marketing - Industrial Engineering

MANAGING RETAILING, WHOLESALING, AND LOGISTICS CHAPTER 16 457
Some retailers have returned to a "no branding" strategy for certain staple consumer
goods and pharmaceuticals. Carrefours, the originator of the French hypermarket, introduced
a line of "no brands" or generics in its stores in the early 1970s. Today, a Japanese
retailer has taken Carrefours' strategy a step further by successfully defining its stores with
the no-brand concept.
MUJIRUSHI RYOHIN
Mujirushi Ryohin's full name translates into "no-brand quality products." The Japanese retailer, known simply as
"Muji," has become a huge success, with 387 outlets in 15 countries, including 34 in Europe. Until recently, it
has been known in the United States only through products carried in the New York Museum of Modern Art
store-an $8.00 aluminum business card holder and $42 collapsible speakers. But the no-brand retailerwhich
carries 7,000 products ranging from $4.00 socks to $115,000 prefab homes-is opening a 5,000­
square-foot store in mid-town Manhattan. Its biggest challenge will be deciding what to charge for its wares. In
Japan, low prices are a huge part of MUji's appeal. Another challenge will be to stay true to its no-brand ethos.
MUji's intended audience is young 20-30-year-olds who are tired of in-your-face logos and designer goods. But
its sleek, functional postindustrial products will probably seem anything but generic to U.S. consumers. Muji's
prOducts resonate with the minimal ism of Japan's gardens and haiku poetry, and this is how the company will
differentiate itself among the competition and-whether it wants to or not-become an identifiable brand. 5o
Generics are unbranded, plainly packaged, less expensive versions of common products
such as spaghetti, paper towels, and canned peaches. They offer standard or lower quality at
aprice that may be as much as 20% to 40% lower than nationally advertised brands and 10%
to 20% lower than the retailer's private-label brands. The lower price of generics is made
possible by lower-quality ingredients, lower-cost labeling and packaging, and minimal
advertising. Generic drugs have become big business. Pharma giant Novartis is one of the
world's top five makers of branded drugs, with such successes as Diovan for high blood pressure
and Gleevac for cancer, but it is also the world's second-largest maker of generic drugs
following its acquisition of Sandoz, Hexal, Eon Labs, and others. 51
The Private~Label
Threat
In the confrontation between manufacturers' and private labels, retailers have many advantages
and increasing market power. 52 Because shelf space is scarce, many supermarkets now
charge a slotting fee for accepting a new brand, to cover the cost of listing and stocking it.
Retailers also charge for special display space and in-store advertising space. They typically
give more prominent display to their own brands and make sure they are well stocked.
Retailers are now building better quality into their store brands and are emphasizing attractive
packaging. Some are even advertising aggressively: Safeway ran a $100 million integrated
communication program in 2005 that featured TV and print ads, touting the store
brand's quality.63
The growing power of store brands is not the only factor weakening national brands.
Many consumers are more price sensitive. Competing manufacturers and national retailers
copy and duplicate the qualities of the best brands. The continuous barrage of coupons and
price specials has trained a generation of shoppers to buy on price. The fact that companies
have reduced advertising to 30% of their total promotion budget has in some cases weakened
their brand equity. Asteady stream of brand extensions and line extensions has blurred
brand identity at times and led to a confusing amount of product proliferation.
To maintain their power, leading brand marketers are investing significantly in R&D to
bring out new brands, line extensions, features, and quality improvements to stay a step
ahead of the store brands. They are also investing in strong "pull" advertising programs to
maintain high consumer brand recognition and preference and overcome the in-store
marketing advantage that private labels can enjoy. Top brand marketers also are seeking
ways to partner with major mass distributors in a joint search for logistical economies and
competitive strategies that produce savings. Cutting all unnecessary costs allows national
brands to command a price premium, although it can't exceed the value perceptions of
consumers. 54 "Marketing Memo: How to Compete Against Store Brands" reflects on the
severity of the private-label challenge and what leading brand marketers must do in
response. 65