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| ISBN-13: | 9789063693664 |
|---|---|
| Publisher: | BIS Publishers |
| Publication date: | 06/03/2014 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 304 |
| File size: | 2 MB |
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Branding A Store
How to Build Successful Retail Brands in a Changing Marketplace
By Ko Floor, Bojoura Floor
BIS Publishers
Copyright © 2006 Ko Floor and BIS Publishers, AmsterdamAll rights reserved.
ISBN: 978-90-6369-366-4
CHAPTER 1
THE STORE AS A BRAND
In the next few years the retail market will change dramatically. The pace of change is quickening. In order to survive a store will have to become its own brand. A strong brand can differentiate a store from the competition. So far retailers have approached the consumer in a predominantly rational way. The emotional differences between retail brands will however become more and more important. Now that stores are becoming strong brands themselves, a battle of the brands between manufacturers and retailers has started. Both try to achieve a strong position in the consumer's mind, and increasingly, manufacturers will find out that retailers will win this battle. After all, retail brands have the big advantage that they communicate directly with the consumer.
1.1 The need to differentiate
The retail industry is undergoing many changes and faces enormous challenges. The competition is huge. New retail formats are emerging. Discounting is becoming more popular and price wars are going on every day. Shopping behaviour is changing rapidly. Value-driven consumers have more shopping options then ever before, and they are also much better informed about all options. Retailers are losing share to markets like leisure, travel and health. Some retail markets seem saturated. Consumer lifestyles and spending patterns are changing. Staying ahead of these changes is crucial for success.
People buy what they want, not what they need. So they want retail brands that satisfy wants, more than needs. Consumers who used to wonder what they should buy will in the future often wonder whether they should buy something at all. They already have almost everything they could ask for, at least in the prosperous western world. Buying is about a product and sometimes also about store abundance. And if something is needed after all, there are many alternatives to choose from, both online and offline. A retail company will have to do its very best to be favoured by consumers, and this is getting more and more difficult. Consumers have less time to shop and often do not like to shop any more. Retail companies will have to do more than just meet the consumer's expectations, they will have to exceed those expectations. They should go beyond satisfaction, and stores should be easier and more fun to shop in.
In some sectors sales do not grow and overcapacity occurs. Price competition and pressure on margins are the results. New technologies are emerging and they call for big investments. Consumers want more for less from retailers. They want it cheaper, faster and better. They expect more from the shopping experience, and are looking for shops that can make their hurried and hectic lives a bit easier or more pleasant. Customer loyalty is decreasing, and store loyalty only exists because of a lack of a better alternative. The consumer chooses the store that has the best proposition in the short term. At the same time retailers are also pressured in other ways. They have to increase their sales and at the same time lower their costs, but wages and rent continue to rise. In addition, competition comes not only from domestic retailers, but also from foreign retail companies. The consolidation and globalization of the retail industry continues. Many current, well-known retail companies will have to close their doors forever.
Changes in consumer lifestyles will have a considerable impact on the lifecycle of store formats. The lifecycle of store formats is shorter than before, because the competition rapidly copies successful innovations. And newcomers challenge the traditional way retailing has always been done. In a few years some sectors will change completely. Big successful retail companies like Wal-Mart, Ikea, H&M, Home Depot, Amazon and Starbucks have only existed for a few decades. Existing retail formats will therefore have to be adjusted on a regular basis. Retail companies must rise to the challenge of change and innovation, and in some cases the store format will have to be changed drastically. Retail companies that do not adjust their store format and strategy in time are losing ground rapidly. After all, the battle for the consumer will only get tougher, and keeping the store ahead of the competition will be difficult. To stay ahead, a store needs to differentiate itself.
Retail companies that want to survive among other retailers will have to make sure their store is more than just a collection of products. They have to stand out from the competition and have to become a brand themselves. Branding the store is becoming crucial for success, because retail differentiation cannot be achieved without branding. The retail environment and the retail brand should add extra, differentiating value to the merchandise. Creating a strong retail brand will be one of the most important means to secure survival. Branding the store will be the challenge for the future. By creating a strong brand, the relationship with the consumer will be strengthened. It will become a relationship that is based not only on rational but also on emotional motives. Stores will have to become living advertising pillars, which clearly communicate what the retail brand stands for. But not only that, the stores will also have to prove the brand promise. After all, the store performance will determine the consumer's brand perception.
