How GNC is Building its Brand “Outside Its Four Walls”
GNC is trying to pull off this magical feat where it can close 1000+ store locations, but actually grow its physical retail exposure.
For retail strategy nerds or longtime followers of the nutritional supplement specialty retailer GNC, it might sound more like that buddy of yours that thinks he is a magician, but really only has that one trick that he shows everyone at parties…
GNC is essentially trying to pull a “new” rabbit out of the same ole hat!
For those that don’t understand my random analogy:
- New Rabbit = (new) retail partners
- Same Ole Hat = strategic retail partnership strategy
Strategic Retail Partnerships
“Retail-Retail Partnerships” are essentially when one retailer sets up a “store within a store” or takes control of a category for another retailer. These type of strategic retail partnerships can be seen in all kinds of places
- Kroger inside Walgreens
- CVS inside Target
- Amazon “smart home” products inside Kohls (the retailer also allows customers to return any Amazon online order, but that is a different retail strategy)
When done correctly, strategic retail partnerships can result in a number of win-win outcomes, such as…
- Additional exposure
- Additional revenue
- Better use of space
- Enhanced foot traffic
- Creation of competitiveness and profitability in specialized categories
For a retail strategic partnership to be effective, GNC (and other retailers) should consider the following:
- Complementary offerings — does each retailer appeal to the same demographic/psychographic, but with products and services that work well in tandem?
- Similarities in customer/fan base, but without too much overlap
- Complementary operational expertise
…but, most importantly there should be an allowance for flexibility in the partnership. While both parties might have certain expectations, it is always a good idea to test the partnership first before getting into a huge long-term large-scale commitment.
History of GNC’s Strategic Retail Partnerships
I made an initial introductory comment that longtime GNC followers should understand this retail strategy. That is because GNC has been using it for over two decades! Since December 1998, Rite Aid and GNC have had an exclusive partnership in the chain drug channel. According to the 19Q2 GNC earnings report, there are approximately 2000 GNC “store-within-a-store” locations operating in Rite Aid stores nationwide.
Additionally, GNC has had a partnership with Walmart-owned Sam’s Club since 2011. The initial goal of this partnership was to support an increased focus on health and wellness-oriented Sam’s Club consumers through more robust offerings of supplements and sports nutrition items. This would also allow for increasing visibility of the GNC retail brand with mass market customers.
Increased Focus in 2019 for GNC
The nutritional supplement specialty retailer is currently midstream in a comprehensive store optimization plan that is seeking to close 1000+ GNC physical locations. While struggling retailers that drastically shrink their footprint rarely come back stronger, GNC is in an interesting position…
For one, the consumer category of products that GNC sells is growing significantly with mass market customers. Secondly, it is a specialized consumer product category that requires knowledge to maximize profitability. Finally, the GNC brand equity is strong in the U.S. (and globally)…
That makes for an attractive set of variables to court new strategic retail partners. So, while GNC is closing its own physical locations, it is looking to build its brand “Outside its Four Walls” and seeking to get the brand to customers where they want to buy it!
GNC “New” Strategic Retail Partnerships
Dick’s Sporting Goods
- Strategy = merchandise 50 GNC private label products within the sporting goods retail locations
- Current Locations Available = 77 of ~565 by end of 19Q3
Hudson News
- Strategy = merchandise GNC private label energy, wellness, and sleep products in the airport retail store locations
- Current Locations Available = 360 of ~950 by end of 19Q3
Albertson’s
- Strategy = merchandise GNC private label products in the grocer’s healthy living section
- Current Locations Available = 35 of 2000+ by end of 19Q3
(Note: This year, GNC also extended the relationship with Rite Aid until 2021)
Newest (and Biggest) Strategic Retail Partnership?!?
At time of publishing this article, I couldn’t find any mention of this strategic retail partnership officially announced through either GNC or 7-Eleven. This image was taken at a 7-Eleven location in Austin, TX and sent to me for comment by one of LinkedIn connections. This set-up appears to be a modified Hudson News cardboard shelving unit that is geared towards convenience customers. It seems that the convenience retail giant is branding it a bit and calling it “GNC 24/7 Life by 7-Eleven”. Since no information could be found, the “test size” is unknown, but the potential is endless with 7-Eleven. If you consider only the North American locations, GNC private label products could be merchandised in over 8000 stores.
Why is GNC Bullish on this Retail Strategy?
- Provides a large opportunity to increase an existing $80+ million business (not including previous partnerships with Rite Aid and Sam’s Club).
- Allows GNC to grow “doors” in many of the same geographical areas they are closing their own stores. This essentially improves cost structure for GNC.
- Helps them build the GNC brand out to new diverse customers.
- Helps them grow the GNC brand stronger globally to continue building international growth (mostly from Hudson News deal)
Which Strategic Retail Partnerships Could be Next?
With the strategic retail partnerships added this year, GNC will now have exposure in all the major sales channels except one…Mass Retail! I am sure GNC would love to “bulk up” on their Walmart relationship, but it will likely come in the way of a wholesale agreement for popular GNC private label products. Additionally, I could easily see GNC making an exclusive private label for Walmart that is similar to the ones they have built for Amazon.
Wait! What about an untracked sales channel that is closer to the GNC customer base? While often forgot about by hardcore retail strategy junkies, the “gym channel” could be a perfect next more for GNC private label quick consumption products, such as Beyond Raw Lit energy drinks, Lean Shake 25s, and GNC Climb Recovery protein bars.
I would attempt to go both wide and deep into the fitness channel, even creating co-branded products for the right partners…
- Wide = Planet Fitness
- Deep = boutique studios, such as SoulCycle, Orange Theory, Barry’s Bootcamp
