Retailers are marketing the “Captive Brands” (Brands that are sold exclusively by a retail chain) as a way to boost profit margins while competing with known brands.
Retailers have come a long way from the no frills aisle.
Rather than marketing store brands as some lesser, cheaper alternative to brand name products, Wal-Mart, Walgreens, CVS and others are increasingly creating and promoting their own "captive brands."
For example, the bioInfusion line of haircare products, available only at Walgreens, sits on the shelf alongside Procter & Gamble's Pantene. At CVS, Pantene has to contend with the Cristophe line. At Wal-Mart, it is up against Equate.
Carrying no evidence of the store's affiliation, these brands, manufactured by a third party and sold exclusively at the chains (hence "captive"), let the retailer command a price similar to brands produced by consumer packaged goods companies like P&G. They also let the retailers gain ground in a category—beauty—for which consumers generally take a dim view of traditional private label brands
The success of the Captive Brands is seen mostly in beauty products.
One reason why the shift has affected beauty care more than other industries is because the category itself is "over-SKU-ed," said Mike Moriarty, partner at A.T. Kearney's consumer and retail practice division in Chicago. "If you look at the haircare aisle, it has way too much product in it anyway."
With attractive margins and the differentiation, there is every reason for retailers to promote their captive brands.
Organized retail in India to form 14-18% of overall retail pie by 2015: McKinsey
by Deepak Sharma on Sunday, September 28, 2008
According to a new Mckinsey study, Organized retail in India which accounts for less than 5 per cent of the retail market today — will expand to anywhere between 14 and 18 per cent by the year 2015. There are some interesting data points in the report as shown below:
Experience Design enabled using In-Store Scent Technology
by Deepak Sharma on Thursday, September 25, 2008
While surfing Retail News today, this article caught my eye, Abercrombie Chooses In-Store Scent Technology. I followed the article and came to know that In-store scent technology or advanced Air treatment is an industry by itself. Prolitec, which deployed the tech at Abercrombie has some nice examples of how Retail Stores are using the technology to enrich store experience.
http://www.prolitec.com/malls_retail.htm
Retailers utilize Prolitec’s Ambient Scenting service to create the desired olfactory environment for their customers in a manner that complements the many other ways – through sight and sound – that they offer shopping experiences. Prolitec can be used to enhance Point-of-Sale promotion of products such as fine fragrances, detergents, foods, leather goods and other items. In addition, Prolitec’s technology offers Odor Remediation and Restroom Hygiene in all public spaces that are subject to high traffic.
Prolitec’s use of Aromatherapy creates an ideal shopping environment and a more pleasing consumer experience.
Click below to read case studies relating to Prolitec’s Mall and Retail Services.
There is a whole new practice called Experience Design which involves designing products, environments based on experiences and perceptions.
From Wikipedia:
Experience design is the practice of designing products, processes, services, events, and environments -- each of which is a human experience -- based on the consideration of an individual's or group's needs, desires, beliefs, knowledge, skills, experiences, and perceptions. An emerging discipline, experience design attempts to draw from many sources including cognitive psychology and perceptual psychology, linguistics, cognitive science, architecture and environmental design, haptics, product design, information design, information architecture, ethnography, brand management, interaction design, service design, storytelling, heuristics, and design thinking.
More and more Retailers are using Experience Designers to make the whole shopping experience enjoyable and technologies such as Prolitec’s makes the whole thing more interesting.
Sears selling using interactive experience on it’s website.
Shop Talk » Blog Archive » Sears to offer virtual dressing room | Blogs | Reuters.co.in
Sears, Roebuck, looking to engage shoppers in new ways, is embracing a 3-D Web technology that will allow shoppers to try on clothes virtually from its Web site in an effort to replicate the in-store dressing room experience.
The retailer this week said it is partnering with IBM and My Virtual Model , a Montreal creator of virtual identity products, to revamp its Sears.com site so that consumers can search for clothing items by clicking on images and try on garments virtually.
From Sears.com, customers will be able to create an interactive model of themselves by giving info on weight, height and other features. They can then dress that model by clicking on blouses, pants and accessories. The technology enables buyers to mix and match outfits and change garment colors.
“We’re doing this to really drive an interactive experience with our customers,” said Rob Mills, vice president for Sears’ online business unit. “We’re trying to offer a lot of personalization.”
He said the virtual search function will be available on Sears.com in late October.
Sandy Carter, a vice president with IBM, said she expects this technology to eventually become the norm for online shopping.
“Today it’s being applied to apparel,” she said. “Tomorrow we see it being used with appliances and other types of merchandise.”
Next time you are visiting your local Retailer, look around, there could be a marriage going on near one of the aisles :)
While Shop.Org had their Annual Summit in US, some of the top Indian Retailers & professionals gathered in Mumbai for India Retail Forum (IRF) from 16th to 18th Sept. A lot of good discussion, which you can read at the below URLs.
