Retail's 'Exclusive' Club
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Shoppers walking down the main aisle at Target these days are just as likely to see an endcap for Emerge products as they are for Tide. And shoppers at Walmart will encounter a display for Hairitage just as easily as one for Maybelline.
But Walmart shoppers won’t see Emerge products, and Target shoppers won’t see Hairitage items. That’s because those brands are exclusive to each retailer – at least for now.
While brand exclusivity is not a new tactic, the practice is alive and well – and growing – at these mass merchants and elsewhere, including in the convenience store channel.
“Providing exclusive products and experiences is even more important today as the lines that were historically clear between traditional channels are now completely blurred,” says Marissa Jarratt, SVP and chief marketing officer at 7-Eleven. “Convenience and value are table stakes across retail – grocery, drug, dollar, c-store, e-commerce, mass – and so exclusives are a way for retailers to differentiate their offering and position themselves as a destination for shoppers.”
Of course, the benefits aren’t exclusive to retailers. “We like to be a go-to partner for large retailers such as Walmart and Amazon that reach so many consumers,” said one brand marketer in the cosmetics/personal care category while responding to a question about product exclusivity in the Institute’s “Path to Purchase Trends 2020” survey. “It’s a great opportunity to test new things on a large scale and offer something that’s truly geared for the specific retailer’s shopper.”
It’s also a great way to gain greater attention from retailers, who typically are far more inclined to provide promotional prominence to exclusive brands, as the Emerge and Hairitage examples mentioned above can attest (see sidebars below).
One explanation for what seems to have been a recent surge in exclusive brands and products is a change in shopping behavior. “More and more consumers – led by Millennials and Gen Z – are looking for experiences and not just ‘stuff to buy,’” suggests Jarratt. “Discovery and FOMO [fear of missing out] are key drivers for this behavior. One way for retailers to provide experiences is through exclusive items that are only available for a limited time at a particular store, and which have a different ‘story’ that makes the product or service more interesting than it might typically be.”
“The landscape is very dynamic right now, with shoppers more willing to buy brands that they emotionally connect with,” says Elizabeth Gretkowski, senior consultant at WSL Strategic Retail. “For example, brands that are sustainable, organic, ‘free from’ … or brands that offer a compelling value proposition or tell a unique story. Because of the internet (e-commerce, social media, influencers), startups are able to develop new products that gain a following, substantiate their success to retailers, and get distribution in large chains.”
“These types of relationships are exploding. We can likely find three to four dozen major introductions of these exclusive offerings in the last year alone,” says Path to Purchase Institute veteran Steve Frenda, founder and president at Inspiring-Retail. “They are sourced from major brands, led by Procter & Gamble, as well as very muscular emerging brands that have the funding and production capabilities to effectively compete on a large scale.”
P&G, which launched the Gleem, Joy and Just brands only at Walmart in 2019, has stood out among large manufacturers with its agility in offering exclusive brands. “Many times, larger national brands have too many internal barriers that prevent them from jumping on trends quickly,” Gretkowski says.
Some of those barriers at traditional CPGs may be coming down in direct response to those aforementioned emerging brands, who lately have been stealing prime store real estate from traditional players as they sign distribution deals.
Types of Exclusive Relationships
While the number of exclusive relationships seems to be growing, exclusivity may not be any more beneficial now than it was 10 years ago, according to Christopher Brace, founder and CEO of Syntegrate Consulting. “The strategic benefits remain the same, as far as I can see,” he says.
The arrangements can take various forms:
Exclusive brand/product, limited time. “A retailer has exclusive distribution for a limited time before the brands roll out in other retailers,” Brace says. “The benefit to a brand is, this is basically an in-market test-and-learn situation. Another benefit is that it makes them a good partner for the retailer. This gives the retailer something new to talk about, plus it does have the potential of pulling new or light shoppers into their stores during the time of exclusivity.”
Exclusive product, permanent. A brand makes a product or product line for the retailer with the intention of being exclusive permanently. “This is, of course, beneficial to the brand if the line fills a gap in the portfolio,” he says. “This option is the most beneficial to retailers because it provides them a new revenue stream by filling a gap in their assortment to fill a specific shopper target’s need.”
Exclusive brand, permanent. “This is basically a private-label situation,” Brace says. The nature of the relationship would leave the retailer with substantial control. These opportunities are limited.
“Based on what we’ve seen, a period ranging from 6-18 months is most common [for exclusives],” says Brandon Leong, VP of marketing and growth for RangeMe, an online sourcing platform that streamlines new product discovery between suppliers and retailers. “However, plenty of brands will offer specific products to be exclusive for much longer.”
