Brand versus ‘Brandless’: The Epic Battle

Would you replace your favorite brand of soap or shampoo you use every day with unbranded products? Off the bat most people would respond with a resounding ‘no’. Instead of shampoo and soap, if the products were toothpaste and a packet of sugar what would be your response? In all likelihood you would be open to unbranded sugar and may not yet be okay with unbranded toothpaste.

So, it is obvious that some products are more amenable to being commoditized, and hence unbranded, as compared to other products. A product like ‘Atta’ that most of us would believe could easily be commoditized has defied this belief. ‘Aashirwaad’ is a brand of ‘Atta’ that has totally wiped out all other brands of ‘Atta’, and no private label has dared take on ‘Aashirwaad’. This brand by ITC has become pretty iconic because the brand team at ITC obsessed with the quality of ‘Atta’ that would deliver the perfect end product – ‘Rotis’ that would remain soft several hours after baking.

The Emergence of Store Brands

The tussle between the power of brands and the power of distribution has been an old one. Over the decades, as retail got corporatized and large retail chains began emerging, store brands began making a presence. With mounting real estate costs, retail chains had to think of innovative ways of improving margins. So far, they were stocking big brands on their shelves. Consumer companies that controlled these brands created a pull for their brands through a combination of product quality, advertising, price, and distribution (the classical 4 Ps).

At some point, the retail chains began wondering if they should create their own brands. The brands were unlikely to be as powerful as the regular brands and were not expected to create a strong customer pull, but this could be more than compensated by giving them much more visibility in the stores. The regular brands were about creating ‘pull’, and store brands were largely about ‘push’. And these store brands could be priced much lower because there would be no advertising, and other associated brand building costs. Store brands started by establishing their presence in categories where differentiation was difficult like staples and other food products. Gradually, the retail chains figured out that they could create store brands in most categories, though some would be more difficult than the others.

As someone once observed, ‘after mastering the art of selling everyone else’s stuff, retail chains and marketplaces began persuading shoppers to buy their own stuff!’

If physical retail chains could create store brands by leveraging their access to customers and through reach, then why wouldn’t marketplaces at some point of time think of creating their own online store brands! This has begun happening. Apparel is a category where fit and style are of paramount importance and hence the entry barriers are limited especially if good designs can be distributed at low costs. Amazon has close to eighty private labels and has raced ahead of Macy's in apparel, a category in which Macy's has been the undisputed leader! As a competitive strategy, Macy’s has been trying to offer more brands that consumers can’t get anywhere else. Macy's has tried to adapt quickly by evolving into an omni-channel retailer.

While some argue that store brands (private labels of retail chains – offline or online) will eventually kill the regular brands, there are others who argue equally strongly that brands will never be destroyed. Softbank has backed an ecommerce company in the US, ‘Brandless’. This company manufactures and sells food, beauty and personal care products, and household supplies under its own ‘Brandless’ label. ‘Brandless’ will go head-on against Amazon in the retail space.

It is not without reason that brands have existed for as long as they have. They have delivered clear and sharp value propositions for their target consumer segments. Consumers associate a certain imagery, and often derive an identity, from the brands they are associated with. This fulfills an inherent human need and hence brands are not going to be displaced easily. Having said this, brands that do not have a strong value proposition are more likely to be displaced by private brands of retail chains and distribution companies.

The battle between ‘Brands’ and ‘Brandless’ will be epic!