Offline retail is fighting back – and that could crush your brand

I’ve just got back from presenting at a conference to around 500 marketing professionals. It was a great event, focused on the impact of digital on marketing: new consumer behaviors, new generations of consumers, new data opportunities. And it is true that this new digital world presents many opportunities to brands and to marketing. Everyone’s eyes seem to be on the digital possibilities. But there is also unprecedented threat too. Those threats are huge and come in many forms. In this post I’m going to focus on how offline retail is responding to the new trends in shopping behavior, and how that will potentially crush your brand.

The world of offline retail is changing – driven by shoppers

Make no mistake, offline retail is under more pressure than ever before. Changing shopping behavior, unprecedented in a generation or more, is forcing them to rethink everything they thought they knew about retailing. E-commerce is growing. Discounters too. Convenience stores are adapting fast. Retailers historically have relied on their real estate to give them competitive advantage, but in the age of e-commerce, stores can be a huge inflexible burden. Offline retailers find themselves having to support falling revenues from existing stores, at the same time as having to fund expensive (and often unprofitable) ventures into new channels such as online.

What has this got to do with brands? Pretty much everything – but let’s look at the five key ways that offline retail responses to this challenge could crush your brand.

When a retailer hurts, it’s the supplier who bleeds

What happens when a retailer is under profit pressure? They turn to their suppliers. Suppliers are already facing more pressure on trading terms, and this will increase as cash from suppliers is the quickest and easiest way to fund new ventures and prop up an income statement.

Offline retail is changing – Delist ahoy!

Offline retail is rapidly realizing that a good range of well-known brands at a good price in a nice store isn’t enough to win in this disrupted retail world. Offline retail will focus their efforts on categories where they can differentiate. Recent moves by Woolworth in Australia demonstrate this with a big focus on fresh. Tesco in the UK hacked their range a couple of years ago – expect more! Expect ‘ready to eat’ to take more space at the expense of traditional consumer packaged goods (check out this convenience store in Thailand – it’s hard to even see the packaged goods!)

Offline retail is differentiating – Private Label

One traditional area of differentiation for offline retail has been private label. Expect more of this – as private label drives differentiation and profit for retailers. If your brand isn’t a market leader or highly differentiated, you are at risk of a delist. If you don’t offer differentiation, expect less space and poorer space in the future.

Smaller ranges will become the norm for many categories in offline retail

Mainstream retailers such as Tesco and Woolworth will balance their range: expanding ranges in key differentiation categories and narrowing in others, as mentioned earlier. But an interesting quirk of the retail disruption is that the offline winners often have very tight ranges. Think discounters, or convenience stores. Shoppers will see fewer brands, period. Not only will many brands be squeezed off the big shelves of hypermarkets and supermarkets, they will find no place on the smaller shelves of some of these growing channels. The net effect, that fewer shoppers will see your brand, potentially.

Offline retail – Some categories will see range expansion

Online it is a completely different world, where retailers often expand range, using a broad range as another way to differentiate. This is still a challenge for mainstream, legacy brands. Online retailers will increasingly seek to list, highlight and promote unique and differentiated brands. Online gives small brands a chance to compete with the big boys as mega e-commerce players radically reduce barriers to entry. Will your brand get found in all that mess?

And big retailers such as Tesco and Woolworth will also use range as a weapon. But they are going to look to use a wider range in some categories only and will be seeking to use this to differentiate. That means private label, or exclusive offers, will get much more attention than mainstream mass brands.

How to survive and thrive in offline retail in the future?

To survive in this world, brands need to look at the world differently. Being big, and on TV, is no longer a guarantee of retail success. There are a number of key strategies brands need to embrace if they are going to avoid being crushed, and it will impact the entirety of your business. I’m going to explore this more in future posts (so don’t forget to subscribe now so you don’t miss out!) But one of the key first steps is to work out which retailers you need to win with – which retailers will be your key partners for the future

How to choose your offline retail partners in the new retail future?

Of course, brands need to consider which retailers will have scale, but in this new retail future brands need to go further. They need to consider which retailers they can win with, and that means focusing on the following questions:

Which retailers are important to me and my target shoppers? Brands need to think beyond scale to consider which channels and retailers are important to them: and that comes down to focusing on the right consumers and shoppers. Are you clear on which consumers are key to your future growth? Have you used this to identify target shoppers and target shopper missions? If you have, this information can also help you identify which retailers and retail channels will be key to your future growth

Which retailers are willing and able to deliver what I need to do to win with my target shoppers? Some retailers simply aren’t configured to help. If you need to engage closely with your shoppers, can this retailer facilitate that? Do they have the right shoppers on the right missions? Just as importantly, is the retailer willing to play ball with you? Are they likely to be open to ideas, to sharing, to collaboration?

To which retailers can I add significant value (beyond being an ATM!) such that they are likely to want to support me and my brand? Having a huge brand used to be a guarantee of at least some retail support – that is no longer the case. Brands need to step up and deliver value to a retailer. What can you bring beyond sales and fees? Do you even know what these retailers are looking for? Can you bring differentiation, for example, insights, or growth strategies? If you don’t have anything to add value, don’t expect to stay in the game.

Consumer brands and offline retail face a tough time. The solution won’t be easy but changing retail relationships will be a big part of this. We’re working with clients right now to do this. If you want help, give me a call. If you’d like me to speak at your next event, to help your team get a fast start, just let me know. Whatever you do, please do it now – don’t wait until it’s too late!

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