Balancing the retailer - manufacturer dynamic

As global retail chains increase their presence in the Asian markets, analysts question whether the battle for power between brand manufacturers and large retailers will also be fought here.

If pressure from retailers and their private labels continues on brand manufacturers, what are potential moves for manufacturers to alter a possible gloomy outlook of retailer dominance?

Create your own distribution network

If the mass channel becomes difficult to compete in, leverage your dependence away from that channel. Go in-house and target your customers directly. Using the franchise model is a relatively easy way for a quick expansion. McDonald’s uses this method to quickly expand its presence in new markets.

Engage in e-retail

Explore this as a serious option. Online retail has grown at a tremendous rate and there are no signs that this trend will change over the next years. Amazon, for example, has known an enormous success and has recently set up plans to start a free weekly home delivery service.

Provide your customers with a shopping experience

Don’t forget that shoppers see shopping as an important leisure activity. Focus on providing your clients with the best attraction in your category section in the supermarket or in your shop in the shopping complex. Apple experiences a lot of success in this way: shoppers can test and try Apple products, attend workshops and ask for advice from Apple ‘Geniuses’ about all kinds of products. Make your products stand out from the rest by experimenting with creative packaging, creating your own shelves, sample tastings and introducing innovative products. In this way, you essentially force the retailer to stock your products.

Be innovative

Many large brand manufacturers have spent decades creating an emotional brand value. Nowadays, as shoppers are more than ever aware of the huge amount of options they have, focus should shift towards creating innovative products and marketing them accordingly. Knowing how your shoppers shop and offering them a quality product will generate repeated sales. This focus readjustment to products can potentially prove to be effective against private label competition.

Cooperate with retailers

Work together and search for win-win situations.  Retailers and manufacturers are in it together to sell products. Retailers need brands in their shelves to create their own brand image. Look for symmetries between your brand and the retailers’ brand and establish safe long-term contracts to secure that collaboration.

Take these 5 guidelines into consideration and question yourself what they practically mean for your brand. We need to remember that the emergence of mass retailers is an effective channel for brand exposure and reaching your end customer, especially in the Asian markets where infrastructure is still developing.

Considering organic growth? Retailers don't forget to ...

As confidence heads back into the region, new and suspended growth strategies are reinvigorated and reinvented in attempt to capture market share.

While there are many challenges faced in delivering on any growth plans, a common conundrum often facing the business development directors, CFOs and CEOs is what is the right path to growth – do we take the organic or acquisition route?

In Retail, we often consider scale as a key winning metric and we tend to shoot for the stars when discussing store target numbers for years ahead. The reality is that delivering on these target numbers is often a hurdle too far for many businesses.

Having worked with clients across the region, the following points are not to debate the merits of either taking an organic or acquisitive route to growth but rather to highlight some of the elements that need to be on the radar when looking to expand your retail estate the organic way.

The little things add-up – control your costs
A costly decision on an individual store can be managed, once you roll-out this out over 20, 50 or even 100 stores this mistake can suddenly become a serious financial burden. Among others this could relate to fixtures and fittings or even site layout that impacts delivery of products. One client having procured a number of tailor-made gondola shelving for his estate, only then realized the depth was insufficient for his new product layout.

Location, location, location – do your due diligence
A good location now may not enjoy the same success in 12 months time and as this is always critical to the eventual triumph or failure of the store you need to be sure of the projected returns before investment is made. Understanding future property plans for the area and the possible competition needs to be assessed in depth. In markets across Southeast Asia where new malls and buildings are constantly being developed, it’s even harder to know the sustainability of a location in comparison to the mature western markets.

Be conservative with your numbers
Make sure your financial projections have the breadth that can incorporate all the variables that will have an impact on the overall cost of the store development. We are always keen to see positive returns on our plans and sometimes this can feed directly into the numbers we project; make sure they are given an objective view and all details are captured.

Do the detail, make sure the logic is there; first focusing on understanding the location, the impact of competition, the projected sales – average daily transactions, ticket values, days open etc – and then document all the capital costs and the back office needed to support the growth. With all projections make sure you provide at least 15 to 20 percent downturn on your numbers so that you’re not left high and dry should your sales not hit their intended target initially.

Connections – nurture key contacts
This is obviously country dependent, but we would be foolish to underestimate the influence of the authorities in any growth plans that may involve licensing, property or human capital decisions. Nurture these relationships and be proactive in networking with the right authorities and individuals to prevent those unforeseen time hurdles that will inevitably arise from ambitious growth targets.

Preparation is a key factor to driving a successful organic growth strategy and without the business platform, your targets will stay as targets but they just will not be met!

The points mentioned above are by no means exhaustive and there are many factors that lead to a winning organic growth strategy.

Making the right decisions

There has been recent discussions regarding whether or not Carrefour will remain in South-East Asia. Reports were published that suggested that Carrefour would be pulling out of all markets in which it is not number one - namely, Thailand, Malaysia and Singapore. While those initial reports have since been denied by Carrefour it still raises interesting questions regarding the motivation behind the decisions that businesses make. Standard corporate finance theory dictates that projects that generate positive net present value are worthwhile undertaking as they, by definition, add to the bottom-line; however, businesses sometimes ignore rational business thought and make decisions purely based on visions of industry domination and expansion. While it is understood that Carrefour has made this particular decision based on economic reasons (Carrefour has chosen to focus on the Indian market, for example, and may be using the proceeds from the sale of their South-East Asian assets to fund that expansion), are there examples of companies readily available that have made decisions not based on the underlying economics but rather a visionary target?