G2 tips on countering big retailers

Malaysia - Unlike multinationals, local consumer brand owners are not doing enough to defend their market share in light of retail consolidation and brand proliferation, said Jonathan Dodd, EVP/director of strategy of G2 Worldwide, in an interview with Marketing Malaysia.

Retail consolidation will significantly increase the negotiating power of retailers vis-à-vis manufacturers. Dodd said the experience of mature markets show that sales are already concentrated in a few retailers. In Europe, 50% of retail sales passes through the top three retailers.

Nicky Lim, CEO of Grey Worldwide Malaysia, further illustrated that hypermarkets are expanding into small towns in Malaysia. Carrefour, for example, recently opened in Butterworth.

To counter big retailers like hypermarkets, brand owners should build the quality of relationship with retailers and understand their strategies. Dodd said, "Retailers do not care if they sell Coca Cola or Pepsi. But brand owners can help them increase beverage sales."

For example, when working with Procter & Gamble on the baby products account, G2 found baby items were placed in different sections of the retailer, resulting in a stressful shopping experience for mothers. With this insight, G2 had advised the retailer and changes were subsequently made to the placement of items.

Private labels (or in-house brands such as Tesco) are having a stronger presence, adding to brand proliferation. Dodd said the top selling consumer brands in Europe are private labels. He believes price is a major selling factor and retailers have managed to build trust with customers.

Lim felt that although he does not foresee private labels to be a big threat in Malaysia yet for items of high emotional value, he noted that they do occupy front space and in-store promotions are done.

A good shopper marketing programme would help brand owners navigate through these challenges. Lim said G2's benchmark is for every RM1 that the client invests in a shopper marketing programme, a minimum of RM3 in sales should be generated.

Dodd added, "A shopper marketing programme should give sustainable results, build a quality relationship with the retailer, and enhance brand equity. It is not just about running competitions and ‘bribing' the customer."