Amazon has recently announced plans to open cashier-less grocery stores in urban areas throughout the United States. This move, coupled with the steady growth of their own-brand offerings, is generally seen as bad news for their competitors in the retail sector. But the real victims of Amazon’s aggressive move into the supermarket sector might not be supermarket chains like Kroeger, Wal-Mart, and Tesco. The Seattle-based giant’s foray into the FMCG/CPG sector could end up hurting established brands like P&G, Coca-Cola, and Kraft much more than it will their retail competitors.
Own Brands’ Own the Marketplace
Aldi and Trader Joe’s have built immensely successful businesses by hooking consumers on a diverse array of high-quality own-brand products, and other retailers are following suit. As industry analyst and SupermarketGuru.com founder Phil Lempert notes, “if I love a product from Aldi; I can’t get it anywhere else, and you’re locking in your customer.” Similarly, a recent survey from Magid found that American consumers think more highly of Trader Joe’s private label offerings than any other grocer’s. The study found that their products were perceived as “unique, trendy products that are ahead of national brands.”
House-made products are popular with retailers because they allow total control over costs, pricing, and distribution. CB Insights reports that private label goods are 25-30% more profitable for retailers than national brands and that they’re expected to corner 25% of total dollars spent in the US within a decade! Kroeger is in fact already generating 26% of its revenue from private label brands, and other retailers are committing more resources to building their own stable of products. Target, Wal-Mart, and Amazon are ramping up their efforts in this area, while recent studies in the UK have found that “own-label goods are now outperforming national brands with a 52.5% share of sales.”
But retailers must find an appropriate balance. Many shoppers are specifically looking for their brand of diaper, or laundry detergent, or cola. If they can’t find it on shelves or web-pages, they might take their business elsewhere. Brands are aware of this, and for years they’ve been promoting their innovation, quality, and reliability to consumers and grocers alike. Many have built stable and profitable partnerships with retailers, but as the landscape changes dramatically and more shoppers are drawn to online platforms, they need to make sure that Amazon and its ilk don’t pull the rug out from under them. It will be much easier for retailers to hide or discontinue products that are in direct competition with their house-brand as the marketplace moves online.
How Brands Can Fight Back
Brands are no longer going to be competing with other brands to offer the best product. The new reality is that they’ll be up against retailers who are promoting their own offerings, which will have built-in advantages due to lower prices, lower marketing and distribution costs, and the choicest spaces on real and virtual shelves. If you’re depending on Amazon, Costco, Kroeger, or Aldi to deliver your product to consumers, you’re burying your head in the sand as the tide comes in.
Rather than continuing to buy into a system that is rigged against traditional brands, it’s time to invest in new ways to reach shoppers. One trend that big brands can exploit is the rise of voice shopping and subscription services in product replenishment. Consumers are realizing just how easy it is to buy staples through subscription services like Amazon’s increasingly popular Subscribe and Save, and voice shopping platforms which allow you to arrange same-day delivery simply by uttering a short sentence to Siri or Alexa. For leading brands like P&G or Nabisco, offering substantial savings on automatic deliveries of everyday essentials seems like an obvious way to maintain customer loyalty in the evolving marketplace. Building your own voice shopping channels rather than relying on Amazon is another way to take control of your destiny.
Your Secret Weapon: Convenience
If you want to ensure that your message is reaching eyeballs that might not be seeing your product on supermarket shelves, consider investing in shoppable ads. Shoppers who have migrated to Amazon’s subscription replenishment program for the convenience it offers in replenishing toilet paper or diapers can be reached through shoppable ads. This strategy has been working for Inspired Pet Nutrition, a UK pet food manufacturer trying to fend off Amazon’s aggressive move into their industry. Since partnering with Adimo to create convenient, shoppable video content, they’ve found that “results so far show that this certainly secures the initial sale but also keeps customers coming back time and again.” As instant, online replenishment becomes the norm, creating pathways to a frictionless first purchase will be absolutely essential for success. Customers prioritizing convenience won’t be spending hours researching products, you have to offer them the smoothest possible path to purchase.
Another way to reach consumers is to integrate your product into services, or partner with other businesses and institutions to ensure maximum exposure. P&G has been particularly active in this area, launching Mr. Clean car washes, as well as Tide pick up and delivery laundry and dry-cleaning services. Offering a new level of convenience is a great way to ensure that your products get used. Other brands have made new alliances to ensure that they reach the buying public. Red Bull has done well sponsoring events and offering free apparel to university students, and its easy to picture deodorant brands in fitness chains, yogurt in a fast food breakfast, or Nescafe at a bank. If retailers are no longer an effective way to expose consumers to your brand, it’s time to get creative.
Don’t Be a Casualty in the Grocery War
Supermarkets used to need leading brands to attract customers. The tables are turning, and the time has come for brands to start viewing retail giants as the enemy. If you’re serious about surviving, it’s time to invest in taking control of your sales platforms. If you’d like to take advantage of Adimo’s expertise in leveraging voice shopping, creating shoppable content, and developing cutting-edge add to basket technology, get in touch today!