Retailers can capitalise with own-brand products as customers seek out value, says David Wild
All retailers know the economic climate is tough for customers. In this environment retailers’ own brands will have a heightened role to play in demonstrating value and attracting shoppers.
The history of own-label is fascinating. Retailers’ growth has given us a scale and brand strength comparable with leading manufacturers. Own-brand products provide a guarantee of quality and create choice and better prices for customers.
They also give retailers a route to improved margins and a differentiate their product offer. With customers cutting back there will be renewed interest in these ranges.
Customers are making more careful choices on what and when to make their purchases. They are researching online, where they have unprecedented access to product details and are aided by shopping apps and price comparison sites.
It’s a process that, with smartphones, is now also part of the shopping trip as customers scan barcodes and use GPS to locate lower-priced alternatives in neighbouring stores.
This creates a dilemma; customers check prices for branded products and shop where it’s cheapest. It can be a race to the bottom with shops shaving margins to attract sales. There’s also the danger that this tactic doesn’t necessarily build loyalty or repeat purchases.
The new reality favours greater development of retailers’ own brands. In Halfords’ case we work directly with manufacturers, designing and making products based on our own experience and customer research.
In the Far East for instance we have a team and a number of offices. This has helped us create a series of exclusive brands across our categories and a range of products that offer superior specification and a better price point.
These exclusive brands will power the next phase of the own-brand story. They mean we can create a particular personality in a specific product area. Tesco has just announced a move in exactly this direction with so called “venture brands”. One of the first is an ice cream called ChokaBlok, a standalone brand to compete with category leaders. The only mention of Tesco is in the small print of the product website.
Online as well as in-store, these products work to our advantage. It’s easy for customers to compare specification, read reviews on performance and ask specific questions and get answers. All of which points to the better value of retailer brands.
We have developed this idea most effectively in cycles, with five exclusive bike brands. At the premium end we have Boardman that sells for up to £1,800. At the other end of the market, there’s new range Trax priced between £60 and £130. In between come Apollo, Carrera and Voodoo. All these bikes offer unparalleled value.
Research also shows that customers want innovation. Retailers can sometime work faster to understand the trends and make changes to designs.
For instance last year, Halfords wanted to launch a DAB adapter for UK car radios but there wasn’t an appropriate product from any of the leading manufacturers. We developed a unit under our own brand Sonichi.
Manufacturer brands continue to play an important role. They provide the opportunity to offer customers products they have seen advertised or take advantage of technology advances.
The economic environment will make this a challenging year. What’s clear though is our own brands will be central to helping us create value and attract customers.