Will big retail in India undermine big brands?

YES, big retail will undermine big consumer brands. Today, it is the honeymoon period. Retail needs the big consumer brands to generate footfalls and revenue, and big consumer brands are overjoyed that their products which were relegated to the back of poorly maintained and dusty shelves have now got a visibility and presence they never had before. Consumers are rewarding the stores by opening their wallets or swiping their credit cards with an enthusiasm, which they have not evidenced before. But how long will this honeymoon continue? How long will it take for retail to recognise the power in their hands? That they can breathe new life into medium-sized brands, that consumers will be more demanding for choice, and certainly some would be actively seeking greater value from the retailer’s own brands? Even before big retail became a reality, we saw the rumblings of a power-struggle between retailers banded together through trade associations and consumer goods manufacturers refusing to stock a new product, demanding a higher margin, asking to be paid for window-displays. The battle seems inevitable - retail would want to be compensated for the investments they are making in infrastructure, while consumer brands would be scurrying for a place on the shelves and willing to pay for this privilege. Margin pressure because of the scale of purchasing offered by the big retail, intense competition among brands and the threat of private labels, is imminent. Today, the threat by big retail in cities like Hyderabad, where it is reported that as much as 20% of the sales run through these outlets, is a very real one. The only way for brands to survive in this environment is to partner with big retail for growth - creating different strategies for different kinds of channels - doing different things for hypermarkets. Understanding shopper dynamics and focusing on category growth is the only way to win the war. Can consumer goods manufacturers use their superior analytical abilities to assist retailers maximise aisle traffic and identify what are the best ways to enable shoppers to trade up transaction sizes? Can they generate insights through analysis of loyalty card data or shopper observation research and drive up category growth? How would shopper behaviour change based on the shopping mission - the main shopping event, top-up purchasing, or specific need shopping? Is the task to get more shoppers to the aisle, or to get greater conversions at the fixture? These and other questions need answers. Big retail will emerge victorious unless brands can gear up and bring some power back in the relationship through a better understanding of drivers, which will propel category growth.
courtesy:economictimes

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