Multi-brands are dead! Long live the new multi-brands!
You must have been living under an enormous rock to have missed the dramatic changes in the retail landscape. Whereas in the past, retail recovered relatively quickly after an economic crisis, now a large part of the retailer sector has ended up in a perfect storm. The economic crisis already killed most of the resilience of the traditional retailers, but when combined with an increasing shift from high street sales to online sales, it is enough to push a lot of them over the edge.
Take the traditional role of retail (and wholesalers in b2b for that matter): it’s essentially to combine the products from different brands and to be the last mile in the logistical journey. However, this role is increasingly being fulfilled by eCommerce players. The endless aisles offered by online stores replaces the limited shelf space available in traditional stores. And more and more players like DHL and UPS are taking care of the last mile. This also leaves the doors wide open to brands who now can skip the indirect channels and go direct-to-consumers (D2C), keeping the distribution margin in their own pockets.
The aggregation of brands in traditional retail is most prominent in the so-called multi-brands: shops within a certain segment that offer a large variety of brands in one combined offering. Well known examples are MediaMarkt, Hudson’s Bay, Gamma and John Lewis. But, no matter how big your store is, shelf space is limited by definition. Some chains try to extend their shelf space by adding digital kiosks at the point of sale. But to be effective, your customer has to come back to your store in the first place, and fitting such a kiosk in the layout of a store is a challenge in itself. Granted, some of these multi-brands are successful in developing an omni-channel strategy, but more often than not, multi-brand websites are a direct translation from the physical store (typically offering a smaller product range), taking little advantage of the possibilities of eCommerce platforms.
Calling all traditional multi-brands – your time is up!
At the end of the day, Multi-brands will find themselves being squeezed between brands that go direct to consumers via their own channels and the new generation of multi-brands without limited shelf space: the online marketplaces. Players like Zalando and Amazon are taking over the role of the traditional multi-brands: bundling brands and taking care of the last mile in a very efficient way. Add to this the enormous amount of data these companies are aggregating to support their business and it will be virtually impossible for a traditional multi-brand to catch up. They can never match these endless aisles with products and, as a result, they will become less and less relevant for their customers. And so, one flywheel is coming to a full stop while other flywheels are gaining more and more speed: on marketplaces, new consumers attract new sellers who attract new consumers who attract… you get my point.
To illustrate this, I’ll share a personal experience. As a proud owner of a new Apple Watch but not happy with the original strap, I turned to my local stores for a replacement - to no avail. So I looked to everyone’s darling, Coolblue, only to find 3 branded (and thus too expensive) straps. The next stop was Netherlands’ Online General Purpose Store: Bol.com. This gave me dozens of options to choose from. However, the same query on Amazon gave me hundreds of different straps (almost to a degree of being overwhelming) and thanks to my Prime subscription (to be able to watch The Grand Tour), free delivery to my doorstep within a matter of days. Guess where my next shopping journey will start…
Does this mean that all is lost for multi-brands? If they continue to rest on their laurels, the short answer is yes! in that case their business will be taken over by the Souqs of the 21st century. But smart multi-brands will increase their product ranges - and thus relevance - by allowing other sellers on their online platform, and become a marketplace themselves. This way, a retailer or wholesaler can increase his or her product range without having to invest in inventory and physical storage. For example, take a food product wholesaler who sells food products to restaurants and hospitals. Without any investments in inventory and physical shelf space, this wholesaler can offer non-food products (with typically lower turnover) from 3rd party sellers to its customers. Thereby they’ll be earning commissions on the additional product range and, more importantly, taking away a reason for customers to switch to another seller. Sounds far-fetched? It happens today! Take the French hypermarket chain, Auchan, who extended its already considerable product range five-fold to more than 100.000 different products from more than 100 sellers on its platform.
Connecting external websites to your eCommerce platform is not a walk in the park. You will be mixing all kinds of financial and operational processes, raising questions like: do you allow price competition on your platform? How do you integrate the different catalogues? Who will ship the products? How will you make money? And if you don’t do your homework, the end result will likely be a big mess, leading to disappointment. Luckily, there are off-the-shelf tools like Mirakl that will help you to organise your new marketplace. That does not prevent you from having to consider all the processes and develop a smart strategy, but as luck will have it, there are companies around that can help you. Of course, you know that as I work for one of them – Salmon.
So, if you are a multi-brand retailer or wholesaler and you want to adjust to the new reality, it’s time to act now and reconsider your role in the world of organising product ranges and last mile logistics.