And not surprisingly, the largest retailers get the most attention. In the aforementioned Trends survey (published in the January issue), 51% of respondents said they were already partnering with Walmart and/or Amazon to offer exclusive brands or at least considering the strategy. Their motivations ranged from the desire to foster a spirit of partnership (and/or avoid trade conflict in regard to private label) to the opportunity to test new products on a large scale and increase sales volume.
Whatever the arrangement, the goal is for it to be a win-win situation. “Brands that are open to exclusivity have an opportunity to get their foot in the door and build new retailer relationships,” Leong says. “Additionally, the more hands-on the retailer is, the more a brand will learn, and sell, through this process.”
From the Retailer Perspective
Industry insiders interviewed for this report indicated that exclusive relationships typically start on the retailer’s end. “Retailers have been the ones leading this charge,” Leong says. “Brands, especially when they are newer to market, are more open to working with retailers and creating relationships. This can be a great way for brands to get their foot in the door. We have seen, however, more and more brands offering exclusivity upfront.”
Says WSL’s Gretkowski: “Retailers want exclusives to help differentiate from other retailers – especially in this retail world where everything is available everywhere. This can be in the form of exclusive brands, exclusive pack sizes, exclusive flavors or colors, or exclusive packaging.”
Take, for example, 7-Eleven. When brands partner on exclusives with the retailer, they tap into the massive scale of the 7-Eleven system, gaining the opportunity to drive awareness across more than 9,000 U.S. stores and 10 million-plus transactions per day, Jarratt says. “Providing exclusive experiences to our customers builds consideration and equity for the brand relative to competitors. Depending on the product, it provides additional ‘surprise and delight’ for our customers, especially [the regulars] who visit us multiple times per week.”
The retailer “encourages our manufacturing and vendor partners to provide a point of differentiation vs. the competition,” says 7-Eleven’s Jawad Bisbis, VP, proprietary beverages. “It’s a collaboration with manufacturers that starts during the joint business planning process the year before, where we share and align on strategic priorities and initiatives we want to work on together to build a win-win partnership.”
The Trend Going Forward
Frenda doesn’t see the trend slowing down anytime soon. “Major brands have suffered greatly” in recent years due to negative consumer perceptions about their track record related to such key trends as health and wellness and sustainability, he says. “They see exclusive brands as a remedy to their woes, to some degree, (because] they enter the market with no baggage.”
One respondent to the Trends survey went even further, proclaiming: “Mass market cookie-cutter brands are dead” because good strategy requires building around unique shoppers at key retailers. “Not all shoppers are the same. Retailers have a point of difference, and good retailers build a strategy around the uniqueness of their shopper,” said the respondent, who represents a health/beauty product.
But there are some risks, Frenda admits. “What happens when shoppers discover that these new products are owned by the traditional brands, which they rejected in the first place? And what will be the reaction of Kroger, Walgreens, Target and other retailers to the brands produced by P&G that are now available in Walmart exclusively?”
But if key retailers are asking for it and brands are obliging, why would things change? “Retailers gain the benefit of exclusivity itself, and the demand for the brand is pointed at them,” RangeMe’s Leong says. “So, the bottom line will always be the primary benefit here. Retailers have a bit more control over the product, packaging, etc. Additionally, it positions the retailer as a destination for consumer traffic both in-store and online.”
As another respondent to the Trends survey indicated, brands still need retailers: “We want to serve these leaders in their respective segments of the industry. Amazon was thrilled to have one of our brands used exclusively for them. We always want to partner with our top customers in innovation, which is why we are always open to developing custom-made programs with them – including brands.”
HAIRITAGE AT WALMART
Walmart in January tapped YouTube influencer Mindy McKnight to exclusively launch Hairitage, a line of plant-based solutions for diverse hair care needs. Proprietor of the popular Cute Girls Hairstyles YouTube channel, McKnight worked with Maesa Group, known as a global provider of beauty brand incubation and strategic outsourcing, to launch the products.
The 16-SKU collection rolled out to all stores and Walmart.com. It earned secondary merchandising space in some 1,700 locations for a dedicated endcap display in the beauty department. A dedicated e-commerce shop corrals the products within Walmart.com, touting that everything is priced at $7.94. The destination also offers a video showing McKnight’s family styling their hair with the products. A Walmart circular feature supported.
EMERGE AT TARGET
Target is stocking an exclusive line of textured hair care products from Unilever’s Sundial Brands subsidiary targeting Gen Z multicultural women. Emerge products recently rolled out to stores and Target.com, encompassing six moisture-rich SKUs.
In stores, the SKUs get the spotlight on shelf trays positioned on endcaps that sort the items by those intended to “cleanse & hydrate,” treat and style. A banner ad and promotional page within Target.com support.
To spread brand awareness, Emerge assembled an “Emerge Creative Collective” comprising influencers “with diverse hair types, styles and creative passions.” The influencers include professional ballet dancer Erica Lall, LGBTQIA activist Jessica Zyrie and musician Tonina Saputo.