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Strategic Overview: Changing with the times

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The boundary between ‘brand’ and ‘retail’ has always been fuzzy. Some retailers, such as Marks & Spencer, have always been both. The retailer has only ever sold own-label clothing in its own stores, although its original M&S house brands, St Margaret and St Michael, have long since given way to Per Una, North Coast, Blue Harbour and the rest.


Today, a brand is something sold, promoted, advertised, marketed and respected as such: anything from Coca Cola and KitKat to Armani and Louis Vuitton. For this InternetRetailing report, based on RetailX research, a ‘brand’ is owned by a company that sells its own-label products direct to the public – be that a manufacturer or a retailer. So we have a list that embraces Nespresso and Swatch, Apple and Microsoft, Top Shop and Laura Ashley.

 

Some companies in the RetailX Brand Index are, or were, primarily manufacturers with a label, while others are retailers with a label contracting-out production. The important point that links them all is that they are all ‘brands’ that are recognised as unique entities and regarded as such by today’s shoppers.


Brands also have an ‘image’ which they actively project and protect, and which is recognised by the shopping public. It may be an image of reliability, luxury, excitement or expertise projected with recognisable slogans epitomising the core ethos: Nike’s “Just do it” or Farrow & Ball’s “Craftsmen in paint and paper”, for example.

 

As such, brand websites must convey the same image: Farrow & Ball’s landing page shows a hand swirling colourful paints, with tag lines such as “colour expertise” and “skilled craftsmanship” reinforcing the message. Nike’s website builds on its world-famous slogan with “Unzip your potential” among its page headers, while its sports bra selection declares “With the right support you can do anything”.

 

Adding an extra something

In the early days of internet shopping, a prime concern for many retailers was that the branded manufacturers who supplied them with merchandise would start to bypass the established sales channels and sell direct to the public. By cutting out the retailer, ran the argument, the brand owner could sell at a lower price point, thus undercutting any supplier on the high street.
Threatened with delisting by their major retail customers, manufacturers hung fire and, if an inquisitive member of the public happened to land on their websites, the potential shopper would be directed to high street ‘stockists’ with no opportunity to buy direct whatsoever.


Today, things are very different. The feared price undercutting generally doesn’t happen, and shoppers have realised that the brand owner’s website can deliver an extended range, in-depth product information and – in the case of companies such as Philips and Playmobil – be a valuable source of spare parts that are rarely found on competing retail sites. Trust is also key, especially in those geographies where fake products, notably of upmarket and luxury brands, are commonplace. Buying from the ‘official’ site gives confidence that the products will be genuine.

 

For the fashionistas, a designer brand website will also be the first with catwalk videos and products from the latest collection. In 2016, Burberry – a Top 50 brand – launched its “see now, buy now” approach to making the latest styles immediately available. Items from its latest collection were on sale both at its flagship London store and via Instagram and WeChat – the Chinese platform – within hours of the catwalk show launch.


Adidas and Nike, both in the elite category, attract shoppers to their websites with such tactics as generous student discounts, timed product launches so that enthusiasts can be the first to wear the latest trainers, a range of apps and various tactics to encourage loyalty and repeat visits. At the same time, such brands must also encourage and support their wholesale customers to promote their products, while at the same time directly competing with them: a factor which no doubt helps maintain general price consistency between the offerings of a brand owner and
its retail customers.


In a world of search engines and social media, shoppers may start their buying journey looking for a brand rather than a generic product description, so retailers who stock a combination of manufacturers’ brands, own label and unbranded lines increasingly include a “search by brand” option on their websites.

 

Key a brand name into a search engine such as Google and the brand owner’s website may top the hit list – usually declaring itself the “official” site – but it will be followed by a long list of ‘retail’ stockists, while the usual featured adverts will include images from both categories. Price transparency is immediate and obvious so, while shoppers may initially visit a brand owner’s website to explore the full range, they can very quickly compare prices and availability from a wide range of competing sites.


Interestingly, RetailX found a decline in the number of brand name searches via the major search engines for around half of the top 250 companies compared with last year. This could, of course, be simply due to large numbers of shoppers bookmarking such sites obviating the need to use a search engine, rather than implying a major shift in consumer attitudes to brands.

 

Maintaining multiple channels

Major brands – notably in fashion and footwear – have always maintained a high street presence, either with their own standalone outlets or as concessions within department stores, while at the same time supplying many other retailers wholesale.


It’s the same in the digital world, where brand owners are happy to sell direct from dedicated websites but are also increasingly willing to sell via online marketplaces or through competing websites.


In the past, retail brands such as New Look, Miss Selfridge, River Island, Hunkemöller and Warehouse would largely have sold through their own high street outlets, with the possible addition of concessions in key department stores. Today, these retailer brands can also be found on marketplaces and sites such as Asos, while Marks & Spencer has ousted Waitrose as the key ‘brand’ that’s available from Ocado.


Search for a leading brand such as Esprit on Google, and the ‘official’ site is followed by Esprit clothing available from Asos, Zalando and Amazon. Searching for a designer label such as Gucci reveals an ‘official’ site – “Redefining modern luxury fashion” – followed by such additional choices as Selfridges, Farfetch, Net-a-porter, Harrods and many more.

