible for sales personnel to focus on the consumers wanting the more advanced options.
3. Show that all products are not the same
Making suggestions on what to by in a specific situation, making top lists and arrange combination offers to make it possible to buy a complete function is different than only display products for consumers to discover for themselves or need to ask a person for help to find what they want.
4. Make the offer reachable in time and space
Vendingmachines are making their into new categories including fashion, mobile phones, food and shoes...
5. Use technology to show alternatives
Michel Giullon, an optician has a wide range of glasses but uses simple technology to help people choose.
6. Invite consumers to interact with the store
Build A Bear Workshop, REI, Vom Fass and other retailers make the visit itself a true experience and a part of the product itself.
7. Use education as a possibility to build relations and make consumers even more aware of the possibilities
Apple host seminars in their stores and brittish DIY-retailer BBQ offer tool training to women and children. Guess why? It works!
8. RFID will mean everything in service development
Metro Group have worked with RFID and other high tech devices in order to take service to a whole new level.
9. Don´t fake it-Make truly unique solutions
CB Perfumes takes personalized products to the extreme. Christopher Brosius, founder and owner states "People who smell like everyone else disgust me" indicating that everybody ought to have their own personal scent. And not surprisingly, this is what he offers. At CB Perfumes you can either choose to go through an interview of some 30 minutes where your preferences and personality is evaluated whereafter your unique blend from more than 5000 scents are mixed as you wait. You can also go for the option of recreating a "scent memory" from your child hood or other period in life when you felt comfortable. How about re-live your feelings by sniffing into a bottle of "Grandma´s kitchen"? This is true personalization.
So, take a look around you. Is showing up and smiling in your stores enough anymore?o
No matter if you are a merchant of a crowded market in Beijing or a retailer in shopping centre in Birmingham or the Streets of Copenhagen, you can be absolutely certain of one thing: That your customers have never had so many options as they have today.
To say it frankly, there are few retailers, or suppliers for that matter, that would be missed if they suddenly, over night, would be extinguished from the face of the earth. As consumers, we are overwhelmed with possibilities and offers. One store, or chain, more or less, would considerably change our possibilities to buy what we wanted, at any given moment we wanted it. The world is full of similar retailers, selling similar products. The market is flooded with standardised goods in standardised concepts. So one of the biggest issues facing 99% of all retailers today is, in a world when we are no longer needed, how can we see to that we are wanted?
Globalization, the fact that retailers cross borders at an increasing scale and speed, is giving more options to consumers than they had yesterday. And during the same period that the retailers has grown from their respective local origins into the global monsters they are today, the availability of production resources has developed even more, as modern technology has found its way even into the otherwise labour intensive Asian factories.
After WW2, and during the golden consumption decades of the 50s and 60s, production resources of the world had a hard time coping with the demand of the growing consumerism of the west. All this is now a thing of the past. To say it at the very least, there are already too much products and production capacity to meet a real need, from consumers of the world. And as the earlier less quality minded Asian industries are moving into high tech and providing design up to the level of their western adversaries, they have moves up to being equivalent.
So what is the logical consequence when similar product sare being distributed by retailers under heavy pressure to increase volumes and saturate the market before their competitors do?
Needless to say, this affects price. And why shouldn’t it? In a world of abundance of equally good products, performing equally well the only difference lies in the price. And as the low price alternatives has moved up in quality, the medium price segment has been the target for many of the big box retailers, using their international presence to by volumes at the right place for the time, and then distribute it to the place where the buyer is. As one spokesperson choose to put it: “Bad products are´nt just that bad anymore.”
And when the market don´t grow as fast as the retailers expand their already vast distribution networks with yet another store, price is certainly in the focus.
But there is yet another aspect than bad product quality that has to be overcome if consumers should be willing to increase the share they buy on discount, and that it the psychological one. Namely, the fact that consumers have used their ability to pay a little more, and thereby expressing themselves as being at a certain level on the career ladder. In many western countries a large middle class, has led to a majority of the traditional retailers being in the medium price segment. And in a world with a direct correlation between price and quality, who would like to be the one buying at the low end.
However, the aspect of quality has changed along with the rising quality in general. Look at fashion retailing as one example. A few decades ago clothing were largely bought as durable investments that should last over a certain period of time. Fashion was at the high end, a not really at the reach of the large mass of consumers. Since then personal expression and individualism has evolved the public into being more interested in showing who they are. The durable aspect of clothing has given away to the fashionable aspect, and clothing is not really worn to the end of the technical lifecycle of the textiles.
