Consumers move to multichannel shopping

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There is an ever increasing number of consumers who browse through multiple retail channels to research and learn about products before making a purchase. Picking up on this development, retailers have been prompted to perk up multichannel practices including opening up online stores and enhancing internet retailing capabilities.

“Multichannel retailing refers to the concept of selling goods through multiple channels rather than solely through one channel, such as traditional brick-and-mortar stores. The additional channels that can be used to reach out to consumers include the internet, mobile devices and catalogs, each of which present unique benefits and drawbacks. To succeed in multichannel retailing, merchants must optimally utilize the benefits of a variety of channels.”

It is crucial that retailers combine multichannel efforts with existing ones to maximize the benefits. Although the number of consumers engaging in multichannel retailing is constantly on the rise, many customers still prefer the touch and feel of a new product before purchasing. A survey, conducted by commerce solution provider ATG, showed that about 40% of respondents who read catalogs never made purchases through them.

Selling through online channels can be marginally more profitable than selling through traditional stores but, online retailing also provides other advantages, “retailers can avoid the risk of stocking inventory, since merchandise can be shipped directly from the supplier to the customer.”

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Consumer Protection Act

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On the 24th of October the Consumer Protection Act takes effect, and everyone’s waiting in anticipation and wondering who it will affect, and how. Will it breathe some life into consumer’s rights in the local market or will it fall by the wayside onto the ever increasing pile of consumer formalities?

As its name suggests, the act sets out to protect the rights of consumers. And manufacturers, suppliers and retailers should take note that ‘consumer’ is a very broad term in this case and encompasses any user, recipient or beneficiary of goods or services, even if they were not part of an agreement relating to the supply of goods.

Furthermore, the legislation dictates that formal policies and documents be written in plain, simple language to the effect that, “an ordinary consumer with average literacy skills and minimal experience as a consumer…can be expected to understand the content, significance and import of the document”. This could prove to be quite a significant ruling as organizations’ liability risk will increase significantly.

The CPA will have far reaching impact and will influence all aspects of the consumer industry. Look at a case currently taking place in the US where a public interest group is suing soft drink giant Coca Cola for making unjustifiable claims about its vitamin water. This is the kind of power that the CPA hopes to bring to local consumers.

And the cost for breaching the legislation? The penalties are harsh, and an organization which is found by the Tribunal to have contravened the Act, may face:

• An administrative fine up to 10% of annual turnover or
• An administrative fine of up to R1 Million, whichever is the greater.

Organizations have, or should have been, aware of the implementation of the CPA for the last 18 months and if they haven’t begun to assess the implications of this yet, now would be a good time to consider doing just that.

For a concise breakdown of the CPA and its implications take a look at the primary source for this article here.


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The Middle Ground Between Private Label And Brands

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A new ‘level’ of brand is gaining prominence on retailers’ shelves. More affordable versions of established manufacturer brands, these ‘basic brands’ are finding favour with still-strapped consumers across America and Europe. For the supplier, they are painstakingly designed to deliver extra force to the counteroffensive against private label growth and discounting trends.

Leading the move is FMCG giant Procter & Gamble (P&G). Internationally recognised as a virtually untouchable brand originator, the company invests more than $2 billion a year in R&D - nearly twice that of Unilever. In the US, P&G has faced particularly formidable competition from the private label offerings of large retailers and supermarket chains during the last decade, a trend that saw marked acceleration during the recession. Sales of Target’s own label products achieved an average annual growth rate of 15% from 2003 to 2008, while stalwart Wal-Mart’s 5 500-product-strong “Great Value” brand has gained substantial ground across the country.

To help keep private label incursion at bay, P&G has maintained a robust investment in product innovation and development of different versions of its existing products at different price points. The company offers at least two tiers across many product categories, an in-house diversification strategy that offers variety, secures loyalty – and ensures for its creator an all-weather game of play. For example, the company has recently seen its value diaper brand Luvs stealing share from sibling premium brand Pampers, which is also P&G’s biggest brand and one of its most global businesses.

In the US, the current consumer bias towards basic version offerings is reflected in increased advertising of ‘commonplace’ mealtime products. According to global research agency, TNS Media Intelligence, advertising for Heinz ketchup was up 967.1 percent in the first half of last year, while that of Hellmann’s mayonnaise and Jif peanut butter increased 165.6% and 39.8% respectively.

For some critics, however, the sustainability of basic line launches is questionable. For them, basic product innovation is contextually – not philosophically - driven and, as such, represents a strategic move rather than a business policy.

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New Brand Icons

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Incorporating several first-time categories, the Sunday Times Generation Next 2010 survey revealed the brands currently held in high juvenile esteem – and offered some interesting insights into the relationship between youthful perception and popular demand.

Votes cast in the newly introduced Petrol Station category highlighted the value of an energetic, multi-offering convenience store to the forecourt operation. For the non-driving 8-13 year-old group of respondents, who voiced a clear preference for Engen, the winner has more to do with the perceived forecourt store offering than service levels in the fill-up bay. Besides the appeal of Engen’s busy marketing initiatives, the under-13’s were impressed with its colourful multi-brand bundle offering. For the in-betweeners in the independently mobile19-22 age bracket, however, BP came up trumps.

Award winners aside, the forecourt sector remains one of the most vigorously contested, with frontrunner rivals Engen and BP going head to head in consumer rankings. Their respective convenience store investments point to a recognition of the potential profitability of a shopping space that is adequately flexible to give the customer what he wants, when he needs it, where he can reach it.

And the forecourt store’s drawing power isn’t limited to passer-by consumers - the survey showed the forecourt store also holds a strong presence in the overarching Grocery Store category, in which BP Express and Engen Quick Shop landed 9th and 10th positions respectively. This says something about the power of the forecourt store as a driver of brand recognition.

Winners in other categories included Pick n Pay (Grocery Stores), Nivea (Skincare Products), Nestlé Milo (Breakfast Cereals), Danone Yogi Sip (Dairy Drinks), and die-hard favourite in the Cold Drink category, Coca-Cola.

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