MAD: Malaysia Retail Industry: Should start to think about branding?

¹Steven Tan Chong Yew

¹ Consumer Marketing

¹(chongyew.tan@gmail.com / steven_tan@oum.edu.my)

Abstract

The retail industry consist of local chain-retailers, International retailer, small-medium and stand alone retailers. It is foreseen that the retail industry will be saturated in the next five to ten years. Are they prepared for the challenge and what should they be doing now? In order to be competitive, retailers are no longer able to compete solely on price or economies of scale. They should start to think about branding, and strengthening their product quality.

Keywords: Retail branding

1. INTRODUCTION: THE POPULATION GROWTH MAY REPRESENT ANOTHER POSSIBLE RISE IN CONSUMER CONSUMPTION?

The Malaysia Social Statistical Bulletin 2003 from Department of Statistics shows that Malaysia’s total population stood at 25.0 million, and over the last 11 years, Malaysia’s population has been growing at a steady rate of 3.0% per annum. The growth of Malaysia’s population may have contributed to the growth of consumer consumption, which in turn leads to the increase number of convenience store, supermarket, shopping centre, and hypermarket. The growth has also acted as a catalyst to the growth of retail industry as a whole. However, overall expenditure by consumers in the market may have just risen vaguely. The saturation of retail outlet in Malaysia have not significantly seen or discussed but the growth of retail outlet in Malaysia posses some skepticism into the future market movement due to the swamp of domestic and international retail investor into Malaysia market.

2. THE POPULATION MAY HAVE RISEN BUT THE SPENDING POWER IS OBSCURE

The retail market consists of domestic and international players. The competition is intensifying from time to time, and the growth of population is not on a par to the growth of retail industry. It does not significantly demonstrate the rise of spending power. It is foreseen that the Malaysia retail market will be saturated in the next five to ten years due to the increasing number of retail opening, and it has also shown that the retail industry is possibly hitting the condition where “supply is more than demand”.

3. RAPID EXPANSION TO ACHIEVE ECONOMIES OF SCALEIS NOT A PANACEA

Retailers are overemphasized on economies of scale; hence, rapid geographical expansion has become a common strategy. They believe rapid expansion offers the necessary economies of scale to compete, and also the strength to exert power over suppliers in so they are able to purchase at lower cost, and priced competitively.

This common strategy ignores the benefit of individual store, quality and standard which may not justify the sole desire for economies of scale. This common strategy has also confined retailers to compete only on price by monitoring their Stock-Keeping Unit (SKUs), analyzing and comparing rival’s price to remain competitive.

Retailers will soon face challenge when competition grows stronger over time with increasing market entry. When the market is eventually saturated and stagnant, either local or International retailers will have to vote for international expansion, again, somewhere around the world, which is rather questionable as internalization of operation will increase cost; the further the distance of expansion, the higher the cost of operation. It also attaches certain crisis which you may need to overcome in foreign country such as the cost and purchasing crisis, management and investment crisis, and many more unforeseen circumstances.

4. WINNING PRICE WAR DOES NOT BRING HEALTHY GROWTH; IT IS NOT SUSTAINABLE!

Most retailers are invariably clinging to ‘pricing strategy’ which ignites price war, and eventually everyone will suffer due to low profit margin. They will also have problem to maintain and foster customer loyalty due to a large number of rivals in the market, and eventually lead to the fissure of customer loyalty. In addition, some retailers are self-confined to serve certain target group, and will soon face difficulty to expand the customer-based as well.

Supermarket such as The Store, Jusco, Bintang, are all expanding, and they commit to provide a better shopping environment with much variety. However, the number of consumer visiting the store is near stagnant. Retailers need to consider the demographic condition of the local market too. With the increasing cost of living of consumers, coupled by the growing retail competition, this will eventually split the market shares, and business may not profitable anymore with constant price competition.

Gradually, the sale of individual retailers will be stagnant. Perhaps, the big players will be able to perform better with their big variety. But, small-medium retailers will probably suffer because they are always the followers, and unable to offer as much.

