Why retail home brands aren’t the devil

The issue of retail own brands came to the fore again over the past week across a number of retail sectors and geographies with the release of half year results.

Myer reported a great result in tough conditions, based in no small part on investment in the retailer’s own brands.

In Myer’s case, by providing high-value fashion-forward brands that the regular Myer shoppers love.

David Jones on the other hand fell over the finish line with correspondingly less of an investment in retail own brands.

In the grocery sector, Tjeerd Jegen, Woolworths’ Australian grocery boss, highlighted in a letter to The Australian Financial Review that retail own brands sold via Woolworths accounted for only 6% of sales, which is considerably less than the widely reported 25%.

Jegen said “the products stocked on [Woolworth’s] shelves are a reflection of what [Woolworth’s] customers want to buy”.

And he’s 100% right. That’s despite this point of view appearing alien to our senators who seem to be infrequent shoppers at Canberra grocery stores.

Retailers lose sales, and profitability, when they stock stuff shoppers don’t want. So do international and national brand owners.

In Australia, every retailer who reported  “better than expected” half year results including Myer, Coles, Woolworths and JB Hi-Fi all did so because they have invested in a balance of widely available international and national brands as well as through direct sourcing of their exclusively held retail own brands, with lower prices.

Because that’s what shoppers want. Hold that thought.

In the bottom right hand corner of the USA is a grocery retailer called Publix Super Markets. It operates in five states, with more than 1,000 stores – about the same size as our Woolworths.

It is privately held by the employees and has a relatively low assortment of Publix retail own brand. Why? Because that’s what its own regular shoppers want.

When a little old lady from Florida calls the chief executive of Publix, William Crenshaw, and they do, he takes their call. Just like his predecessor and now president of the company Todd Jones did. The little old lady says: “I was in the juice aisle and couldn’t find Campbell 120z tomato juice, just your own brand”. He replies with “Thank you ma’am, I’ll call the buying office now.” He calls the buying team and the tomato juice line is reinstated in that store.

Each and every retailer finds the best way to serve their own most regular shopper in each store. So each international and national brand owner needs to find a way to serve the shoppers who regularly frequent the different retailers, and do it by store, not by chain.

Back to the grocery retail own brands. In the US and the UK, grocery retail own brands represent between 20% to 50% of grocery sales. In Australia, it is much less.

Although in Australia we have a diverse variety of flora and fauna, we need to learn that the mammal that shops for groceries is the same around the world.

Senators should perhaps stop focusing energy on holding back the normal tide of change that leads to lower prices for shoppers, and focus energy on creating policies that assist productivity and flexibility for all the retailers, manufacturers and distributors who employ Australians. Just a thought.

As CROSSMARK CEO, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia and across the world. His international career in sales and marketing has seen him responsible for businesses in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands.

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