The Rise and Shine of Private Labels: Edges

We all seen and read about the rise of private labels. In UK and US, companies as Walmart, Tesco or Mark’s and Spencer delight us with true valuable products at the level of any brand we have seen before. Retailers are beginning mastering brand management and realized how to manage their portfolio of products covering today categories within low, medium and high end offerings, sometimes stated by consumers as better than well established brands.

In the past years the world revolved around advertising and distribution: more ads would probably create more demand, therefore more distribution, therefore more sales. This as changed today with massive competition from many players and information accessibility brought by the Internet. No longer advertising works so well as in the past did. At the same time retailers realized they have the power in their hands, at the end of the day, they are the core location where people physically shop and choose their products, if even not online whereas they’re also doing a great job at delivering a great service.

Some experiments lead to implementing products of their own, copying what was already done. With a bit more effort retailers realized they could actually build brands and improve their margins by settling wider offerings throughout different categories and different choices throughout different quality layers. Again, they own the aisles and the shelves. Hiring talent to manage their portfolio doesn’t seem like a problem as well.

Some changes on the packaging, an incremental investment in improving product quality and bingo, people question themselves why not? Why not I don’t buy a product with the same quality as the other brand but at a lower price? After all this is value for me. People’s questions became imperative, and the rise of private labels seems to be here to shine. When thinking about what causes this shift, besides of what was mentioned above, the following key points lead to the situation:

1.  Branding is more vulnerable in FMCG. People use Armani to make a statement, but they don’t use TIDE or eat Danone Yogurt to make such a statement.

2.  The value proposition of private labels is huge. The inexistent costs in advertising, economies of scale, and distribution capabilities along with an alignment in product quality makes it very hard to compete with.

3.  The economic downturn as deeply changed consumer behavior. Smaller family budgets and a new mindset of value within shopping as helped private labels rise. People experiment more lower priced items and eventually get loyal fast if happy with overall experience. The incremental quality in private labels is buzzing already and spreading fast.

4.  The insights retailers can work on on their own shops is gold mine for developing strategies, products, brands and experiences which make the cut.

Given this what brands are doing? Well buying some supermarkets.. focusing on power brands and selling out others. Yet, we see brands as “Innocent” rising. The edges are where brands will win. Middle market is hard to cope with as people wonder around the cheap or the expensive, the big or the small, the fast or the slow. Focusing on a single positioning within the edges seems to be the best strategy.

Branding Cities

People are attracted by landmarks. From these, ancient monuments, massive constructions, aligned ancient styles, great palaces or thriving castles, play a great role attracting people to countries or cities. On the other hand, wild nature, steep mountains, fast rivers, or amazing beaches play a similar role captivating people to other kind of places. So beyond cultures and tradition which also represent the key elements in attracting people to places, modern landmarks make the big cut in attracting crowds.

Louvre is a wonderful museum, filled throughout the year with amazing masterpieces of great artists, though, I believe a great deal of the people who visit the Louvre (specially most tourists attracted by Paris in general), are first subconsciously pointed to its architecture which also made its mark in films rather than firstly involved with the art collections itself. Ask your friend what is the Louvre and guess that quite probably he will remember its glass pyramid first instead of Mona Lisa (if you do an image search on Google you’ll confirm this aspect as well).

Ask what Bilbao is all about for a lot of people, and the wonderful Guggenheim Museum will probably come up first. Ask then which key exhibitions regularly come up there, and I’ll guess what the answer is. Rome, Istanbul, Barcelona, New York, Hong Kong, Chicago, and other examples as recently Dubai, are all surrounded by something that attracts people: Architecture. People are greatly attracted by buildings or other landmarks that make a difference.

I believe architects are the great masters that lead us to a visual impact that deeply shapes our perceptions and moves the whole experience with a city or place to a different level. When branding a city, giving absolute freedom to creative architects is definitely a one step further to put it on the world map.

Dip

What you do when your company heads towards out of business by a search giant conquering several categories. Google is launching a free sat-nav application integrated with search which you can use it on your phone. Garmin, Tom Tom and other related company’s shares just fell severely in the last days, and figures are not positive.

So what these companies should do? the dip is near and the turn should be strong, but the fact is that the question lies on what should have they done. One of many reasons GM might have failed was that it didn’t spot or believed in the green opportunities of the future auto industry, which could reduced people’s annual spending on cars with a valid reason behind. Yet, they kept insisting building bolder cars with high levels of gas consumption plus launching more and more brands losing focus.

GPS nav companies face the same irony when confronted with such market shift. Google is offering a free app which might be of a superior quality when compared with others charging around 50$ to 100$ US per app. Mobile is concentrating everything, and search is indeed the perfect match for such GPS services. As for the free model, that’s just how Google operates, along the long tail.

Toyota plans hundred years ahead, and as many say today that it is hard to plan next month in such rapid changing markets, I believe companies should definitely plan ahead several scenarios that can happen in the fast moving markets we see today. The key thing here is that they shouldn’t be able to react, but instead drive their industry and product categories as Google keeps on driving. Innovation is staggering and decisive today. If you had a Google next to you as your direct competitor what you would do today?

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A Public’s Company Inertia

RATP is the company behind the transportation service and the metro in Paris. RATP is broken. Every beginning of a month inside the metro stations we can see huge lines of people waiting to solve their problems with their monthly passes to access the metro.

After these huge lines of people we can spot a few unmotivated employees, usually two or four at a small office trying to deal with the crowd demands, which can span from acquiring their passes to technical problems solving or a need for more information in determined issues.

These small offices are present in a few key stations, 28 in fact within the whole Paris area (which has about 400 in total). The recharging machines also see huge lines of people as everyone tries to recharge their passes within the same day to not lose a single dime in the monthly period.

The fact that is a public company might be a strong reason why people from top to bottom actually don’t care that much about what happens. Not only this is normal here but also in many other countries throughout the world, as the key goals that drive state owned companies seem not driven to improve but to maintain. There is a complete inertia in RATP and also a lack of care in fact for the people who use the service.

Now, if we changed the scenario from this essential transportation service natural monopoly by RATP to a product or service fitting in whatever existent category, the result would be interesting to see, I guess in a 6 months’ time the company would have closed.

You don’t have to pay consultants to realize that if you change the configuration on the pass to start-end whatever day instead of first-last day of the month, or add more people for support at peak days, or get more machines rolling at the same days, or divert the crowd by days within increasing timelines, etc. You just have to do it as you would do it if it was for yourself. Effectiveness unfortunately is still very scarce in public companies and just makes Paris in this aspect definitely not a fast moving forward thinking European capital as others nearby indeed are.

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Brand preference hard to say

“I bought it because was cheap and I really like the brand”. Says a friend of mine regarding a sun cream. So I asked, why do you really like the brand? First thing was, “I don’t know”. Then trying to extend his arguments came more rational attributes to justify the brand choice. The product smell or parfum experience was great and could even make the bathroom have an aroma in the air. Then also the competitive pricing and some comparisons with other brands, as well as the creamy side of Dove’s line of products. Funny to see how rational attributes come to justify a brand choice when there’s a bunch of emotional attributes behind that. The first glimpse of my friend’s answer was that he actually didn’t know what to answer. People take it hard to understand, market researchers harder.

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