India Retail Forum’08 – Day 3 at a glance 19 Sept, 2008
Tier I and II cities to be the future retail destinations: Experts 18 Sept, 2008
Bata sees prospects in small towns: VP 18 Sept, 2008
Ritu Wear on expansion drive 18 Sept, 2008
Niche category retailers set to expand 18 Sept, 2008
Retailers, manufacturers not collaborating: D Shivakumar 18 Sept, 2008
Sacoor Bros exploring opportunities in India 18 Sept, 2008
Global retail design firms eying Indian market 18 Sept, 2008
Gilman's speak on supply chain management 18 Sept, 2008
IT solution providers get bullish 18 Sept, 2008
Supply chain management-the biggest challenge for retailers 17 Sept, 2008
Food Bazaar to retail fresh meat and fish in separate enclosure 17 Sept, 2008
MCC showcases Wellness as retail category at IRF 17 Sept, 2008
India Retail Report’09 set to be released 17 Sept, 2008
Round up of IRF 2008 – Day 1 and Day 2 17 Sept, 2008
Four P’s plaguing Indian retail: Gilman 17 Sept, 2008
Pantaloon buys 70 pc Aadhar stake, open 180 outlets within 18 months 16 Sept, 2008
Nair calls for partnership between retail, mall developers and civic authorities 16 Sept, 2008
Online retailing emerging in India: eBay India 16 Sept, 2008
The 40 pc challenge: Kamal Nath 16 Sept, 2008
Future eyes Rs 12,000 cr from private labels 16 Sept, 2008
Private labels are combating competition with the established players 16 Sept, 2008
World's best brains on retail to gather at IRF 16 Sept, 2008
Impressive line-up of speakers at IRF'08 16 Sept, 2008
Subhiksha head honcho is IRF’08 chair 16 Sept, 2008
Reality Check. SAP is currently doing business with 60 growing Indian retail companies. It has all top retailers as its customers, names include Future group, Reliance Retail, Tata Trent, ITC Retail, Great Wholesale Retail Club, Vishal MegaMart, Welspun, Nilgiris Dairy Farm, Videocon, Spencers etc.
Retailing continues to gain momentum in India with the main focus being on growing customer experience and increasing retails footprints. A Springboard Research study on IT in India's retail sector confirms SAP's strong position in the Indian market, with 27% of study respondents identifying SAP as the leading primary influencer in terms of solutions investments.
"Technology is a high-priority investment area for most large and medium-sized Indian retailers, as they look to scale up their business operations in a competitive market," said Nilotpal Chakravarti, Senior Analyst - Vertical Markets at Springboard Research. "We have seen a strong momentum for investments in ERP and other back-office solutions and SAP has emerged as a leading player in this space," he concluded.
If like me, you have missed attending or following the Shop.org’s Annual Summit this week, don’t worry. The Shop.org Blog has blogged (providing a very good summary) all the events on a daily basis. There are tonne’s of information there including many sessions on retail technology. I liked the following:
Best Buy Bails Out Failing Napster - Bits Blog - NYTimes.com
by Deepak Sharma on Tuesday, September 16, 2008
So, The Electronics Retailer, Best Buy is buying Napster. The deal which looks good in Best Buy's favor is a good way to expand beyond just consumer electronics. This looks to be a positive step with future in mind and something that will differentiate Best Buy from it's competitors like Circuit City.
Good Analysis and coverage here.
PaidContent.org: The Next Chapter: Best Buy To Acquire Napster For $121 Million
ReadWriteWeb: Best Buy Acquires Napster: But Why?
Silicon Alley Insider: Sold! Best Buy Swallows Napster For $121 Million (BBY)
Very interesting and thought provoking article on what happens when Technology and Culture collide. Talks about how Workforce Management systems are affecting Retail Workers.
Retailers Reprogram Workers In Efficiency Push - WSJ.com
Such "workforce-management" systems are sweeping the industry as retailers fight to improve productivity and cut payroll costs. Limited Brands Inc., Gap Inc., Williams-Sonoma Inc. and GameStop Corp. have all installed them recently. Some employees aren't happy about the trend. They say the systems leave them with shorter shifts, make it difficult to schedule their lives, and unleash Darwinian forces on the sales floor that damage morale.
"There was a lot of animosity" toward the system, says Kelly Engle, who worked at an Ann Taylor store in Beavercreek, Ohio, until late last year. "Computers aren't very forgiving when it comes to an individual's life."
...
Vendors of the systems claim they can boost productivity by 15% or more, and can help cut labor costs by 5% or more. Wal-Mart Stores Inc. just completed a yearlong rollout of a computerized scheduling system for 1.3 million workers. It cited 12% labor-productivity gains as a key reason for improved results in its fiscal quarter ended Jan. 31.
"There's been a natural resistance to thinking about human beings as pieces in a puzzle rather than individuals," says John M. Gibbons, a senior research adviser at the Conference Board and a former director of human resources at Gap. "When you have those clear methods of measurement, and just-in-time delivery for supply-chain management, it's a natural transition to apply it to human resources as well."
