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Durable cos plug in to branding

Durable cos plug in to branding

Author | Source: The Economic Times | Friday, Sep 08,2006 8:42 AM

Durable cos plug in to branding

Consumer durable makers have begun sharpening their brand-building strategies as they face a changing and challenging distribution scenario. Companies like LG, Samsung, Philips and Onida have begun focusing on fewer strategic products as technology differentiators and have upped spends on instore branding.

The strategy now is to talk out the technology edge of their brands, leaving the efforts of getting the footfalls to the trade, where both traditional chains and modern retail formats are emerging as the more powerful partner in the business.

“In a commoditised market, it is crucial to get consumers to experience the brand and that is done through a personalised approach instore. Which is why companies are talking about an LCD television or a hometheatre and talking technology to an extremely intelligent and aware Indian consumer,” said S Nagarajan of Philips India.

Retail chains are forcing manufacturers to offer better pricing and display to attract consumers. Spends in promotions and offers are shifting to the retail formats, which are bargaining for higher margins from the manufacturers.

Sources indicate that now durable companies are serious about brand building moves which earlier consisted of merely offering promotions and freebies to attract the consumer's eye. The attempt now is to attract consumers by highlighting differently and reach them at the point of sale.

Top industry officials say it has become more expensive to advertise in a cluttered media and catch the consumers eye through routine promotional offers and freebies. Manufacturers are clearly worried about the changing business equation in the market where trade will begin calling the shots with several players ramping distribution formats across the country.

“Earlier, the durable manufacturers would call the shots. Now, it is mutually decided between the manufacturers and the retail chains about the promotions and the advertising spends,” said Nilesh Gupta of Mumbai-based Vijay Sales, a consumer durable retail chain. However, it is a 'win-win situation', Mr Gupta added.

Increasingly, retail chains are advertising heavily pushing price as the carrot to catch the consumers eye which has impacted brand pull in the market, sources said. Also, at a time when margins are under pressure, due to rising cost and fierce competition, manufacturers do not have enough funds to make significant funds in make serious investments in brand building.

“Companies don't have the money to build brands, I believe that retailers will call the shots in the future and build better equation with the consumers,” said KS Raman, senior industry consultant.

Durable companies spend 30-35% of the revenues as advertising spends, especially during the festive months to push volumes. “Retail chains have become much more demanding and it has become crucial for us to shift a lot of money out of the usual advertising and promotion spends to offer better margins to the retail chains and also focus on real brand building to enhance the pull of our brands.

Identifying technology differentiators in our portfolio and seeking help of brand ambassadors will also help us to be in the mind of the consumer when they walk into a retail chain,” said Girish Rao, VP, LG India.

Modern formats like Pantaloons Retail Solution, Woolworth with the Tatas and the proposed big scale entry of Reliance are also looking at launching private labels while traditional retail chains like Vijay Sales, Sumaria, Soni Moni in Mumbai and Vivek's and Vasant & co in Chennai are ramping up their distribution chains by tying up with private equity funds or other distribution partners.

“The traditional retail chains are getting their act together before the modern formats come into place,” said a Samsung company official. The new crop of retail chains are expected to not only offer multi-branding formats, but also larger shelf-space for individual brands with better MRPs to consumers, information kiosks and area-specific models. Durable manufacturers may end up losing further to the new formats in return for higher volumes.

Retail sales (in real terms) are predicted to rise more rapidly than consumer expenditure during '03-08. The forecast growth in real retail sales during '03-08 is 8.3% per year (compared with 7.1% for consumer expenditure).

Tags: e4m

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