The struggle between retailer profits and CPG brands is reaching new highs. Wal-mart has aggressively been pursuing co-op advertising -- essentially having vendors cover significant levels of their holiday advertising costs. Other retailers are making merchandise decisions that will have direct impact on brand visibility and, potentially, consumer perceptions of brand relevance. These retailers are not just reducing the presence of brands, but eliminating brands from their shelves in favor of greater line depth from those products they are keeping and expansion of private label products.
For example, CVS will be removing nearly all Energizer batteries, while Costco will no longer be selling Coca-Cola products. There are a number of reasons for these shifts, ranging from retail margins to consumer purchase patterns. But the key impact is the apparent power shift from CPG brands to retailer control.
Retailers generally cannot just eliminate brands without worrying about the consequence of shopper rejection. After all, if the brand is important enough, consumers will reject the retailer. The reason that retailers are able to make these decisions is that the consumer is letting them.
The question is whether consumers are accepting these changes in order to get greater price sensitivity and if they are willing to permanently forgo brand choice. If this is just the beginning of a trend then CPG companies are looking at a new battle. Most companies usually worry about "what does my brand stand for." Now the bigger question may become is my brand relevant in today's market.
Retailers will not drop a brand if their customers demand its presence. But if consumers do not see a difference between brands then loyalty and demand is fleeting.
The key has always been understanding the consumer and why they would want to buy your product. However, now it is even more important. Having an open and on-going dialog with your customers is even more important today than ever before. People have become more judicial in how and where they spend their money. You need to consistently hit the sweet spot in terms of communication and messaging.
The bad news is that the market has dramatically changed in the past 12 months. Many of the rules and perceptions have changed the marketing landscape. Brand relevance may not be the same as it once was. If a marketer is not careful, they are likely to be part of the background rather than being seen out in front as a leader (which is what most retailers will be looking for). Just ask Chrysler and GM about the impact of not being relevant to their audience.
The good news is that there are more avenues than ever with which marketers can talk to and interact with consumers -- from Social Media outlets to traditional and non-traditional market research techniques. Using all these avenues of communication and evaluation will allow a brand to connect with the marketplace and retain its relevance.
And with relevance comes consumer demand. And with consumer demand, retailers will have to provide retail space for them to retain their own relevance. The battle between retailers and CPG brands has begun. The side that better understands and utilizes the consumer is going to win this battle (hopefully with the consumer being the overall winner). It should be interesting to watch and see who does it right and who is shuttered to the sidelines.
Comments