Brands have power. From McDonald’s Golden Arches to Apple’s minimalist chic, we’re surrounded by smart, entrenched marketing strategies that stick in the mind and prompt us to spend that bit more on a name we trust. But while known brands can add value, better margins can sometimes be found elsewhere – as many furniture retailers are discovering, writes Paul Farley …
From your fridge to your wardrobe, which brands still have clout in your household? While some will seemingly always have a place in our hearts, unbranded goods are finding favour with cost-conscious shoppers – just look at the growth of discounters like Aldi and Lidl.
“It’s basic retail practice,” says Surrey Beds’ Jerry Cheshire. “The non-branded goods usually make the better margins.”
While this approach is most commonly seen in the lower end of the market, more retailers are now harnessing their own unique qualities to sell unbranded goods at higher levels. For example, almost everything Jerry sells is exclusive to Surrey Beds – which now serves as his brand. “I try to offer an enhanced product with added value,” he notes. “This protects my margin and builds my brand, rather than the manufacturer’s.”
He’s not alone. Last year saw Amazon unveil its first UK own-brand furniture ranges, while John Lewis & Partners redesigned every aspect of its Home goods range (3000 new own-brand products during autumn alone), in response to the relative success of its own-brand lines.
Yet established brands also made headway. Shop Direct added seven prolific home and furniture names to its portfolio in one move, complementing its strong own-brand offer with a greater proportion of branded goods, while Furniture Village celebrated its 30th anniversary by issuing a limited-edition collection that celebrated its brand partners.
“The range, quality and diversity of brands that we stock at Furniture Village is one of the key reasons our customers keep returning to us year after year,” says commercial director Charlie Harrison.
In brands we trust?
Few furniture brands are recognised by today’s consumer, and those that do owe much to a legacy of TV advertising. But while commercial breaks once commanded significant attention, modern media is deployed through so many channels (physical and digital, social, mobile and more) that building a brand is a considerably more complex (and expensive).
At the same time, brand disloyalty is rife, notes consumer insight expert Nielsen, which found that while more than a quarter (28%) of global consumers are drawn to the strength and confidence associated with familiar brands, only 8% are actually committed to them.
Branding can broaden a product’s reach and lift its value, but its success depends on how it is perceived. Many shoppers are suspicious of the hidden costs involved when they buy an item with a big-name label, and if a brand is compromised in any way (quality, visibility, identity, authenticity or integrity, for example) it can lose its ability to command higher margins.
Yet despite – and because of – all the advertising noise around us, we still have faith in the concept. The team at InternetRetailing Expo (IRX) states that nearly half (45%) of consumers trust recommendations made by brands. “The encouraging news for marketers is that brands still have the biggest influence over purchasing, validating decisions to continually invest in their own content, websites and marketing campaigns, which in turn lead to knowing their customers better,” says portfolio director, Stuart Barker.
Thomas Small, MD of one-stop-shop supplier TCS, agrees that brand benefits cannot be ignored. “You get more value from brands,” he says. “Some products need a brand just to be credible, but the power of a brand will always out-do non-branded.”
Matches strike
However, the role of brands changed with the advent of online price comparisons. Such transparency meant anyone looking for branded goods could shop around for the best price, bringing stockists previously separated by distance into conflict with one another. Maintaining the price points recommended by brand suppliers became more challenging, prompting further exploration of own-brand strategies.
“We decided to white-label our products many years ago, for exactly this reason,” says Kettle Interiors’ Simon Ainge.
“Online competition is here to stay, and own-branding provides retailers with exclusivity and protects margin,” adds Sussex Beds’ Steve Pickering, who successfully transformed his multi-store independent business to reflect this ethos, bringing added value to white-label products – a strategy which has long been associated with the biggest names in global retail (IKEA and JYSK among them).
“Own-branding is a creative approach to dealing with margin pressure, and over the coming years it will be necessary for retailers to shift towards own-brand models,” he continues. “Consumers buy from retailers – therefore retailers need to become the brand.”
Balancing act
Yet these examples are extremes. More retailers choose to strike a balance between branded and own-brand goods – enjoying the profile and credibility of the former, alongside the freedom to define their own margins and differentiate their online portfolio through the latter.
“Branded goods work at the higher end of the spectrum,” explains Select First’s Tom Bourne. “They are less effective and less important when purchasing is primarily a price-based decision.”
An own-brand strategy enables retailers to compete at every level of the market. Bensons for Beds, for example, offers a mix of established brands alongside a complement of own-brand lines, according to its bedframes and bedroom furniture buyer, James Hollas, who says: “Branding is enormous in retail. As value retailers sell products at a discounted price, non-value retailers then have to work harder to educate customers on paying more than the minimum for their products.
“All our value and mid-range bed frames are designed and commissioned exclusively for us – so here, Bensons is the brand, and it’s a brand consumers can trust. But in addition, our 100% exclusive Conran Collection bed frames are proving that branding can play a significant part in our offer.”
It’s a similar story at sister business, Harveys. “All our products are built to the highest quality standards and are available at affordable, everyday prices,” states head of buying, Kellie Oliver. “We are able to achieve this by working with established brands who customers recognise for quality – but by also developing our own range of products and staying close to the manufacturing process.”
Mike Murray, MD at three-store independent Land of Beds, says it’s important to carefully define the own-brand component in relation to unbranded goods. “We like to differentiate our offering when we think we can add value, and offer our customers something exclusive that we have designed in partnership with a supplier. Most customers are pretty switched on, and if you just try and disguise a product with a change of label, more times than not the customer will see through this, which can lead to an awkward conversation!
“It’s also important to offer branded product – especially if it’s a good-selling range that customers are specially searching for.”
And (as Shop Direct and Amazon demonstrate) it’s important for online retailers to strike the right balance, too. Steve Adams, CEO of MattressOnline, comments: “We are increasing our own-brand strategy, and as a proportion of our sales, this has grown consecutively over the last three years. However, brands are important to our strategy going forward.”
Service sells
The growth of own-brand reflects the increasingly competitive nature of retail. Gone are the days in which a shop could prosper by simply selling goods on – whether they’re trading in bricks or clicks, today’s retailers must offer higher levels of service than their rivals.
Some would argue that it’s not what you sell, but how you sell it – and an emphasis on service before price certainly helps narrow the gap between brand and own-brand products.
“Price comparisons are the nature of the beast, so you need to focus on differentiating by service,” states Mike Murray.
“Brands have a place in the product mix, but I don’t believe that price is always the major driving factor in consumer choice that many portray it to be,” adds Fairway Furniture MD, Peter Harding. “Service levels, reputation and guarantees are all important as well.”
Gavin Boden, business development manager at Rhenus Home Delivery, agrees: “Unless you’re at the bottom end of the market, there’s no reason why you have to compete with online retailers on price.
“You need to offer your customers an unparalleled customer journey/experience, from the moment they enter the shop/website to the moment they receive their purchase. Customers will pay extra for that experience – make sure they can’t get it anywhere else.”
Successful retail is about more than price. Delivering the right product, in the right way, means any business can compete – if they strike the right balance.
