012 dissecting trends

7/31/2019 012 Dissecting Trends

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Dissecting Trends in

Distributor Private Label

Heavy Duty

Aftermarket Implications

Bill WadeWade&Partners


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Creating and Protecting Enormous

Value Through Positive Association

This session is designed to be a discussion of Brand Equity...

Private Labels Vs. Real Brands


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What exactly is Brand Equity?

The component of overall preference thatis not explained by objectively measuredattributes.

This is often measured as the pricepremium over a Private Label.

The set of customer associations andbehaviors that permits the brand to earngreater volume or margins than it couldwithout the brand name.


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10 Second Quiz

Private label is a positive trendfor the aftermarket.

Yes No


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10 Second Quiz

Private label is brand corrosive.

Yes No


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Defining Brand Value

Price premium that thename alone can support

Impact of name on customer preferences Stock value less tangible assets

Earning power of the brand


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Brand may mean:

The symbolic embodiment of a product.

The imprinting of brand

marks on live skin.

A lifelong association with an institution.


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BullsBalls.com

Made To Swing

TEXASINTERSTATETRUCKSTOPS

Big Boy Nuts

The symbolic embodiment

of a product...
http://www.slime.com/index.phphttp://bullsballs.com/


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Private Labels are Hardly Newto the Aftermarket. Remember:

Visall, Gard or Modac? (NAPA)

Sturdee Batteries? (Pep Boys, 1930)

Polarine ? (Standard Oil)

Craftsman ? (Sears, 1941)

RevelationShotguns?(Western Auto 1939)


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Common Private Label

Rationalizations:

PLP give the group buying leveragewith brand manufacturers.

PLPs give stores unique value offerings,especially the better-quality-for-lower-price which grow customer loyalty for

the store.


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National brands are application coverage ortechnologically insufficientor,

This new brand represents a way to beat themarketing tax those charges foradvertising, cataloging, merchandising and

training that neither the customer nordistributor needs or wantsor,

We are offering our own

alternate brands because:


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We are offering our ownalternate brands because:

We distributors (as the last mile), deservea greater cut of the margin pieor,

This label is the only way we can be sureyou bought this from us in the first placewhen you want to return itor,

Over 40% of Wal-Marts sales are privatelabel...


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Welcome to the real world!

Private Label or National Brand

There are no unserved NAFTA markets.


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Brand ValueCat is most powerful industrial brand in the world.

Harvard is the most powerful in education.

Coke is the most valuable consumer brand.

Toyota is the top automotive brand


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What Is a Brand Really Worth?Worlds Most Valuable Brands

1 Coca-Cola U.S. 2 Microsoft U.S.

3 IBM U.S. 4 GE U.S.

5 Intel U.S. 6 Nokia Finland7 Toyota Japan 8 Disney U.S.

9 McDonalds U.S. 10 Mercedes Ger.


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PLP Growth and Success:

Purchasers are consumers first! $65 Billion1 in 5 items sold in U.S.

supermarkets, drug chains and

big boxes. 7 in 10 shoppers believe that

PLP are as good or betterthan national brands.

Store brands are a way to managereturns!


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10 Second Quiz

Brand suppliers should supplyprivate label lines as well.

Yes No


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10 Second Quiz

Aftermarket private labels can create

stand alone brand equity.

Yes No


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Components of Brand EquityDont Favor Private Label

Brand Permeation: advertising awareness andproduct availability

Brand Distinctiveness: brand differentiation.

Brand Quality:overall reputation of a brand (andits line extensions) in terms of quality.

Brand Value: does the brand deliver what buyers

pay foroften known as price-value.


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Components of Brand EquityDont Favor Private Label

Brand Personality:The extent to which thebrands image is congruent with the buyer.

Brand Potential:are consumers willing to try newproducts, services, or line extensions.

Competitive Inoculation: The consumer loyaltyin times of adversity or competitiveness.


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Brand Life Cycles

Introduction

Elaboration

Fortification

Abandonment

PLP

Heaven


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10 Second Quiz

Private labels suggest a marketing

failure on the part of branded lines.

Yes No


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10 Second Quiz

Most private labels are more profitable

than their branded counterparts.

Yes No


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Why Store Brands Succeed

Brands depend on unchanging commodities Consolidating distribution sells the copy

cat products with satisfaction guarantees.

Functional consumers and repair techs

continue to test products, find real valueand spread the word.

PLP sales have shifted profit power to retailers

from suppliers.


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Personal Opinion...

With the solid domestic supply base wehave in the heavy duty market

with at least three national branderscompeting in each product segment

I generally dont get the need for anincreasing number of alternate brands.


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Merrifields 7 Cautions:

Studies conclude that 50% of PLP are net losers froma profitability perspective

even though the PLP have higher margin percentsbuilt into their lower price.

$ %

Net margin dollars are less on thestore brand per square foot...

And this createsat least twice the SKU / inventory costs.


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Average PLP Price Discounts

Discount Market Position

56% PLP brand is perceived to beinferior (generic/value)

37% Copycat brands of equal quality21% Premium store brands

Categories with the strongest brand power forcePLPs to be discounted the most and still get thelowest share.


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What percent of these sales are tonew customers.

as opposed to cannibalizing sales to oldcustomers that were already buying thebranded products...

that yielded almost the same totalmargin dollars (albeit at a lower marginpercent times a higher price)?


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With long supply lines from Asia, pluscontainer quantity shipments

are the clones really turning-and-earning as well as we might thinkwith equal or better fill-rate


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Even if the first wave of copy-cat productsproves to be a winner

when will we cross the line into the 50% ofPLP items that arent profitable?


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What are the criteria for ranking whichitems should be clonedfirst to last?

Should the criteria be modified and re-weighted for each new category of itemsand for each different segment of

customers that category might be sold to?


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As we source more items and do more repeatbuys from Asian sources

How do we stay on top of those producers

all around reliability and economicefficiency?

Should we consider outsourcing allof these problems to firms that have

grown into giant, supply-chain,process managers for storebrands and now haveindustrial divisions?


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Could mimicking the private brandstrategies from the world of retailers beless successful in a commercial orindustrial distribution channel?

PLP Demand Replenishmentvs.

Branded Product Push


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Recent Wal-Mart Admission

Castro-Wright...We learned that providingcustomer choice wasnt about more product,

but about carefully selected product...

We made big bets in growth categories likeelectronics...Providing brands that gaveus authority.


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10 Second Quiz

Private label growth has altered thepower structure of the aftermarket.

Yes No


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10 Second Quiz

What should manufacturers do to counterthe private label growth trend?

A) Produce private labels to limit disruption. B) Partner (the PLP distributor) effectively to

craft Win-Win relationships.

C) Innovate brilliantly to beat private labels.

D) Fight selectively to marshal resourcesagainst private labels.


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Enjoy the Beach!

www.wade-partners.com


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Heavy Duty

Aftermarket Implications:

Global Trends in

Distributor Private Label

Bill WadeWade&Partners


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Types of private labels

Store brands - The retailer's name is very evident.

Umbrella branding - Generic brand, independentfrom the name of the retailer.

Exclusive brands- Name used in one category.

Group brands - Brands are typically seen inindependent stores that cannot afford own PLP.

Copycat labels- Owned by a retailer which usesimilar trade dress as a leading national brand.

Who makes store brands?


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Who makes store brands? Large national brand manufacturers that utilize

their expertise and excess plant capacity Small manufacturers who specialize in particular

product lines and concentrate on producing storebrands almost exclusively.

Offshore manufacturers that produce private labelproducts for specific markets

Now a Turnkeyproposition

012 dissecting trends

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