Consumers are no longer only looking for a certain product, but also looking for a store experience. They want to be more emotionally involved when they are shopping. Shopping used to be about buying something, but in the future shopping will be more about doing something. Shopping is now competing with other leisure activities, and consumers will have to be persuaded to spend their free time on shopping. The winners in retail will either be the brands with the lowest prices or the brands that really differentiate themselves by offering the consumer a unique competitive advantage. The retailer will have to build an emotional connection with the consumer; a connection that will only be realized when the proposition of the retail brand is really unique and relevant. Customers should not just be satisfied with the retail brand; they should be delighted. Their expectations will have to be exceeded every time.
In principle, a retailer can choose from three competitive strategies to help tackle all these challenges and to improve its market position:
• increasing sales;
• cutting costs;
• improving gross margin by increasing differentiation.
Together these, three competitive strategies determine the profitability of a retail brand.
1.1.1 INCRESING SALES
First of all, a retail company can improve its market position by increasing sales. It can stretch the brand name by starting to sell more product categories under the same brand. Therefore, many retail companies experiment with enlarging their range: sometimes successfully, but just as often unsuccessfully. Also by autonomous growth, developing new formats, takeovers, mergers, domestic or foreign expansion, or strategic alliances with other retail companies, a retailer can obtain economies of scale and achieve better buying conditions. Lower costs and a higher profit will be the result. That expansion does not only have to take place through existing or new stores. Extra online profit can be achieved without the need to open any new stores. When this online profit is achieved by using the existing stores, as at Tesco, it can lead to attractive synergies.
A retail company can grow by exploiting multiple store formats and brands. For example, Carrefour operates five different store formats and a number of brands in different types of retail distribution. The right store format should be chosen, depending on the local market situation.
• The Carrefour hypermarkets offer a wide range of food and non-food products at very attractive prices. Their shelves stock an average of 70,000 items. Floor areas of hypermarkets vary from 5,000 sq m to over 20,000 sq m, and their catchment areas are very large.
• Supermarkets with brand names like Champion GS, Norte GB and Marinopoulos offer a wide selection of mostly food products at competitive prices, in outlets with floor areas of 1,000 to 2,000 sq m.
• Hard discounters such as Dia, Ed and Minipreco stock 800 food products at the lowest possible prices, in small stores (from 200 to 800 sq m). Half of the products are sold under the Dia brand name.
•Convenience stores include the Shopi, Marché Plus, 8 å Huit and Di per Di chains of stores
• Cash-and-carry and food service outlets are designed to meet the needs of restaurant and food industry professionals.
The strategy of Carrefour consists of building group market share in each market it does business in, by expanding the store format best suited to that local market. It does this by taking advantage of the way the formats and brands complement one another.
Many retail companies increase their profits by a quick expansion abroad. Benetton, with stores in more than 100 countries, and McDonald's, with restaurants in about 120 countries, are examples of retail brands that are almost as international as manufacturer brands like Coca-Cola, Sony and Chanel. Not only for these manufacturers, but also for retailers, there are various reasons to go abroad:
Further growth
Further growth could be difficult in the originating country. There could be legislative constraints, or the domestic market might be mature or saturated. That is especially the case when the home market has limited potential. Therefore, the need to go global could be even greater. In general European retail companies are, for this reason, often more global than their American rivals. Retail companies in the United States have an enormous home market. Wal-Mart, by far the biggest retail company in the world, still obtains the biggest proportion of its sales in the United States.
Economies of scale
Retailers go global in order to lower their costs. When a retail company grows, it can profit from economies of scale: not only when purchasing, but for example also with marketing, product development, information technology and physical distribution. The exchange of knowledge between the various countries can also lead to extra synergies and economies of scale.
Spread of risks
A retail company that operates in several countries spreads its risks. A recession never hits every country in the same way, and when a fashion retailer suffers from a bad summer in one country, other countries that have better weather could very well compensate for that loss. For a fashion retailer, it would therefore be smart to exploit stores in countries with various climate conditions.
Profit from advantages in knowledge
Competition abroad can be weaker than in the home country. Or the retailer might have developed such a balanced store format (as a result of the strong competition in the home country), that it is able to challenge the competition in various countries. Mango, the Spanish fashion retailer, mentions the fierce competition of the Spanish textile market and its determination to triumph in it, as the key to its success in other countries.
Exploiting the brand
Sometimes a retail company is already a strong brand in other countries before it even has its own stores there. The retail brand could already be well known through its website, or maybe consumers got acquainted with the stores as tourists. For example, foreigners often visited Tie Rack stores in tourist centres. The store at Heathrow Airport enjoyed success as a result of this, and therefore Tie Rack concluded that its retail brand had international potential and decided to start up in other countries. Now there are a total of 330 stores in 20 countries.
