Advertising vs retail: from accomplices to competition

During my marketing days with S.C Johnson, I learned something interesting. The small size of traditional retail shops protects market shares for brands that are market leaders!

Since the small retailers can only afford to stock 1-2 (max 3) brands in a category, they are likely to keep brands that sell more – namely the leading brands. It meant brands that are number 3 or below in a category have a tough time finding retail space.

For big brands, high salience through advertising worked in tandem with low capacity at retail.
So even if the smaller brands created some awareness through advertising, non-availability at shops often killed their chances of converting it into sales.

In the much larger supermarkets, however, with much greater shelf space to keep 6-7 brands in a category, even much smaller brands got a fighting chance, causing a dip in the leading brands’ market share in such stores. Especially in categories where the consumer is open to trying a new brand, visibility at the shop converted into sales due to factors like price, promotion, packaging or just novelty.

It tells us that often, people travel the entire AIDA journey at the shop floor (as opposed to the old model of awareness at home through advertising, and action at the shop).

Indeed, studies showed that shoppers often used their trip to a modern format store to ‘discover’ what was new and expand their awareness and consideration set.

Of course, the reach of modern format stores – limited to the larger urban centres and accepted primarily by the upper LSMs meant the dent in market shares wasn’t significant.

This is where online shopping gets interesting.

With seemingly endless space for brands within a category, it puts tremendous pressure on the established brands to battle a horde of hungry, innovative challengers sitting alongside. Besides, with the rapid penetration of smartphones, online shopping has penetrated both in terms of town class and socio-economic strata.

Retail is competing with advertising as the source of awareness, interest and desire for unheard-of brands and often winning!