Vendors call their industry human-capital management. It notched $7.2 billion in revenue last year, and is projected to grow at 12% a year over the next five years, according to Boston-based AMR Research, which advises companies on information technology. Major providers of business systems, including Oracle Corp. and SAP AG, are now in the business.
Tesco's entry into US with it's small store format is changing the Retail Formats for big Retailers in US.
Miles of Aisles for a Gallon of Milk? Not Here - NYTimes.com (registration required)
After years of building bigger stores — many larger than a football field and carrying 60,000 items — retailers are experimenting with radically smaller grocery stores that emphasize prepared meals, fresh produce and grab-and-go drinks.
The idea is to lure time-starved shoppers who want to pick up a few items or a fast meal without wandering long grocery aisles or paying restaurant prices.
Safeway has opened a smaller-format store in Southern California, and Jewel-Osco is building one in Chicago. Wal-Mart plans to open four “Marketside” stores in the Phoenix area this fall, and Whole Foods Market is considering opening smaller stores.
...
The biggest push in such stores is coming from the British retailer Tesco, which made a splashy entry into the United States last fall, opening a 10,000-square-foot Fresh & Easy Neighborhood Market in Las Vegas.
Since then, Tesco has opened 72 stores in Nevada, Arizona and Southern California.
More and more, we will see Retailers using such Appliances to perform complex analytics such as tracking stock wastage and performing market basket analysis.
Netezza (NYSE Arca: NZ) today announced that Tesco has installed its market-leading data warehouse appliance to power market basket analysis and track stock wastage. The move from Teradata for this project was designed to improve the performance and class of technology in Tesco’s data centre, while driving down all associated costs.
Widely recognised as the world leader in understanding retail customer behaviour and loyalty programmes, Tesco has tracked different data warehousing vendors coming to maturity in the market, and is keen to keep pace with business change. Marcel Borlin, Programme Manager at Tesco explains, “We examined a number of vendors in great detail. We were looking to realise savings; not only on the purchase cost, but on the total cost of ownership too. The physical footprint and power and cooling requirements in the data centre were also important factors. The Netezza system needs literally a fraction of the space, power and cooling of our existing systems. We also needed better performance than our current Teradata platform can offer, and our Netezza system is performing very well on both queries and data loads; up to five times faster.”
Impressive. Wal-Mart launches Retail Media Network, monitoring/controlling more than 27,000 screens in more than 2700 stores across the country.
Walmart to Bring New 'Walmart Smart Network' to 2700 Stores
Walmart is the first retailer in the US to rollout a next generation retail media network that is supported by a flexible, open enterprise platform powered by Internet Protocol Television (IPTV) -- technology that will allow the retailer to monitor and control more than 27,000 screens in more than 2700 stores across the country. The Walmart Smart Network will also deploy response measurement and message optimization technologies to enable delivery of the most relevant content to shoppers -- by store, by screen, by day and by time-of-day. All of the content on the Walmart Smart Network will be customized, designed to deliver helpful product information to consumers at the point of decision when and where they need it in the store.
Indian Retailer Sales per Sq Ft comparable to US Retailers
by Deepak Sharma on Thursday, September 04, 2008
Interesting metrics related to Retail Sales per Square Feet coming out of on news article (Retail biggies force to focus on destination malls) I read yesterday. In India, the modern neighborhood format stores are achieving sales per square feet around Rs16-20 per sq ft per day. And a number of Rs 35-40 (roughly $1) is considered viable to keep running the store.
The thruput (sales) for the modern neighborhood formats currently stands at Rs 16-Rs 20 per sq ft per day as against Rs 35-Rs 40 per sq ft per day, which industry experts reckon is the minimum required for viability. There is a huge mismatch between the rents paid and the actual sales that take place in the formats.
This comes to be roughly $360 for the year which is very much comparable to that of Retailers in United States, which considers $300 per square feet as a respectable number (as of 2005).
As of 2005 annual store sales in the range of $300 per square foot ($3,000/m²) is considered a respectable result in the United States as the national average for regional malls is $341 per square foot[1], but the target number depends on the location, the type of store and other factors.
Just to corroborate this, I searched for Reliance Retail's (One of India's top Retailers) Sales per square feet and found this article, Reliance Fresh and Small. According to this article, Reliance Retail could be having Sales per sq ft north of $300.
Sources say that Reliance believes each Reliance Fresh outlet could earn annual revenues of Rs 3 crore. That’s a sale per sq. ft of roughly Rs 12,500. Industry sources say this is in line with what other chains have achieved in the past. For instance, at its peak FoodWorld had managed a Rs 300-crore turnover on its 80 stores. The average size of a store was about 3,000 sq. ft — or sales of Rs 12,500 per sq. ft.
Some more details on Sales per Square Foot for US Retailers:
