Saturday, November 7, 2009

Copy cat package design and house brands

Marketers are losing upto $2B in sales annually as consumers are reaching out accidentally to home brands with similar packaging , according to a recent report that I read. Not sure if it is an accidental switch as it is claimed to be. Most consumers hard hit by the recession are more than willing to switch to the house brands. Why would I pay an extra dollar for Glad trash bag, when I do not get to flaunt the widely recognized brand name in front of anybody and I dont care too much about the quality as long as it can hold my trash.

Where would consumers be truly reluctant to switch to a house brand? I do agree there are some areas:

1. Pharmaceuticals: no way I want a Shop-Rite's version of Tylenol- it might just add to my headache later

2. Beauty products: I wouldn't want to mess with my face- I dont want that get that Amrish Puri look

3. Certain food products: this may be the greatest gray area ias this would vary from person to person. Changing from Aunt Jemima maple syrup to Shop-Rite version may be a strict no-no for some but maybe okay for others. Some people would continue buying it, just because that was what our family has always bought. But changing from LactAid version of milk to local house brand of milk might be easier. After all, I wouldnt know if LactAid changed it cows!

Housebrands were originally intended to compete with established brands and served as an alternate cheaper option. These are also called "White Label" or "Private Label" products. The house brands are beginning to become brands by itself. "Up and Up" from Target or " No Label" from Loblaw are examples of white label brands. (Loblaw's also has a high end brand called President's choice.). Hopefully retailers would not get into the game of spending huge amounts on these house brands such that these brands lose the competitive advantage that they have today

Plus sizes: Walmart sees the cash register ringing

Apparently realizing that 60% of its women's customers are of plus sizes, Wal- Mart has started selling an extended line of women's apparel focussed on plus sizes. First, McDonald's fed us to make us plus size characters, then Target ads proudly featured plus size women as opposed to the leaner variety so that shoppers don't feel guilty staring at the displays in  its stores, and now Wal-mart has decided to cash in on it

Tesco Express: self service check out

Tesco is experimenting with self service check outs. It recently introduced it in one of its Express outlets in UK with a set of four check outs with just one person overseeing it. Yet another way to cut costs. Not sure, if shoppers prefer that convenience or  if it would be faster as it claimed to be. Either way Asda indicated it is not going to follow suit.

I dont mind it as long as the machine can easily scan my code and the automated machine keeps its volume low. I hate when that machine started screaming at me last time at a Home Depot store almost scolding me to "keep the product in a bag"....well hell...I will do it...give me a break...even my mom never shouted at me like that!

Random notes

  • Sam's Club generated $47 billion in sales in 2008, almost 12 percent of Wal-Mart's overall $400 billion in revenue. That is almost the size of Lowe's stores
  • Wal-mart's four store formats: discount, neighborhood markets, supercenters and warehouse (Sam's club)
  • Walmart's international revenue by itself is $100b. That is the international division by itself would still be amongst the top 5 retailers of the world.
  • Walmart has 11.3% of the US retail share- i.e almost like owning the entire Indian retail market
  • Carrefour is world's second largest retailer. (It is always easy to remember the first man in space or the first man on Everest. But the second ?)
India Retail
  • Wal-Mart has a tie-up with Bharti, UK retailer Tesco has tied up with the Tata group's Trent and Carrefour is in talks with Future to firm up an alliance

Top US retailers since 1970- Walmart? What?

Well if you check out the who is who of retailing, you would not find Walmart in the top 25 retailer list in either 1970 or 1980

By 1990 it it was in the top 5 list. The rest is history.

Kroger seems to be the only company which has held on to the top 5 list, since 1970s.

Lowe's recent expansion

Of course I have a soft corner for Lowe's. For four years, I had the opportunity to serve their global sourcing / procurement from Indian sub continent. Amazing how Lowe's evolved and grew in recent years in home improvement giving Home Depot a run for their money. While Home Depot focussed on Mr.Contractor and the  Guy, Lowe's focused on the female shopped knowing fully well she made the decisions in DIY.

So I was happy to hear that finally Lowe's is slowly following other stepping out of the US. First it was Canada, then Mexico and now Australia. Lowe's announced in August 2009 their joint venture with the Australian retailer Woolworths to enter the Australian market with 150 big box style superstores. Would be interesting to see how Bunnings, owned by Wesfarmers and the largest home improvement chain in Southern Hemisphere with 223 stores would react. Well, why Australia- when the theme today is to chase the BRIC opportunity?

P.S. Did you know that Lowe's was around since 1940s. Much before Home Depot was founded in the 1970s. Lowe's was initially reluctant to switch to the big box format of Home Depot thinking that would not work since they were focused in smaller towns. Well now, they have almost completely converted to big boxism!

Auchan- one store every two weeks

Auchan apparently opens a store every two weeks, according to a report I read recently. It did seem impressive until I did the math.Well that is just 26 stores a year. I remember in 2005, when Lowe's was on a store expansion spree, it used to open a store every 3 days!

Auchan is world's 14th largest retailer with 1,200 supermarkets in 12 countries. Compare with Walmart which has 8000 stores under 55 banners in 15 countries. Auchan's sales is $59b.Auchan part of the retail empire controlled by the Mulliez family. Based in France they compete with Carrefour in its home turf.

P.S. I used to do sourcing from India at one time for one of Auchan Groupe's companies - Lerou Merlin- a home improvement chain like Lowe's but with a much greater focus on home decor

After BRIC?....It is VIM

There is too much talk about BRIC- Brazil, Russia, India and China- ever since Goldman Sachs coined the word in 2001. These countries are believed to be the fastest growing developing economies. With these countries holding 40% of the world's population, there was a race by retailers to have a presence in these countries of late.
It seems the next set in the series is VIM- Vietnam, Indonesia and Mexico. The rising middle class,  a growing population and  technological advances - the same old reasons are cited as to why this could be the next hot bed. Surprised to find Casino and Metro Group already have a presence in Vietnam