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Changing Channels

Posted: August 28, 2008, from the February 2007 issue of GCI Magazine.

The retail environment has been shaken dramatically by a variety of developments, both local and global. In the mature retail environment of North America, the ripple effects are being felt by brands and retailers trying to balance consumers’ needs and wants with a changing global economy. As a result, alternate distribution channels are emerging, granting greater access to consumers.

Conversely, the traditional channels are altering through consolidation, even as retailers continue to blur the line between prestige and mass market.

“Retailers such as Target and Wal-Mart are creating more and more prestige-like methods and working to create private label brands with names. They also may be trying to buy directly from brands as opposed to finding alternative sources to buy from,” said Beth Ann Catalano, co-founder of twist.new.brand.venture. Department stores are fi nding themselves in the position to create exclusive lines, limiting distribution to stand out from the crowd. At the same time, a unique distribution channel has emerged in Canada, where the drug store meets the prestige boutique. “Retailing has become much more sophisticated due to the high level of competition and the need to differentiate brands on the shelf,” said Laura Setzfand, director of marketing for Jason Natural Products and Zia Natural Skincare. Additionally, consumers have diversified to find the shopping experience that works for them.

Changing Environment

The current retail environment continues to erode the image of prestige products, as mass market products become more luxurious and prestige products become more accessible.

“Packaging has become a key factor in the retail market and often plays a signifi cant role in a consumer’s decision to evaluate a product, especially when product functionality is deemed to be equivalent across multiple brands,” said Setzfand. As a result, manufacturers are turning back to department stores and stand-alone boutiques to boost the prestige image of their products and differentiate them from mass-market variants. But as department stores and drugstores consolidate, a few buyers control large but fi nite amounts of retail shelf space.