Articles

Manufacturers as Retailers

Most big brand manufacturers have driven their distribution to over-saturation point and, as a result, seen mass retailers driving their price points down in response to consumers obvious behavioural reaction to like for like merchandise from copy cat retail outlets.

Many have felt their “brand power” diminish as buyers force cost price (and hence wholesale margins) south in an effort to claim back some retail margin handed back to customers. Some have felt commoditised. Worse still ,others have either been de-ranged or severely restricted in the way in which they are displayed. New product introduction at retail – at a pace equal to the ambition of the manufacturer – has also been restricted.

Enter the brand store. Sony, Nokia, Apple, Levis, Nespresso to name a few. And the trend is growing.

A situation brought about through blind distribution growth at all costs has led to a self inflicted problem – affecting all their stockists as well – and now being added to by yet another customer purchase option – the brand store. Many predict that these stores will only continue while the branded manufacturer sees them as promotional vehicles and subsidises and supports the retail margin. But Sony – by way of example – have recently sold one of their stores in Sydney to the Bing Lee Group. So what impact will these stores have? Are they a long term proposition? Will specialty retailers finally get the message that they need to develop exclusive product themselves – with or without a brand manufacturers help?