The Spanish fashion gigants Zara and Swedish H&M have been the ones which have harvested from this transformation, and have to a large extent made it happen. While the traditional clothing retailer used to work with a few collections each year, Zara and H&M are constantly pushing new fashion to their store at a price level much lower than otherwise expected from a fashion retailer. Zara has a reputation of copying trends and model from the catwalks and then get them to the stores faster than the famous fashion brands themselves. The Spanish retailer has some 200 designer working full time to get the right models out to the stores faster than anyone before them. In a Zara-world, getting a top or a pair of trousers from the drawing board and to the stores in less than three weeks is an everyday operation. Zara launches two minicollections each week, using no promotions or tv-commercials whatsoever. There is no fixed assortment and as a true fashion retailer, it changes with what is hot right now. The store being their only medium, they are situated in a building with an “interesting architecture” and as consumers learn that they are launching new stuff at the speed of light, their customers come there often.
H&M has been growing internationally the last decades into being a hot fashion retailer, and hardly anyone buying from their 5th Avenue store in New York, where the windows change during the days to show a different offers to the people passing by at their way back from work, than what they saw when they walked buy on their way there, could guess that H&M still struggle with a low quality image of the elderly consumers in Sweden that remember its first years in a time were clothing where meant to last.But now, when fashion is changing faster than ever, who needs durable cloths? And can anyone doubt a retailer that has sold both Lagerfeld and Stella Mc Cartney outfits at discount prices?
The horn of plenty is leading to a situation where consumers have understood that whatever I want to buy, there is probably a better price somewhere else. And when they have slowly realised that low price necessarily do not mean low quality, the bargain hunting has reached a new level. Because, if one could find a product with the same function and similar perceived quality, at a considerably lower price, but without the frills of the market leading brand, would´nt that be a smart thing to do? And at the same time, wouldn´t one be a total moron to pay more for a similar product if one had the choice? This psychological change has made the low end to become the “smart buy”-segment.
To borrow the words of Allen C. Questrom, JC Penney Company: “While there once was a stigma at-tached with bargain hunting, the only thing consumers seem to be embarrassed about is paying the full price”.
That about sums it up…
From mainstream to extreme
So EDLP – Every Day Low Prices – retailers have challenged the medium price segment from below, possible by rising average product quality and boosted by consumers changed perception of what quality is all about. As discounters of all categories has moved across the continent, there is almost always a discount alternative within reach of all consumers.
German Aldi and Lidl within the supermarket segment. Swedish IKEA within interior decoration Finnish K-Rauta and German Bauhaus within DIY British Dixon and German MediaMarkt within brown and white goods Swedish H&M and Spanish Zara within fashion American Toys R US within toys
The ones having the hardest time to cope with the newcomers are often the local, by tradition, medium price segment, mainly because the discounters of today use their massive purchase power to buy the same brands as traditional retailers do but at a lower price and then selling it buy less margins. And often having newer and better looking stores, who would want the old ones?
The medium price segment has, in general, been to similar in terms of quality and perception compared to the discount alternatives to be able to compete on the same level. That is the difference in price has not been up to par with the value it deliver. The medium price segment have not been able to deliver value for money, the option of self expression or any of the criteria needed to compete at the same level as the big box discounters.
So if you really want to stand out in a crowd it is the upper segment you have to go to, not necessarily luxury, but up to the premium level. The arrival of the discounters came timely as consumers demand of new products began to rise on every level. In a time where more and more wants to define their personality and show who they are, and at the same time have it all, buying some of the things you need at a lower price is almost necessary to be able to buy the things you want.
Looking at all the things any European fills (or litters) their home with, continuing buying everything at medium price level would not make room for all the consumption that any middle class wants these days. Anyone would expect to own a car, or two, a mobile per person, a DVD, a comfortable home, an ok closet given the line of work you do, the possibility of going on vacation at least once a year, and so on. The income of the working force has not risen in the same pace as the possibility to spend it. It usually takes some degree of compromise to get all the things you want. And this is where today discounter comes in handy. Discounters make it possible to by standardised products, with an ok quality at a low price, and thereby make room for some consumption in the premium segment within prioritized areas, primarily those who really define the consumer as an individual. So one person could by a BMW and the go to Lidl for cereals, while another person buy a luxury fishing gear and an Armani suit, while skipping the car totally.
Buying discount is no longer a thing for the poor, and buying premium is not only for the rich. The consumers jump from one extreme to the other depending on what the category and the product or brand means for oneself as an individual. If it helps define who you are in a good manner, then it is bought at the premium segment, and if it is considered an unprioritized commodity it could just as well be bought at the lowest price possible. And this is a major difference from yesterday, when everyone consumed at the same level as you were on the income ladder. The rich were buying luxury and the poor at discount heaven.
Markets with increasing sameness and competition, diverges from mainstream to extremes, that is the bulge that the medium price segment consists of, is flattened out and replaces by to minor bulges, one at the smart buy, and one at the premium segment. And at the same time markets diverge in another dimension as out of town category killers at the same time as convenience concepts pop up in neighbourhood and city centres. The extremes are growing, thinning out the middle.
