Listen up, retailers: brands DO matter.

2010/03/20 at 17:51 Leave a comment

The resurgence of Trademarks and brand names as drivers (rather than set price points): another sign recession receding.

From The Street.com

Retailers Get Push-Back as Brands Disappear

by Jason Notte
Saturday, March 20, 2010
provided byTheStreet.com

As evidenced by Wal-Mart’s (WMT) attempt to streamline its shelf space, even garbage inspires brand loyalty among American consumers.

Earlier this month, Wal-Mart returned Clorox’s (CLX) Glad bags and Pactiv’s (PTV) Hefty bags to its shelves after cutting them in February and carrying only S.C. Johnson and Sons’ Ziploc bags and its Great Value in-house brand. Wal-Mart says the Hefty and Glad bags and hundreds of other items were taken out of the mix as part of a remodeling effort, but the retailer replaced them when it became clear it wasn’t losing only a $4.99 single-item sale, but entire shopping excursions by people seeking specific brands.

“What we found is that you can discontinue items that don’t sell but get you a trip,” said Bill Simon, Wal-Mart’s executive vice president and chief operating officer, at the Bank of America Merrill Lynch Consumer Conference last week. “So, we’ve been through the business and put 300 or so of those items back into the stores that were removed. We believe that that’s going to solve some of those issues.”

Other retailers including the SuperValu chain and CVS Caremark (CVS) are pushing ahead and slimming their selection of stock-keeping units. Wal-Mart’s recent retreat may not be enough to mollify manufacturers from Pepsi (PEP) to Kimberly-Clark (KMB), who have the most to lose when stores slash SKUs.

“They would have to be nervous about it,” says Susan Reda, editor of STORES Magazine, which is published by the National Retail Federation. “It’s the manufacturer that has more to lose, and if you’re not a tier 1 or tier 2 company, you’re in a dicey state.”

One of the ripple effects of the economic recession was an almost industry-wide reduction of retail inventory. Wal-Mart, for example, trimmed its U.S. inventory by more than 7.5% last year, in part, to prevent the overstock and price plunges that punished the sector in late 2008. The result for manufacturers varied as widely as their products.

For instance, Colgate-Palmolive’s (CL) sales grew 12% last quarter, including a 5% jump in North America behind the launch of new Colgate products. Procter & Gamble (PG) and its Bounty paper towels, Duracell batteries, Crest toothpaste and Ivory soap, meanwhile, reported a better-than-expected 6% sales increase last quarter as its gross margins and outlook for the fiscal year improved.

“The whole idea of efficient assortment and giving more shelf space to the brands shoppers are looking for the most tends to improve visibility of existing and new items,” says Jennifer Chelune, a Procter & Gamble spokeswoman. “It favors companies that innovate.”

Meanwhile, Kimberly-Clark (KMB) and its Kleenex tissues, Huggies diapers and Scott and Viva paper towels saw sales rise 8.5% in the quarter, but the company reduced its 2010 earnings forecast as sales of core paper products fell 6% when consumers sought cheaper alternatives. Its stock price followed that downward trend. If that’s the pressure being felt by the maker of the tissue that the NRF’s 2009-2010 BIGResearch Consumer Intentions and Actions Surveys say is their favorite brand by an 18% margin, the burden on manufacturers that are lower on the food chain is even heavier.

“Unless you have come up with a product that’s such a standout and so different from the market, you’re not going to make it if you’re just another iteration of ketchup,” STORES Magazine’s Reda says. “If you’re number three or number four in that space, what’s going to set you apart from those other two?”

That fight gets tougher when store brands join in. According to the NPD Group, sales of private-label items increased 8.8% from 2008 to 2009 and nearly 18% during the past decade. Nielsen found that store brands brought in $86 billion in U.S. sales last year, up $14 billion since 2007. With Consumer Reports finding that store brands, on average, cost 27% less than their big-brand counterparts, such a surge can eat away at sales volume for companies like Del Monte (DLM) and Unilever (UN), with the NRF survey reporting that the No. 2 brands of vegetables and ice cream are store/generic products.

However, many retailers still depend on manufacturers to pay for displays at the end of aisles and other prime shelf space, making private-label products a limited option for retailers not named Trader Joe’s. While manufacturers tend to use this knowledge to their advantage and flood the floor with billboard-sized displays of their merchandise, a slimmed-down store selection can be easily expanded through E-commerce. Procter & Gamble, for instance, is using its eStore commerce site as an “online learning lab” to test consumers’ habits and relay that information to online retailers like Wal-Mart and Amazon (AMZN).

“We are a house of brands,” Wal-Mart’s Simon said at the conference. “We prefer to sell national brands because that’s how we can differentiate ourselves in price better.”

Copyrighted, TheStreet.Com. All rights reserved.
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Entry filed under: branding, community, consumer goods, culture, democracy, engagement, equity, habits, intellectual property, linkedin, marketing, reality, retail, trending.

For the record… The technology is great, but the content is the key: are there publishers out there determined to use i-education as a base for maximum distribution?

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