April 20th, 2016
It’s no secret the retail landscape has changed significantly in recent years. Consumer behaviour, demographics and spending priorities are changing, as Australia continues down the path of economic uncertainty. This has led to in-store traffic slowing for bricks and mortar retailers and we are seeing sales shrink and competition increase, especially as pure online players disrupt the market. One thing is certain, standing still is not an option. In today’s market, retailers and brands must be more agile, flexible and responsive than ever before. Reinvention is a must.
When making a purchasing decision, consumers today have an overwhelming number of products to choose from. But, with little differentiation between products, it’s becoming increasingly difficult to stand out on the shelves and compete on anything other than price. The problem is, there is a lack of innovation in a number of product categories, with many in danger of becoming commoditised, especially in regards to established products.
Consumers have nothing to choose from
Consumers feel, while there are a large number of products available across categories, in actuality there is little for them to choose from, with a lack of distinguishing features from brands and many having similar imagery and identities. This has led to a few brands dominating their category.
Consumers are struggling to discover new products, with no revolution or evolution to drive interest. This means the purchasing process has become almost entirely functional, with consumers purchasing the majority of products based on their basic needs.
Price is all that is left to drive purchasing decisions. This is not a good thing for brands or retailers, especially as consumers are willing to pay for the quality they require. For instance, recent research from Solaris Paper found 16% of Aussie grocery buyers only buy the cheapest toilet paper brands, with the majority of consumers seeking a minimum quality level prior to making a purchasing decision on price.
To go beyond the battle on price, retailers should look to offer a more upscale experiences that emphasise service, selection, quality, organics, fair trade, and locally grown food. In Brazil, premium grocer Pão de Açúcar has found another way to stand out in an undifferentiated function-driven landscape. It has positioned itself as “the place of happy people”, adding an emotional dimension to shopping, rather than just focus on value, price or quality alone.
Purchases have become routine
With a lack of innovation across a number of product categories, there is consumer appetite to see something new. For instance, in the technology sector, everyone is watching and waiting to see what will come next. But how do you get this same appetite for other, less exciting categories like washing up liquid or toilet paper.
The problem is, consumer enthusiasm to try something new is tempered by a reluctance to risk purchasing a new or different brand, which may not deliver what they require from the product. Even if you did design a better phone than the iPhone, consumer enthusiasm won’t be the same until their requirements have been assured. Any brand will need to reduce this perceived risk by providing reassurance on key competing features across packaging and communications or offering trial incentives.
However, brands have to ensure they avoid becoming a ‘copy-cat’. Although it is necessary to highlight the most required features, it’s important that products reassure or create greater expectations on product experience, in addition to delivering on value. Brands must come across differently to competitors, otherwise we’re back to looking at aisles of the same products.
For retailers, this means stocking brands that offer a greater experience and not just any old also-ran. Be selective. According to research from Nielsen, 59 per cent of consumers in Asia Pacific would switch stores due to the product quality offered.
Standing out in a wall of products
With all the different ways to find, compare and purchase products, companies must make their products distinctive. Looking similar ruins all the hard work brands have put into differentiating from the competition. The effectiveness of any packaging design for a product relies on being able to communicate the superior features, is stylish, looks premium and is differentiated from the competition.
In today’s society, consumers are becoming increasingly vain – just look at the selfie revolution. Almost everything can be perceived as a fashion accessory – whether it be the pen you show off in meetings to the bags given to you after a purchase at your favourite store.
By packaging up products in such a way that consumers feel that the brand fits with who they are, more people will feel comfortable trialling and picking up the product, as well as driving greater emotional connection, increasing loyalty and differentiating the brand in the competitive context.
This is the approach we take when designing our own products. By looking at our competition and consumer perceptions, we are able to differentiate our product offering and design a product that stands out. For EMPORIA, our unique selling point was luxury, as we felt there was a gap in the market for luxury toilet paper. We incorporated this into the packaging, providing us with brand personality. Using standout colours, design and creating a unique and premium looking product that would be prominent on the shelves.
For retailers, think of ways to leverage creative brands on the shelves. Can new materials or technologies be used? Maybe it’s promoting the use of sustainable packaging or implementing an NFC chip to provide consumers with additional information?
It’s no longer just about creating a new product. True innovation can be achieved by ‘shaking up’ and modernising established product categories through re-branding, re-design, re-positioning or re-launching traditional products. It’s time for brands and retailers to re-evaluate and re-energise their offerings. Success will require collaboration between retailers and brands, leveraging each other’s strengths to deliver services and offerings aligned with evolving consumer expectations.
If brands and retailers do not look to address this issue, they will likely see themselves going the way of the dodo, as they race to the bottom to capture market share.
Terry Hughes is the CEO at Solaris Paper, the Australian affiliate of Asia Pulp & Paper