I was telling a colleague about Hema, a dutch chain of stores that sell everyday staples, “everything from a needle to an anchor” my grandfather would say. Well they don’t sell anchors but they do sell needles and all sorts of other useful things you need, regularly, for round the house. And everything is their own brand.
It started me wondering about the rise of manufacturer-retailers or retailer-manufacturers, and single brand stores. So I wandered around the shops and took note of which were multi-brand stores, like (most) supermarkets and department stores, and which were single brand chains. It’s fascinating how the world looks different when you look at it systematically, out of “everyday mode”. I expected to find lots of retailers who stocked multiple brands but they are a tiny minority – and look to be disappearing. My list is at the end of this post, I could have gone on walking and made it five times as long but you can see most stores are singe brand.
Indeed I’m sitting in an Apple store writing this post. An LA-based computer manufacturer that once had no stores, now it operates this store here in France and quite a few more like it around the globe. When I was a student at university I remember quite a few case studies of manufacturers that had tried to get into retail to ensure distribution (e.g. brewers who bought pubs) and how it had often back-fired; manufacturing and retailing are different businesses was the lesson. Well it seems that management has improved and many firms can do it (see list below), and many retailers find that they can have a central office buying (and branding and marketing) and that makes life more simple than having to stock their stores by choosing stock from many sellers. The retail staff can just concentrate on retailing, whereas a purely retail store has to buy and sell. This is perhaps why we see chains replacing owner-operated stores, even (sadly) in restaurants (though thankfully not in France).
There are a few exceptions like shoe stores, opticians, and cosmetic stores but even here there are single brand stores (e.g. L’Occitane, Julique), where the manufacturer (or designer or at least buyer) is also the retailer. Department stores, supermarkets and wine stores are among the last, it seems, where the norm is for them to stock themselves with many brands from competing manufacturers – though even here they usually have their own private label brand along with the others.
So what does this mean for marketing? In some ways it’s an indictment on the quality (and quantity) of marketing by manufacturers. They were poor at building their brands, and retailers found that their retail presence was as good at building mental availability as the (little bit) of advertising that the manufacturers were doing. Of course, it also shows that some manufacturers worked out how to be retailers, and very good retailers. So it’s also an indictment on retailers who operated largely as shelf stockers, renting space to competing brands.
Will dedicated manufacturer-marketers and retailer-marketers survive? Meaning stores that stock multiple brands? I think we have the answer, the future is largely already here. Yes there will be a few, a few dept stores, supermarkets, and some specialist stores. But the majority will be single brand chain stores, where one head office designs and/or buys/manufactures its own brand’s product range which it sells through its own stores.
OK, what if you own your own shop, stocking manufacturer brands? Hmm, the tide seems to be flowing against you. I can’t think of any new chains that have emerged along these lines.
OK what if you are a manufacturer brand marketer without your own retail channel? Again it looks like the tide of history is not flowing your way. But can a company like Unilever operate its own stores? It’s an interesting question; L’Oreal already owns The Body Shop. Procter & Gamble and others have their “toe in the water” with their own online stores but that’s a long way from having a Hema type store stocked entirely by P&G.
Will we see wine stores dedicated to a single company? We already see some stores that stock many brands that are in effect commissioned by them, they own or control the marketing of these brands. But might we see a large luxury wine brand like Penfolds open its own stores. Nespresso did it – if only to use stores as a way of showcasing/advertising the brand.
Hmmm, predicting the future is difficult, but while 10 years ago the idea of manufacturers who depended on many different retailers, like Apple and Levi, opening their own stores and surviving seemed unlikely. And it has happenned.
PS Retail marketing scientist Herb Sorensen points out that “own brand stores” are a strike back by manufacturers at “private label”.
List single brand retail chains I made walking around Bordeaux:
Exceptions I noted:
Bijoutiers but only some
Cosmetics but only some
Manfield – shoes
Outdoor and sports clothing
I’m not sure I would characterize all these outlets in the same way you do. Sure, ” everything is their own brand”, but that doesn’t mean they manufactured it. It often just means they purchased it from a manufacturer with their own store brand label (or, like Apple and other computer manfacturers, paid a firm to assemble the parts made largely by other firms).
In part, this is because if you want to offer a broad line at retail you either have to develop manufacturing expertise in a very broad number of things, or you need to purchase that expertise from those who have it (and may be happy to make the small changes to the basic product you’d like in order to be unique).
The apparel firm VF might be a good one to look at in this regard. They have stores, but also sell through other retailers. They have brands they manufacture, but don’t manufacture all the products they brand.
Thank you. I did try to say manufacture or design or buy. The key point is that they mange the brand of everything they sell.
It’s called forward integration and happens in other industries often when margins decline. Manufacturers becoming retailers, for this reason, in Australia is typified by the few companies that either make or import pharmaceutical supplies. The three main organisations that dominate this industry have integrated forward and own or control the main chemist shop retail chains. In other cases is it a reaction to dominant mass-brand retailers that exert their buying power on prices they will pay to suppliers so that these manufacturers decide it is more profitable to sell through their own outlets.
Which companies are you referring to?
I am unaware of examples re forward integration that you mention in Australia.
If it is wholesalers controlling retail pharmacies, then I would have to disagree with you. For example Sigma does not control Chemist Warehouse, rather the other way around to a large degree. Perhaps one could suggest they are interdependent at best.
Interesting post, Byron. I’ve been pondering it for a couple of days.
Strikes me that what you identify brings to light problems in past marketing for both retailers and manufacturers.
Too many retailers stake their sales on “low price” – just driving down prices which is a death spiral of marketing. And in genreal consumers vote with their pocket books for the meaningful products override low price – they’ll pay for value (by and large). Lacking meaning, then price is critical.
At the same time, manufacturers struggle with their own ineffective marketing efforts to make that meaning clear (leaving the reatilers with little option BUT to choose a low price strategy). There are many excellent manufacturer products on shelves – except through marketing inefficients no one knows about them. Surprisingly, manufacturers seem to do far better with that communication in a dedicated store approach – or at least some do.
I thought about our local mall here in my US neighborhood. What’s interesting is that it continues to be anchored by the big stores (Nordstrom’s, Sears, Penney’s, Macy’s) with the smaller connecting stores a mix of brand stores (Gap, Apple, Victoria’s Secret, Pottery Barn) and multi-brand stores (GameStop, Brookstone, jewelry stores). (Note that our local mall is one of the top producing per square foot in the US – not sure if that skews these observations or not.)
Anyway – quite thougth provoking questions you pose.
I bumped into this article… Congratulations.
I especially like the sentence: The retail staff can just concentrate on retailing, whereas a purely retail store has to buy and sell.
This gives Manufacturer Brands a competive advantage in a world of a demanding consumer.
The reason for my post is that I study the changing retail business also, with the eyes of a strategic retail designer that creates store concepts.
I needed to do this, as you understand, to determine what/who will win and loose in the future.
I wrote a white paper with my conclusions (that are pointing in the same direction as yours) and even found a name for these new companies:
“Redefining the retailer; The BrandTailer™”
The end of retail as an economic model.
It is available on our website: http://www.imaginif.com/whitepaper
I would appreciate it, if you could read it and give me your critical comments.