In Carol's first article for Retail Wire covering the 2011 Private Brand Movement conference, she pulls insights from Safeway’s horizontal innovation model and calls out (once again) the differences between retailer and national brand approaches and assets.
Among the confident statistics peppered throughout last week's Private Brand Movement conference in Chicago was that, according to Nielsen, 70 percent of shoppers believe that store brands are as good as or better than name brands, while only 31 percent say that name brands are worth the extra price. These and other data points punctuated the gains in consumer perception that private brands have made even since last year's conference.
According to Alex Petrov, Safeway's vice president of consumer brands, with private brand market share sitting at 23.5 percent, the gap between shoppers' perception and actions is problematic. In his presentation, "Innovation: Transforming the Private Label Business Model," he called this the "say-do dichotomy" and outlined how Safeway is closing the gap.
Safeway's new innovation model fuses the best of CPG and retail brand-building since, according to Mr. Petrov, each model possesses unique strengths and challenges.
He cited three CPG strengths - all of which are transferrable to the retail brand-building model:
- Incredible data-mining capabilities focused on consumers and shoppers
- An unquestionable commitment to quality
- A passion for branding.
CPG and retail innovation models also diverge in two key areas, presenting both challenges and opportunities.
Business Objectives - CPG companies are seeking share of category and saying "pick my brand," while retailers strive to increase shopper trips and basket size, saying "pick my store."
Business Systems and Assets - CPG companies rely on vertical integration and specialized assets, from factories to sales, distribution, and marketing, whereas retailers must operate across hundreds of categories. Retailers lack product focus and insight and as a result, they risk becoming jacks of all trades and masters of none when developing private brands.
Mr. Petrov sees retailers' sweet spot as their ability to execute across the entire store and be agnostic to categories, brands and target segments, which he calls "horizontal innovation." Safeway leverages horizontal innovation to arrive at product and brand solutions to unmet consumer needs without any bias toward particular categories or brands.
He cited Safeway's multi-category lifestyle brands, O Organics and Eating Right, as the ultimate examples of horizontal innovation. In 2005, Safeway began developing solutions to the high expense and lack of accessibility of organic products but, instead of knocking off existing organic product lines, it worked closely with its supplier network to create its own "organic answer."
Safeway's Signature soup program illustrates how retailers can differentiate by owning merchandising innovation. Safeway developed a dual-usage soup cart that features a hot soup station on the front as a destination for the lunch crowd and ready-to-heat versions on the back of the cart for the take-home customer. The stations not only address different need states, but also serve as a testing and sampling vehicle for new flavors. The innovation went a step beyond product creation, moving into product delivery.
Mr. Petrov's presentation had me wondering why more retailers aren't taking advantage of the assets and environments that they already control and tapping into consumers' growing penchant for private brands in the process.