During the last decades - and with more virulence in the last three years - trade has been transformed.
The preponderance of the retail distributor, who is the one in contact with the consumer, over the producer of goods, together with the transformation towards self-service-based commerce, and the emergence of distributor brands has caused a shift in the form of doing business for all manufacturers, breaking down the myths of loyalty in many brands. In the end, the relevance that the price has today, the scarce differentiation of the brand, the growing competition and the drop in consumption make it increasingly difficult to sell, and selling at margins is already a chimera for most.
However, there are those who are weathering the situation, at least, better than the competition. A collation we are going to detail some strategies that have been successful.
Make no mistake, the crisis in which we have found ourselves has only catalyzed a process in which we were already immersed. However, the outcome is accelerating due to the drop in consumption caused by the economic crisis. This has led many entrepreneurs and managers to find themselves faced with the great dichotomy: betting on White Label or My Brand.
La pregunta es ¿cuál debe ser mi estrategia? Pues, siento decir que no hay una sola respuesta. De hecho, no me he encontrado con dos opiniones iguales al respecto y, sinceramente, la pregunta suscita debates encendidos muy a favor o muy en contra.
The defenders of the white label bet on a model that for them is sustainable, for others - according to their own words - they have had no other choice. The common argument is that there are endless savings in commercial and marketing terms only possible because the distributor closes a long-term binding agreement and it is he who is going to sell the product. Let's not forget that around 70% of purchase decisions are made by the consumer at the same point of sale. The distributor, of course, knows how to promote the product and give it priority to make it sell.
It is logical to think that the distributor will benefit from these savings, translating into a substantial reduction in the sale price and, consequently, a significant reduction in margins for the manufacturer. However, delegating the functions of part of marketing and sales will allow us as industrialists to focus all efforts on improving the product and service, optimizing packaging and logistics, optimizing costs in general, eliminating non-value-added activities and to be able to access more information on the sales process, because let's not forget that the distributor has excellent information through the cash registers and loyalty cards.
In summary, the white label strategy is based on establishing closer collaboration ties with the manufacturer, taking advantage of synergies with the distributor and eliminating duplications (the product does not require marketing, the sales force is minimized, etc.), but we it becomes an anonymous manufacturer without differentiation and too vulnerable to the designs of the distributor.
The detractors of the white label point out as a key point obtaining margin compared to volume, but they recognize that they are in a weak position compared to the white label, due to the lack of “democracy” on the shelf. The priority of distributors for their brands is evident in the gondola headers and in the highlights, making way for them to take on more prominence.
It is evident that among the most relevant factors to generate sales is having a good product, good packaging and a good price. However, this will not guarantee sales. We have observed for a long time that many of the manufacturers who advocate the brand carry out an incomplete management of the sale. Most of these companies negotiate a price template with department stores, deferred discounts and agree on a series of offers, promotions, highlights and others. However, they forget - or simply consider that it is not profitable - to properly manage the point of sale. It can be shown that it is relatively easy to achieve increases of between 10-15% (depending on the situation in which we find ourselves) in sales with correct management of the point of sale.
Such management must consist of:
1. Get adequate exposure of the product that generates more sales. We insist on the importance of the moment in which the consumer is in front of the shelf, since it is at that moment that purchasing decisions are mainly made (it is estimated that around 70%). Another relevant aspect is exposure, it is estimated that the increase in sales with two facings instead of one is usually around 50% and 80% in the case of 3 facings.
2. Guarantee the non-breakage of stocks. Out of stock is a guarantee of lost sales.
3. Proactively managing order proposals together with the Head of Section, will allow us to anticipate demand and ensure that the order and supply is placed on time.
4. The Section Chief of the Point of Sale is a key figure in our sales scheme, as he will be the link between our brand and the consumer. We must make it our best seller.
5. Monitor the competition. Knowing what the competition is doing and being able to react in time to their movements to proactively manage the sale, providing each Point of Sale with the necessary tools for the sale.
Coupled with this, it is worth highlighting the fact of being able to direct differentiated sales strategies by point of sale, applying pricing, promotional and animation policies depending on the circumstances. This gives us greater effectiveness in the sale and efficiency in economic terms that finally translates into an improvement in the income statement.
That said, what is your strategy?
