012 dissecting trends
TRANSCRIPT
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Dissecting Trends in
Distributor Private Label
Heavy Duty
Aftermarket Implications
Bill WadeWade&Partners
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Creating and Protecting Enormous
Value Through Positive Association
This session is designed to be a discussion of Brand Equity...
Private Labels Vs. Real Brands
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What exactly is Brand Equity?
The component of overall preference thatis not explained by objectively measuredattributes.
This is often measured as the pricepremium over a Private Label.
The set of customer associations andbehaviors that permits the brand to earngreater volume or margins than it couldwithout the brand name.
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10 Second Quiz
Private label is a positive trendfor the aftermarket.
Yes No
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10 Second Quiz
Private label is brand corrosive.
Yes No
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Defining Brand Value
Price premium that thename alone can support
Impact of name on customer preferences Stock value less tangible assets
Earning power of the brand
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Brand may mean:
The symbolic embodiment of a product.
The imprinting of brand
marks on live skin.
A lifelong association with an institution.
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BullsBalls.com
Made To Swing
TEXASINTERSTATETRUCKSTOPS
Big Boy Nuts
The symbolic embodiment
of a product...
http://www.slime.com/index.phphttp://bullsballs.com/ -
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Private Labels are Hardly Newto the Aftermarket. Remember:
Visall, Gard or Modac? (NAPA)
Sturdee Batteries? (Pep Boys, 1930)
Polarine ? (Standard Oil)
Craftsman ? (Sears, 1941)
RevelationShotguns?(Western Auto 1939)
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Common Private Label
Rationalizations:
PLP give the group buying leveragewith brand manufacturers.
PLPs give stores unique value offerings,especially the better-quality-for-lower-price which grow customer loyalty for
the store.
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National brands are application coverage ortechnologically insufficientor,
This new brand represents a way to beat themarketing tax those charges foradvertising, cataloging, merchandising and
training that neither the customer nordistributor needs or wantsor,
We are offering our own
alternate brands because:
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We are offering our ownalternate brands because:
We distributors (as the last mile), deservea greater cut of the margin pieor,
This label is the only way we can be sureyou bought this from us in the first placewhen you want to return itor,
Over 40% of Wal-Marts sales are privatelabel...
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Welcome to the real world!
Private Label or National Brand
There are no unserved NAFTA markets.
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Brand ValueCat is most powerful industrial brand in the world.
Harvard is the most powerful in education.
Coke is the most valuable consumer brand.
Toyota is the top automotive brand
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What Is a Brand Really Worth?Worlds Most Valuable Brands
1 Coca-Cola U.S. 2 Microsoft U.S.
3 IBM U.S. 4 GE U.S.
5 Intel U.S. 6 Nokia Finland7 Toyota Japan 8 Disney U.S.
9 McDonalds U.S. 10 Mercedes Ger.
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PLP Growth and Success:
Purchasers are consumers first! $65 Billion1 in 5 items sold in U.S.
supermarkets, drug chains and
big boxes. 7 in 10 shoppers believe that
PLP are as good or betterthan national brands.
Store brands are a way to managereturns!
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10 Second Quiz
Brand suppliers should supplyprivate label lines as well.
Yes No
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10 Second Quiz
Aftermarket private labels can create
stand alone brand equity.
Yes No
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Components of Brand EquityDont Favor Private Label
Brand Permeation: advertising awareness andproduct availability
Brand Distinctiveness: brand differentiation.
Brand Quality:overall reputation of a brand (andits line extensions) in terms of quality.
Brand Value: does the brand deliver what buyers
pay foroften known as price-value.
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Components of Brand EquityDont Favor Private Label
Brand Personality:The extent to which thebrands image is congruent with the buyer.
Brand Potential:are consumers willing to try newproducts, services, or line extensions.
Competitive Inoculation: The consumer loyaltyin times of adversity or competitiveness.
