In Australia we split the independent store sector three ways: ‘route trade’, ‘independent trade’ and ‘grocery’. In the US the split is ‘traditional trade’ and ‘modern trade’. In the UK the names are ‘independent sector’ and ‘organised sector’.
No matter what you call each of the sectors, the emphasis on finding ways back into ‘mum and dad’ stores is building amongst manufacturers as they seek ‘blue ocean’ for their brands that can’t find space in the major supermarket chains.
When W. Chan Kim and Renee Mauborgne wrote Blue Ocean Strategy, the initial ‘light bulb’ moment came predominantly to marketing directors, and specifically new product development teams, as the idea of putting a new product into uncontested space resonated.
Over time sales directors, and specifically trade marketing teams, began to focus on using the existing brand portfolios to put existing brands into new channels of distribution.
Pushing against an open door, many buying offices around the world welcomed the opportunity to offer the shopper new products in their favourite stores, understanding the shopper needs Paco Underhill has documented in Why We Buy.
The result in the US was the rise of packaged goods in Wal-Greens pharmacy stores, pharmacy products in Wal-mart grocery stores, more snack food in liquor stores, more beer in 7 Elevens and confectionery in Home Depot.
Around the world this category creep has saved shoppers time and improved choice. It’s blurred lines in retail sectors and brought traditionally non-competitive retail brands up against each other. As shoppers we are no longer surprised to find products in places they haven’t traditionally been. We just like the fact that somebody saved us something so finite and absolutely irreplaceable – our time.
In pursuing the ‘blue ocean strategy’, manufacturers know that they only have a couple of years at most before their competitors follow them into a new retail channel. Shoppers become used to finding a small range of products in a store and over time buyers introduce new brands to continue the category creep.
The key issue many manufacturers face is that most of the leaders have run out of blue ocean in the organised, easy to service and very business-focused major retailers. The major retailers themselves struggle to accommodate this category creep, and must de-list old lines to accommodate new lines. The result? All around the world major manufacturers are going back into the ‘traditional/independent/route’ trade to reach consumers.
Why? In some cases whole brands, not just products, have been de-listed to make way for new brands. Now, whilst these aren’t the best performing brands, there’s nothing wrong with them other than the retailer simply has insufficient space in their store to stock the number three or four player. So the brand needs to find a new home in that same geography, just not in that major retailer.
Away from the space and performance issue, there’s an added issue for manufacturers to address: most 12 to 18 year olds ‘discover’ new brands in mum and pop stores, not in major retailers.
Moving back into the mum and dad space is hard work for manufacturers. Most manufacturers have cut deep into their own field teams to service these smaller retailers and need to find more cost-effective ways to operate.
In the US there’s been a rise in demand for outsourcing head officer sales operations who can deal directly with large regional retailers, and a rise in demand for retail field teams to get products back into the traditional mum and pop stores.
Usually it’s a commission-based model to give the manufacturers a variable cost base, but it’s now supported by much better technology around field reporting and sales and distribution data. In some cases manufacturers have effectively created joint ventures with field marketing companies to allow them to make the most of this blue ocean before their own competitors follow them back into this channel.
Expect to see more activity in mum and dad stores to launch new tween and young adult brands, and to relaunch some old favourites that have lost their way. Don’t worry about missing out on them; if the brand takes off it’ll be in your usual grocery store a short time later.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
