Winning Strategy for Specialty Retail Channel Success in 2019
Every day, the news cycle brings more headlines about brick and mortar retail failure, struggles, and declining sales. Regardless of which way you look at it, physical retailers have seen bigger and better days. But…I am certainly not telling you anything you don’t know already.
What we do forget is that physical retail still accounts for about 90% of the total sales in the U.S. Yes, digital sales are growing fast and they will one day soon be closer to a 50/50 split. Regardless, in 2019, its still a very real possibility that you will need to include physical retail into your sales plans for your consumer packaged goods (CPG) and fast-moving consumer goods (FMCG) brands to successfully grow (especially if you are in grocery categories). Because of that, you need to deploy a sales strategy that helps you grow without carrying too much liability.
Lets look at two basic scenarios below.
- Brand #1 — great product but lacks strong brand identity, aggressive sales team, and diversified sales channels
- Brand #2 — great product with strong brand identity, controlled sales team, and focused sales channel (mostly digital)
Assumptions for both — same operating margins (before promotional activity) and same level of funding
Scenario #1
Brand #1 lets the sales guys run wild and has them selling into every Food, Drug, Mass, and Convenience (FDMC) customer in their books of business. Its about getting on the shelves by whatever means necessary and that’s great because they are selling a commodity product anyways that requires massive paid support to reach “everyone.” Also, those discounts to get into all these retailers are no worry because they will only be worried about the vanity metric of “total doors” from their legacy brand leadership team. After they get into these retailers, the product sits on the shelf and only moves with more discounts to the end-user.
Scenario #2
Brand #2 works off a list of ideal FDMC retailers that fit the brand’s identity. They stay true to themselves and do not offer massive discounts but share a plan that will allow for greatest ability for a win/win partnership. After they get into a few of these retailers, they deploy a controlled plan that tests organic growth by targeting their ideal customers and only pulse discounts to the end-user when it makes sense to their feedback loops.
This is obviously an extreme comparison of scenarios but I think you’d be surprised to know how few degrees off it is when you’re comparing a “legacy brand” and a “digitally-native brand that is seeking a physical presence.”
The comparison above brings up two points; push vs. pull and depth vs. scale. My feelings on the ideal mix (in 2019) is below…
Push over Pull Marketing
I usually look at push over pull marketing in this simple way…
Push = stuck in an endless cycle of hunting
Pull = knowing you will always have a steady stream of ideal buyers
Push marketing is honestly a way of the past. You can’t assume jamming sales and promotions down each level of the retail system will get you long-term winning solution. This is legacy brand 101 thinking because they assume that being “everything to everyone” is best and to complete the cycle you need to be “everywhere” for consumers. The way you get there is to just be “nothing to no one” and stand for the lowest price or basic levels of product wants/desires in the current time.
Push does have its merits but only when there is an acceptable level of pull marketing in place.
Pull marketing is about creating more than low prices or least common denominators of wants/desires with today’s consumers. This concept is about trying a brand identity that allows for consumers to attach themselves to you in a bigger manner. Consumers now (especially Millennials and Gen-Z) are constantly asking the question “how does this product or brand fit into my life.” The only way you achieve that is through a controlled approach to brand and product storytelling that is reinforced with customer data.
If push marketing is the hare, pull marketing is the turtle.
Controlled Retail Depth over Fastest Retail Scale
The common questions I get asked when I suggest this are;
- Why would I want to move slow and leave opportunity to others?
- Why not play the numbers game in today’s environment?
The truth today is that physical retail is a sinking ship that if you play the fast and hard game, you will get burned. Since the competitive landscape changes so quickly today, you need to pick your partners wisely that are not 100% owned or controlled by you. It is about trying to control your own destiny.
Additionally, you shouldn’t be worried about leaving opportunities to others if you’re properly utilizing pull marketing. You aren’t trying to be everything to everyone, you are trying to be yourself and find others that are influenced by that same story.
In CPG/FMCG, when you are looking to get into physical retail or expand it beyond your current level, make sure to consider the following:
- Cash is King — the faster you move, the more you will need to sustain this cycle of buying inventory and waiting on retailer AP cycles. The more retailers you have, the more inventory you have sitting on various stakeholder’s books and that stretch might not be ideal when you are trying to expand in a highly competitive and dynamically changing landscape. Without a doubt, cash gives flexibility to change in the face of anything…
- You Have the Power Now — retailers always had the leverage but with direct to consumer and Amazon, you don’t need them like you used to in 2009. Make sure to give the retailer a solid reason to take a chance on you but also understand how you fit into their plans. This shouldn’t be a “give” and “not get in return” equally type of arrangement.
Prefer to watch a video on this topic? Click on the embedded YouTube Video from my channel below!
