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“We are a start-up company who manufacture our own products. We are bent on developing our own brands and business. When we started selling to big supermarkets and department stores, our selling and marketing expenses skyrocketed due to the usual endless demands of retailers for listing fees, product highlights, in-store promotions, opening supports. Despite all this, we are still not able to significantly increase sales volume and build our brands through the retail stores since our competitors are also doing the same things. In essence, we have been commoditized! Can you recommend other ways we can achieve our objective?” - Tina Trying
I chose to feature this question because many suppliers struggle to connect with their target consumers through retailers who seem to make a living from direct-to-pocket incomes but fail to help build suppliers’ businesses. In the not–so-distant past, there were many retailers but not as huge as they are today in the Philippines. Not one retailer really dominated the industry with great retail power. We now live in a time when retailers have much power than individual brands. Suppliers are now finding difficulty in leveraging on their own brand power. Lars Thomassen, with two other authors, provided recommendations in their book entitled ‘Retailization’ on ways how to survive in this new competitive landscape. I am not an endorser of their work, but I find their observation and analysis relevant to the needs of suppliers like the letter sender. Hence, I am sharing some points from the book with our readers.
Create your own distribution channels. Create proprietary distribution channels by building one’s own retail stores. The increasing number of brands is putting emphasis on getting their own distribution. Look at Nike, Levi’s, Prada, Body Shop, Apple, Avon, Globe, Nokia, and many others who have created their own retail stores. Creating your own distribution can be a convenient way to avoid powerful retailers and reclaim the ownership of contact with your shoppers. And what’s more, suppliers can have the liberty to do whatever is needed to enhance communication and branding through their own distribution channels or flagship stores. Because this makes a lot of business and marketing sense, we could see more of this in the near future.
Reinvent or redefine your place of distribution. In their book, Thomassen, et al, gave interesting examples on how other brands have redefined their places of distribution in the minds of the shoppers. Coca-Cola experimented with its Red Lounges which are upgraded vending machines that target teenagers in malls. Imagine a vending machine inside a mall which is neatly converted into a lounge with custom-built furniture where visitors can relax and hang out with friends while enjoying a ‘plasma-screen media wall and sound domes’ with their favorite Coca-Cola drinks. I oftentimes see something like this being done by cigarette brands, ice-cream, and cosmetics, inside our malls.
Collaborate with retailers. This entails a strong partnership and cooperation between suppliers and retailers who will commit to jointly grow the business of both partners. A. Brandenburger (of Harvard) and B. Nalebuff (of Yale) call this ‘coopetition’ which is basically a play of words to blend cooperation with competition. Their idea of ‘coopetition’ can lead to expansion of the market and the formation of new business relationships and even new forms of enterprise. Thomassen argues that while proprietary distribution and reinvention are viable and important options to consider, creating relevant and meaningful relationships with key retailers would probably be an easier and more accessible strategic solution for brands.
More and more suppliers for large retailers in the Philippines are forging strategic collaborations to grow categories and brands. I recall the joint effort of Watsons and Nivea in shopper insighting to develop Watson’s MenZone category. This resulted to dramatic increase in sales off-take and created brand value for both retailer and suppliers. I also know of one small company who is actually thriving in selling its paper-based brands to large supermarkets and department stores as a result of their collaboration in developing the house brands of the retailers.
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About the Author
Emilio Macasaet III is a Partner and the Chief Channel Marketing Strategist of Mansmith and Fielders, Inc. A bestselling author of three sales books – Distributor Management, 6 Steps To Effective Key Account Management and Fundamentals of Trade Marketing which are now available on Lazada and Shopee. For more info, email firstname.lastname@example.org.
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