Textbook Notes (362,812)
Canada (158,056)
RMG 200 (57)
Brent Barr (19)

ch 11

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Ryerson University
Retail Management
RMG 200
Brent Barr

CH 11: BUYING STRATEGIES BRANDING STRATEGIES Manufacturer Brands - Manufacturer brands: (aka national brands) a line of products designed, produced, and marketed by a vendor and sold to many different retailers - The manufacturer is responsible for developing he merchandise and establishing an image for the brand - Some retailers organize some of their categories around their most important national brands - Buying from vendors of manufacturer brands can help store image, traffic flow, ad selling/ promotional expenses - Retailers buy from vendors of manufacturer brands because they have a customer following – people go into the store and ask for them by name - Manufacturers devote considerable resources to creating demand for their products - Manufacturer brands typically have lower realized gross margins than private label brands due to the manufacturer assuming the cost of promoting the brand and increased competition among retailers selling these brands - Stocking national brands may increase or decrease store loyalty o If the manufacturer brand is available through limited number of retail outlets, customers loyal to the manufacturer brand will also become loyal to the stores selling the brand o If manufacturers brands are readily available from many retailers in a market, customer loyalty may decrease because the retailer can’t differentiate itself from the competition - Manufacturer brands may limit a retailer’s flexibility – vendors of strong brands can dictate how their products are displayed, advertised, and priced Licensed Brands - Licensed brand: brand for which the licensor (owner of a well known name) enters a contractual arrangement with a licensee (a retailer or a third party). The licensee either manufactures or contracts with a manufacturer to product the licensed product and pays a royalty to the licensor - Owners of trade names not typically associated with manufacturing have also gotten into the licensing business Private Label Brands - Private label brands: (aka store brand) products developed and marketed by a retailer and only available for sale by that retailer - Retailers typically develop specifications for the merchandise and then contract with manufacturers who are often located in countries with developing economies to produce the products - The size of retail firms has increased through consolidation, and private labels have assumed a new level of significance by establishing distinctive identities among retailers - Private labels have always added value to retailers (eg. The Bay, Sears, Zellers) - Consumer attitudes are driving the trend – consumers are replacing more expensive brands with private brands from retailers Benefits of offering private labels - Boosts store loyalty - Enhance store image if the brands are of high quality and fashionable - Draw customers to the store – less expensive than national brands - Retailers that purchase private label brands don’t have the same restrictions on display, promotion, or price that often encumber their strategy with manufacturer brands - Gross margin opportunities may be greater with private label brandsd Drawbacks - Although gross margins may be higher for private label brands than for manufacturer brands, there are other expenses that aren’t readily apparent - Private labels outside of Canada are more complicated Private Label Options Four categories of private brands Generic - Unbranded, unadvertised merchandise found mainly in drug, grocery, (house and discount brands) - Perceived by the consumer to be lower quality, and its packaging identifies it as a brand of the retailer Premium - A branding strategy that offers the consumer a private label at a Loblaw’s President branding comparable manufacturer brand quality, usually with a modest price Choice, Tesco’s Finest savings - Attempts to match or exceed the product quality standard of the prototypical manufacturer brand in its category - No intention to duplicate that packaging or to trade off the brand equity of a particular manufacturer brand - Consumer perceive the retail premium labels as competing manufacturer brands - To succeed competition with manufacturer national brands, the retailer must commit the resources in market research, product development, quality control, and promotion in its market area commensurate with it manufacturer-brand competitors Copycat - A branding strategy that imitates the manufacturer brand in branding appearance and trade dress but generally is perceived a lower quality and is offered at a lower price - Risky private branding alternative because close copies can violate packaging and patent laws Parallel - A branding strategy that represents a private label that closely branding imitates the trade dress (packaging) and product attributes of leading manufacturer brands but with a clearly articulated “invitation to compare” in its merchandising approach and on its product label - Like copycat branding, parallel branding seeks to benefit from the brand equity of the manufacturer brand by closely imitating the national bran’s packaging and product qualities - Leveraging strategy used to bolster a retailer’s private brand sales - Exclusive co-brands: a brand developed by a national brand vendor, often in conjunction with a retailer and sold exclusively by the retailer - Eg. national brand manufacturer assigns different model numbers and has different exterior features for the same basic product sold by different retailers - Eg. manufacturer develops an exclusive product or product category for a retailer A Brand or a Store? - A natural extension of the retailer’s brand strategy is to exploit strong retail name recognition by selling its products through channels other than its own stores - On the other side of the distribution spectrum, several firms that have traditionally been exclusively manufacturers have become retailers o Eg. Guess, Calvin Klein, Ralph Lauren - Reasons why manufacturers chosen to become retailers o Total control over the way their merchandise is presented to the public o Use stores to test new merchandise and merchandising concepts o Use stores to showcase their merchandise to the public o Have stronger retail presence creating name recognition and synergy between the manufacturer and retailer that benefits both parties INTERNATIONAL SOURCING DECISIONS - A decision that’s closely associated with branding decisions is to determine where the merchandise is made Costs Country of origin - Retailers must weigh the savings associated with buying from developing Associated effects countries with the image associated with buying merchandise from a with Global country that has a reputation for fashion and quality Sourcing - Other countries may have technological advantage in the production of Decisions certain types of merchandise and can therefore provide their product to the world market at a relatively low price Foreign currency - Exchange rates will increase or reduce the cost of the merchandise fluctuations Tariffs - Tariff: (aka duty) a tax placed by a government upon imports
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