 

Delivery challenges

For today’s online shoppers, convenience is key, hence the emphasis on a growing assortment of collection options and numerous delivery choices – from a ‘standard’ three to five days, to within an hour or two in some metropolitan areas. For retail brands with an extensive footprint in the physical world, click and collect is now relatively straightforward.


For manufacturers’ brands, though, it can be more complex.


Adidas in the elite category offers next-day delivery or standard delivery with the option to collect from a Parcelforce pick-up point. It also sends click-and-collect orders placed on its ‘official’ website to its high street stockists, sending shoppers an email in up to four days, stating when the goods are ready to collect.


Leading brand Nespresso tries rather harder, with delivery options extending to Saturday, Sunday and even same-day in selected postcodes, while its collect options include CollectPlus, Doddle and Parcel Motel. There is also the novel choice of collection from its various pop-up Nespresso Boutiques within two hours of the order being placed.


Others offer a rather more limited range of choices. Knitwear producer Lyle & Scott, for example, gives free, standard and next-day delivery options, but while returns can be made via Collect+ there is no collection option for receiving orders. Kärcher delivers from local country warehouses in one to two days (subject to availability), while Playmobil, headquartered in Germany, has one delivery option: “within five to seven working days after your order is accepted and in any event, within 30 days”. Philips sends spare parts from Eindhoven by post or DHL in three to nine days.

 

For shoppers who expect their online orders to be delivered in no more than a couple of days, or be available to collect from a high street store within hours, this clearly puts manufacturers’ brands at a disadvantage – especially those producers that maintain a single central distribution centre in their home country.


Given the current uncertainty surrounding post-Brexit trading arrangements, manufacturers selling direct may need to revise their current distribution systems, possibly stock holding in additional geographies, extending delivery times, or introducing multiple pricing options to cope with new tariffs.

 

Influencing the influencers

While providing links to social media sites on transactional websites is in decline, social media focus for the brands is often now on the YouTube vloggers and the growing numbers of lifestyle bloggers. With successful vloggers attracting millions of followers, such channels are now seen as attractive options for promoting relevant brands to a clearly defined target market.


Major brands in some geographies may be willing to pay five-figure sums (or more) for vloggers to endorse their products but elsewhere, advertising standards regulators are trying to encourage the influencers


(although not always successfully) to make it obvious that such recommendations are in fact paid-for promotions. In the UK, for example, the Advertising Standards Authority has issued codes of practice covering the activity, yet it has very limited powers of enforcement and vloggers can clearly be tempted by free samples, promotional gifts and other inducements as
well as less ethical cash payments.


A popular alternative is for brands to work with the vloggers to create product ranges curated or endorsed by the YouTube stars, or else to use them in videos to be shown on the brand’s website and video channel.

 

Many established brands – notably in gaming, cosmetics and jewellery – now have established partnerships with individual vloggers. As video analytics company Tubular Labs points out, sponsored video volume is growing rapidly as brands try to find alternatives to ad blockers and the ‘on my phone while the TV ad is playing’ culture.

 

Research by the company between 16 and 22 September 2018, found that 4,680 brands sponsored 8,964 videos that were directly uploaded to brand partners’ channels and pages on YouTube and Facebook. These activities are also increasingly cross-border, with Tubular Labs suggesting that 48% of European vloggers are followed outside their home countries.

 

Looking to the future

Attitudes to brands are constantly changing as each generation discovers a new and ever-changing ‘must-have’ favourite. Today’s millennials, the Generation Y born between 1980 and 1994, are sometimes labelled the “Peter Pan generation” or bamboccioni in Italy and génération précaire in France.

 

They are often beset by economic issues, unemployment and the financial necessity of living in the parental home – or on €1,000 a month – hence them being known as milleurista in Spain. Strapped for cash, they are more likely to eschew designer labels and expensive, high profile brands and opt instead for something with good environmental credentials and a socially liberal image.


From what we know so far, members of Generation Z, those born after about 1996, are rather more optimistic about the future, rather more positive about their financial prospects but even more concerned with environmental issues and the need for sustainability.


Those brands likely to be listed in reports such us this in future may well need to adopt complementary attitudes, stressing their corporate social responsibility policies and ‘green’ credentials in order to attract tomorrow’s generation of shoppers.

 

What is a brand?

Brands are companies that sell own-label products. Direct-selling brands are retailers, selling to the general public, although most are also wholesalers. To qualify as a brand in our meaning of the term, the company must mainly sell its own-label products.

 

Therefore, supermarkets with their store-branded items are excluded. To determine whether the brand is ‘direct-selling’, that is, a retailer too, we employ the same definition used in our Europe Top500 report:

 

Destination:

The brand has created a destination that customers visit in order to buy a product, service or experience. That destination might be a shop, a website or an event.

 

Purpose:

The brand has created goods and/or services in order to sell them to consumers.

 

Merchandising:

The brand actively sells, rather than acting as a portal to accept customers’ payments. That means choosing, promoting and tailoring offers to customers.

 

Acquisition:

The brand actively markets, recruits and attracts customers with a promise or proposition to the destination.

 

Sale:

The brand takes the customer’s money. The brand owns the transaction as the merchant of record.


Recourse:

The brand is responsible for the service, fulfilment and customer service owing from
the sale.

 

Fascia-focused:

The assessment focuses on individual trading names, rather than a parent company that may operate more than one brand.

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