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Brand Life Cycles
Introduction
Elaboration
Fortification
Abandonment
PLP
Heaven
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10 Second Quiz
Private labels suggest a marketing
failure on the part of branded lines.
Yes No
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10 Second Quiz
Most private labels are more profitable
than their branded counterparts.
Yes No
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Why Store Brands Succeed
Brands depend on unchanging commodities Consolidating distribution sells the copy
cat products with satisfaction guarantees.
Functional consumers and repair techs
continue to test products, find real valueand spread the word.
PLP sales have shifted profit power to retailers
from suppliers.
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Personal Opinion...
With the solid domestic supply base wehave in the heavy duty market
with at least three national branderscompeting in each product segment
I generally dont get the need for anincreasing number of alternate brands.
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Merrifields 7 Cautions:
Studies conclude that 50% of PLP are net losers froma profitability perspective
even though the PLP have higher margin percentsbuilt into their lower price.
$ %
Net margin dollars are less on thestore brand per square foot...
And this createsat least twice the SKU / inventory costs.
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Average PLP Price Discounts
Discount Market Position
56% PLP brand is perceived to beinferior (generic/value)
37% Copycat brands of equal quality21% Premium store brands
Categories with the strongest brand power forcePLPs to be discounted the most and still get thelowest share.
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Merrifields 7 Cautions:
What percent of these sales are tonew customers.
as opposed to cannibalizing sales to oldcustomers that were already buying thebranded products...
that yielded almost the same totalmargin dollars (albeit at a lower marginpercent times a higher price)?
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Merrifields 7 Cautions:
With long supply lines from Asia, pluscontainer quantity shipments
are the clones really turning-and-earning as well as we might thinkwith equal or better fill-rate
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Merrifields 7 Cautions:
Even if the first wave of copy-cat productsproves to be a winner
when will we cross the line into the 50% ofPLP items that arent profitable?
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Merrifields 7 Cautions:
What are the criteria for ranking whichitems should be clonedfirst to last?
Should the criteria be modified and re-weighted for each new category of itemsand for each different segment of
customers that category might be sold to?
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Merrifields 7 Cautions:
As we source more items and do more repeatbuys from Asian sources
How do we stay on top of those producers
all around reliability and economicefficiency?
Should we consider outsourcing allof these problems to firms that have
grown into giant, supply-chain,process managers for storebrands and now haveindustrial divisions?
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Merrifields 7 Cautions:
Could mimicking the private brandstrategies from the world of retailers beless successful in a commercial orindustrial distribution channel?
PLP Demand Replenishmentvs.
Branded Product Push
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Recent Wal-Mart Admission
Castro-Wright...We learned that providingcustomer choice wasnt about more product,
but about carefully selected product...
We made big bets in growth categories likeelectronics...Providing brands that gaveus authority.
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10 Second Quiz
Private label growth has altered thepower structure of the aftermarket.
Yes No
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10 Second Quiz
What should manufacturers do to counterthe private label growth trend?
A) Produce private labels to limit disruption. B) Partner (the PLP distributor) effectively to
craft Win-Win relationships.
C) Innovate brilliantly to beat private labels.
D) Fight selectively to marshal resourcesagainst private labels.
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Enjoy the Beach!
www.wade-partners.com
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Heavy Duty
Aftermarket Implications:
Global Trends in
Distributor Private Label
Bill WadeWade&Partners
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Types of private labels
Store brands - The retailer's name is very evident.
Umbrella branding - Generic brand, independentfrom the name of the retailer.
Exclusive brands- Name used in one category.
Group brands - Brands are typically seen inindependent stores that cannot afford own PLP.
Copycat labels- Owned by a retailer which usesimilar trade dress as a leading national brand.
Who makes store brands?
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Who makes store brands? Large national brand manufacturers that utilize
their expertise and excess plant capacity Small manufacturers who specialize in particular
product lines and concentrate on producing storebrands almost exclusively.
Offshore manufacturers that produce private labelproducts for specific markets
Now a Turnkeyproposition