The last two quadrants require more fancy footwork by the retailer.įor brands with high profitability but low customer engagement, there is a strong opportunity for retailers to introduce private brands. Otherwise, the retailer should throw in the towel, trim these products from the assortment and find replacements including private label. If a brand’s products are not productive to the retailer’s assortment strategy, then the retailer should demand big cost savings from the brand. Retailers should do this by offering brands a strategic partnership that provides increased assortment presence, shelf space, and access to customer data in exchange for lower cost of goods sold (COGS) and higher trade funds.Ĭonversely, retailers should go for the knock-out with brands that have low profitability and low customer engagement. Then, based on the results, devise a plan of attack that incorporates direct strategic negotiations and the introduction of private label brands.įor brands with high profitability and high customer engagement, we suggest calling off the fight and working together. We suggest starting by analyzing each category to see how well each brand is doing to drive profitability (accounting for trade funds) and customer engagement (new customers, retention, annual spend) (figure 1). To prepare for bouts with brands, retailers first need to study their opponents. If you see yourself on that side of the ring, we say now is your time to come out swinging! Yet with so much in their corner, why are so many retailers (even the heavyweights) still on the ropes? Many of our retail clients feel they have limited leverage in this fight and that there are no options other than accepting the prices and terms brands offer. As Warren Buffet said recently on CNBC, there is a constant struggle between retailers and brands, but "right now the retailer is doing better in this round of the fight." 4 Retailers are finally learning to synthesize the point of sale (POS) and customer data they have (and brands don’t) to learn what customers are doing, and then basing their assortment decisions on these insights.Īll of this means retailers have significantly more bargaining power and leverage over brands than in the past. Interim Management and Chief Restructuring Officer Services Organizational Effectiveness & Efficiency Valuation, Corporate Finance & Transaction Support Our unique approach enabled this PE firm to quickly restore their distressed portfolio company’s EBITDA performance to levels that attracted a buyer willing to pay a handsome price-one that nearly doubled the investment value at exit.
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