This development has led to dramatic changes in the retail concepts of the mature markets of the world.
As a consequence of the increasing competition retailers are bringing new formats into the action. To a large extent, those formats could be fitted into four main categories of development, each with their own characteristics and success factors.
Discounters
Discounters are the fastest growing retailers today as an overcrowded marketplace logically breeds price competition. The discounters generally offer a smaller range to be able to create an efficient supply and logistic engine to feed the stores. For some consumers they are a supplement of the ordinary super market for specific items, and for other people the main store.
Considering that 90% of a typical shopping basket for a family is built by choosing among some 150 articles, it is understandable to grasp the ongoing behind the recent growth of the discount sector.
Discussing discounters it is also critical to realise that discounters are not all the same. Some hard discount concepts like Aldi carry 90-100% private labels, while other like Lidl supplement PL with the market leaders in every category, if possible, giving the consumer a reasonable offer even if brand con-sciousness is a factor. Other growth strategies includes small scale, small village locations, such in the case of the German Schlecker.
The psychological factor behind the public acceptance of buying cheap in terms of a polarized consumption has been discussed earlier.
Also, several discounters has moved up on the image ladder projecting themselves as “a real supermarket” by shaping up store environment, shopping experience and adding certain products to build a quality image. An example of the latter is Danish Nettos incorporation of ecological products. Through better logistical systems the number of SKU:s can also be set at an higher level to meet consumer demands and play the game of being, the real thing.
Being a true hard discount operator, controlling costs within the organisations are critical to be able to achieve financial goals. For companies such as Aldi typical staff costs is around 3-3,5% of total turnover, and the small range combined with a well oiled logistical machinery are keeping stock costs at some 0,01% while marketing stays around 0,1% of the turnover. Total operational costs (excl. goods) are kept below the 10% level. Keeping costs down are essential to be able to keep prices down.
Dealing with discounters
Discounters are serious about their price image and totally committed to preserving their image as an every day low price provider. Any branded goods supplier trying to tell them stories about brand strength being a reason to sell their goods at a higher price are shown to the door, and suplemented buy a non-branded product.
From a brand owner and supplier point of view, this is bad news at first look. On the other hand, neglecting to se the upside of discounters, could prove disasterous given the fact that discounter share of many markets are up to 30-50%, leaving a small volume for “the others” to battle over.
This being the fact, lets look at discounters from a positive perspective:
Their size and market share make turnover/SKU reach fantastic figures if compared to their competitors. Discounters are good customers if correctly understood and treated as what they are – a logistic battle cruiser always looking for their next target.
- A campaign together with a discounter will move large volumes - They know what the want and usually leave little room for understanding. - Centralized organisation makes negotiations uncomplicated
Discounters can, due to their large share create fast penetration of new products and move markets shares, as well as help getting over stocked items out of the warehouse.
On the dark side of things, discounters are price leaders, closely monitored by other operators, and to some extent the ones setting the standard on key products. Discounters must be treated with respect.
Out of town hypermarkets
As demand grows so does the stores. For the car owner, having a time conscious family, making weekly shopping trips, hyper markets are the format of choice.
Providing a range of more than 30000 SKUs, a number which in some cases in Germany and the US could be multiplied with two or even three, the multitude makes all the difference.
Typically situated out of town, the hyper markets offer a huge assortment of both food and non-food articles, striving to get as much share of wallet of their customers as possible. With this in mind they are also the number one developer of service products such as loans, insurances and so on.
Having a range with a multitude if choices in every category, some hyper markets exists as premium suppliers of ecological fresh produce while others are in the lower price segment. Having a large degree of families and given the market development as a whole, hypers on the European arena usually leans towards the discount side, rather than being the premium provider, at least as an image. The size of the assortment leaves room for at price/quality ladder were both the high end products fits along with the bulk family pack at discount prices. As families are a key target segment, price is always in focus, in terms of being able to bring a low price offer to the market at any time, in any category. There is always a good offer of the week.
Dealing with hypers
Hypers have two main differential factors: Size and price. That is the ability to provide the entire need for even the picky consumer looking for a special brand, as well as providing an EDLP-offer to pay for the gasoline needed to go to the store.
As with discounters hypers move huge volumes, but mainly on campaign-SKUs. Due to logistical reasons hypers also make cuts in their assortment, putting C-brands out in the cold in favours of PL.
Hypers are an interesting partner to get the level below top sellers to the market as they need it to build the image of the total provider. The potential of being a campaign-SKU provider needs not to be addressed.
Neighbourhood stores turning into convenience providers
Yesterday’s neighbourhood stores providing the basic needs for the customers are slowly adding products and services to attract an ever more demanding, time conscious audience.