5. NOT GOOD ENOUGH, NOT BIG ENOUGH OR NOT FAST ENOUGH?

Retail branding has been an emerging trend in the retail market which modernizes current retail tradition. The industry common strategy of rapid expansion for economies of scale may not be so effective anymore. Retailers should focus on branding their services to consumers. Over all, they should commit to create a brand that sells, and penetrate the consumers market. They should first emphasize on brand positioning instead of rapid expansion.

Most retailers are at the stage of self-hypnosis therefore they believe that they are good enough. With current promotional gimmicks, retailers are anticipating customers instead of building customers. Most promotional tactics have become ineffective due to its passiveness. Retailers should not rely solely on discount, display, bundling or free gift to compete; they need to find way to surprise and capture their customers in the market. Hence, they should switch their branding activities to both passive and active-mode. Retailers are no longer selling product; they should start selling ‘brand’, and the brand must be socially and psychologically appeal to create the desire to visit, and the urge to visit your outlets to buy your product.

6. THINK OUT OF ‘YOUR’ BOX

‘Problem may not be solved with past solution’. The retail world is evolving, thus, past branding activities may not be applicable in current retail environment. Furthermore, if branding activities are repeated consecutively, employee will soon take for granted. Employee productivity will become stagnant as employee no longer need to seek for new ideas. It also reduces the momentum for creativity, and it will nurture unpleasant behavioral trend in an organization such as the problem of ‘cognitive branding experience’.

Cognitive Branding Experience is past experience that will bring forth past creativity. This behavioral problem will prevent brand manager to move forward with the market trend. They tend to lose-sight of the market information, and their creativity is shaped through their past experience which may not be applicable in current retail environment. Hence, brand manager needs to creatively find way to plant their brand in consumers’ subconscious mind without affected by their cognitive experience.

7. BRAND CONFUSION VS BRAND ADDICTION

Brand confusion is a branding-plague. It kills the whole branding effort. Retailers must understand that a brand starts with what you do best in the market. Taking Giant Retailer as an example, the name connotes ‘cheap’, compare to Tesco where it means ‘Value’ although their price offer for consumer products is relatively cheaper or on par.

Brand determines the perception of your customer towards your stores and products. It encourages repeat purchase. Skinner in his book, ‘Marketing’, published in 1990, also mentions that, brand signals quality level to consumers, and can be effectively use to gain competitive advantage.

A brand name will tell customer what you are and who you are, most importantly, It also tells what you are good at. A brand must be able to ignite ‘the brand addiction’. Brand should give customers the personal-buying-experience which appeals to customers verbally and non-verbally. Thus, a brand must appeal socially and psychologically as these both factors help to nurture brand addiction that increase customer dependence on your store.

In addition, a brand must be able to build a positive image because brand inference is possible. It occurs when customers are able to relate the quality of the product to the brand. Furthermore, Brand inferences do helps, especially when retailers are looking into ‘house-brand’ initiatives.

8. STRIVE WITHIN THE SATURATION

Apart from geographical expansion, retailers must also refrain from price war, and commit to increase the value of their brand offer. They can build a better customer service program that would increase customer loyalty in order to compete. Retailers also need to ‘think out of the box’. They need to be receptive to change, and understand the future challenge. Therefore, is able to make a quantum leap ahead of their competitors. More crucially, they must provide services that beyond customers’ expectation and strive within the ‘saturation’ in future.

9. REFERENCES

Skinner, S.J (1990), Marketing, Houghton Mifflin Company, Boston, M.A.

Guy, C.M (1994), Grocery saturation: Has it arrived yet?, International journal of retail & distribution management, Vol. 22, No. 1, pp. 3-11.

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Steven Tan Chong Yew

B.A (Hon) Bus. Admin (Marketing Mgt), Anglia Polytechnic University, UK

MBA (International Business), University of Southern Queensland, Australia

NOTE: The views expressed herein are solely writer’s personal opinion. Readers may email writers at chongyew.tan@gmail.com