Own-Brand versus Every Brand
In the battle to retake ground won by Amazon, retailers have adopted a variety of strategies. Many have opted to go niche and appeal to a very specific customer demographic. Others have embraced the concept of creating a smaller, own-brand range that embodies the retailer’s specific brand values. Some have also explored analytics to identify the most/ least profitable product lines/ areas in a bid to re-invigorate profitability. The one thing all these strategies have in common is a reduction in product range. And the one result is the same: loss of online revenue.
In the world of Google, volume is everything. Without product breadth, a retailer is irrelevant. When the majority of online revenue is dependent upon the performance of a customer’s online search, going niche, reducing product lines and going own-brand gives a retailer minimal chances of making that essential first page. In contrast, the bigger the online range, the more chance a retailer will have of reaching, and converting, the potential customer.
Expand and Win
The only way to expand the range cost-effectively and with minimal inventory risk is by expanding your virtual inventory (or drop-shipping), with suppliers shipping direct to the customer, rather than the retailer’s distribution centre. By building partnerships with a broader range of brands within a specific market genre, a retailer has a better chance to be found via search engines.
And this is the great thing about the drop-shipping model – a retailer can dramatically expand its range and extend its appeal to every part of its key customer demographic, with no need to stock a single additional item. The entire product set is made virtually available through the supplier network – with the onus on each supplier to pick, pack and deliver to the consumer while complying with the retailer’s Service Level Agreement.
This approach offers retailers the chance to reduce the number of distribution centres and minimise logistics costs, at a time when many competitors are embarking upon expansions to their fixed costs that can be crippling.
The ability to massively expand the range on offer by creating a network that includes all the top brands within each product genre is fundamental if a retailer is to get anywhere close to converting those Google driven customers. To be able to do so without incurring additional cost, indeed whilst actually reducing the logistics overhead, turns the current, somewhat broken retail model on its head.
Retailers don’t want to be Amazon for good reasons – no one can go head to head with Amazon and win. But they have to fight to retain ground. Going in the opposite direction and reducing the range is not the answer.
Retailers need to offer customers choice, massive choice. The own-brand, reduced range model is quite the opposite – it is minimising the chances of meeting customers’ search criteria. Retailers cannot be all things to all customers, but they must be all things to all customers within a tightly defined category and demographic. Define the category and demographic, and then pack in every product and brand available to create the largest possible range. That is the way to win.