Countervailing power
In many product categories there is a strong concentration on the manufacturer's side. Manufacturers like Procter & Gamble, Coca-Cola, Sony and Canon have used their brands to build strong positions worldwide. To prevent these manufacturers solely determining all the conditions, retailers will have to make sure they have countervailing power. Growth by internationalization is an important means for that. In the future, global manufacturers and global retailers will become opposing forces because of that.
There could, therefore, be multiple reasons for a retailer to export its retail brand to other countries. Still, there are fewer international retail brands than international manufacturer brands. The most important reason for this is that exploiting an international brand is, in general, more complicated for a retailer than it is for a manufacturer. Every day thousands of decisions have to be made within a retail company. Even the best global retailers sometimes fail because of their lack of understanding of the local market. When Wal-Mart opened stores in Indonesia in the late 1990s, it built American-style stores with bright lights, wide aisles, neatly stacked goods and clear signage. Its competitors had dark lighting, messy merchandise, dirty wooden floors and uncertain prices. Indonesians flocked to the competition. To consumers who were just a few years removed from street markets, the Wal-Mart stores gave the appearance of being upscale, even though they were clearly not. The point is that despite the best of intentions, Wal-Mart misread local consumers (Kalish, 2004).
Retail is detail. A store format is a combination of a lot of elements. The range alone comprises hundreds, and sometimes even hundreds of thousands, of products. It is therefore very difficult to choose all the elements of the marketing mix in such a way that the store format can succeed in a large number of countries. Sometimes you are dealing with very specific local issues, as for example Mango and Zara found out. The designs and sizes that did well in Spain and other southern European countries had to be adjusted for northern European countries, because women in northern Europe are on average bigger than in the Mediterranean.
Internationalization is more difficult for a retailer than for a manufacturer. Manufacturers therefore operate more internationally than retailers do. Companies like Shell, IBM and Siemens operate in 100 to 200 countries. However only a limited number of retail companies have developed into real international brands. McDonald's and Benetton are still exceptions. Even very internationally successful retail companies like the German company Metro (which obtains almost half its sales outside Germany) is with its 2,200 stores 'only' represented in 30 countries. But in spite of all the issues, internationalization will continue in retail, because the advantages of internationalization can be huge. Therefore the growth of global retail brands has been enormous, particularly in the last 10 years. Some retail brands are very successful at this.
Most of the successful international retail companies seem to fall into one of three distinct models:
• replicators;
• performance managers;
• reinventors (Catoni et al, 2002).
Replicators
Long-standing international retail companies such as Benetton, as well as more recent examples like clothing retailer Zara and the us coffee specialist Starbucks, are replicators. Typically, such retailers develop a simple format and business system, identify the markets where they will thrive, then export themselves almost unchanged. Such a company can coordinate its home and overseas businesses under one centralized global or regional management structure. Given the simple format and organization of the replicators, they can capture synergies easily and expand overseas quickly. Replicators can accommodate local variations in consumer demand by tweaking their formats, but only within the bounds imposed by their standard systems. For example, Zara adjusted the sizes of its clothing and McDonald's offers a McRye burger in Finland, a Teriyaki burger in Japan, a CroqueMcDo in France and a Kiwiburger in New Zealand.
Performance managers
Companies such as Ahold and Kingfisher expanded internationally by acquiring a portfolio of existing retail businesses and developing them as almost completely distinct entities. These retail companies operate a number of store formats and retail brands. They have largely decentralized structures, and run acquired businesses by using local management teams (often those that had previously run the acquisitions) and giving them considerable operational authority. When the price of acquisitions is right, such factors can make performance managers the fastest-growing category of retailers. But the bigger they get, the harder it is for them to realize any synergies at all, since their organizational complexity also increases at a fast rate. Ahold is therefore, after the financial problems of the last few years and the arrival of a new ceo, looking for more standardization and synergy. Fewer store formats, fewer retail brands, fewer countries and more synergy is now the starting point for the revitalization of the company.
(Continues...)
Excerpted from Branding A Store by Ko Floor, Bojoura Floor. Copyright © 2006 Ko Floor and BIS Publishers, Amsterdam. Excerpted by permission of BIS Publishers.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Contents
Foreword by Dick Boer, CEO Albert Heijn,Part 1: Retail brands,
1. The store as a brand,
2. Building a brand identity,
Part 2: Retail brand positioning,
3. Positioning the store,
4. Positioning on range,
5. Positioning on price,
6. Positioning on convenience,
7. Positioning on store experience,
Part 3: Retail brand personality,
8. Differentiating on brand personality,
Part 4: Retail brand communications,
9. Retail communication mix,
10. Out-of-store communications: attracting customers,
11. In-store communications: higher spend and loyalty,
Part 5: The future,
12. Some forecasts,
References,
Acknowledgements,