Stopping by at the convenience store these days could mean gripping a cup of latte, or a snack engineered to fit on-the-go consumption or a quick stop on the way home from work to get something for dinner. On many markets a large degree of the popula-tion eat out at night or deciding what to have for din-ner at the last possible moment, creating the need for a large “pantry” at close range, as going to the super market seems as a major event as a daily routine. To “dock” into the convenience station at the corner requires much less time, and energy.
This has created the modern convenience store with a wide but shallow range of staple goods often complemented with some form of MRTE - Meals Ready To Eat, on the go or at home.
The petrol stations are often providing the same service and function for the driving audience.
Dealing with convenience stores/petrol stations
Convenience stores are interested in one thing only, to be able to provide convenience at any time, thereby providing repeat visits.
This means that they have to carry well known brands in many categories, with package sizes adapted to either smaller households or on-the-go consumptions. No one goes to 7-Eleven looking for a 20 kg sack of flour.
They are also interested in bringing in new interesting products giving new convenience experiences for their customers.
While discounters roam the market with their lean and mean assortment/price-combination, other types of players emerges in the other end of the market.
Premium providers, either in the form of evolved super markets, product specialists, serving a small niche, have “everything” within a category or experience shops inviting the consumers to be involved in the product itself.
The premium segment grows as a counter weight to the discounter. However, the volumes cannot be compared to the discounters, but still, the premium providers are an interesting factor adding vitality to the market, above the level of the traditional supermarket.
One premium providers that deserves mentioning are M-Preis, an Austrian supermarket having the pay off, the Seriously Sexy Super market. Combining an astonishing architecture, unique for every store, with a wide assortment lifts M-Preis far above the average.
Others include Vom Fass, niche operator selling unbranded oil, vinegar and spirits enabling their customers to pick from over a hundred bottles, combining it with their liquid of choice and thereby creating their personal product, at the same time as they have an interesting chat at the store.
Dealing with the premium provider
Premium providers survive by being special, enabling them to charge more due to the shopping ex-perience as a whole.
Therefore selected and small exclusive brands always should find their way into the premium alternatives, which also add life to the category as such, as it is often frequented by connoisseurs and early adopters looking for the next kick.
Needless to say, price comes second.
Logistics and branding
Apart from the four main development directions there are also the branding and logistics powerfield to take into consideration. There is a common misconception that low price operators cannot use branding. Anyone that have visited a flagship store of an discounter knows this is not true. On the other hand, a streamlined logistic optimizes concept could be a part of a premium concept. Beeing a premium player does not exclude cost optimization!o
Chocri is a netbased store offering customized chocolate for any preference. By combining either milk, white och dark chocolate with spices, nuts, grains and toppings and other ingredients some 10 billion combinations are possible, enough for any chocolate craving consumer on the planet. The chocolate is organic, fair trade and the company also donates a percentage to DIV, a help organization that cares for children on the Ivory Coast, home of much of the choclate that is sold by Chokri.o
Jess Cartner-Morley, writer, wrote a letter to her once-favourite retailer Top Shop explaing why she wanted to break up their relationshop and UK Guardian newsletter published it.
This could be seen as a parallell to the "Bring the love back"-campaign that I mentioned in a previous posting.
For a unsatisfied customer breaking up is not hard to do...Read her letter here.o
You are what you buy. This has been the mantra for the last decade, when lots of consumers have been defining what they are by what they buy, no matter if it is in the premium segment or from Wal-Mart. The term smartbuy became a lable for products with a high quality and a lower price than the market leader of the category, and as the discount operators like Target have invested even more design into their products this gap have widened.
Spending as a definition of oneself has no taken a new turn into social media.
While social media growth have been focused around around Twitter and Facebook, as the mainstream mass social media, nisches of this industry is constantly growing as well. WhosRich.me is a newcomer enabling consumers to share their new things with friends and allow them to be commented on. Of course an Iphone applications allows the user to update the on line profile while in the store.o
...introducing another Vodka". Swedish GeVe Spirits has been producing the Ginseng Vodka for some years now, in a bottle designed by Lars Hall. Winning the Gold Medal for Best Design and Packaging in Vodka Masters in London in 2008 and Platium in the flavoured Vodka category in SIP, LA just before Christmas, it has been standing out as a truly innovative product despite the fact that, as GeVe Spirits themselves say on their web, the world does not need another Vodka.
GeVe Spirits followes up the success by launching the premium Smooth Vodka, an ecological product and internationally recognized by Gold Medal in Vodka Masters in 2008, Gold Medal in Cannes 2009 and Double Platinum and Gold in SIP Awards in LA in November 2009.
Of course expectations are sky high for the new Mystical Red berry vodka with tones of pommgrenate and raspberry,
This clearly indicates that the innovations in the vodka category is far from over. Read more here.
Retail addict and marketing professional. I have dedicated most of my working life to the understanding of how to influence the consumer no matter if it´s inside or out of the store.
Owner of Magnus Ohlsson Retail Management.
www.morm.se
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