A Revolution is taking place in the Route to Consumer

oktober 31st, 2013 · by John · Weblog EN

The most important task within the value chain of the consumer goods and services industry is to ensure that the value proposition of the various companies is accurately delivered to the consumer or end user. This route-to-consumer does not consist of a single road. It is a complex array of internal structures providing a complicated set of intermediaries with critical information on pricing and promotion.

The balance of power in the distribution channel from manufacturer to consumer has seen a dramatic shift towards and in favor of the retail industry. The vast majority of the brand owners face a daily battle to get their products on the shelves of ever more powerful supermarket giants. Even when they do get their new product listed, chances are it will not be merchandised the way they want it. Even worse, super markets place their own white-label copycat products next to the ones, for which the brand owner has spent large amounts on R&D and advertising.

Countervailing power however has emerged. A new generation of brands is doing business in a different way, by (again) taking control of the route-to-consumer and reaping huge benefits. The benefits of taking control are evident:

Brand Presentation
A perfect presentation of the brand, with the most profitable lines taking pride of place, rather than lying out of sight on the bottom shelf of the retailer. Imagine putting your brand on a billboard in a central place in the city. People can order your products directly by scanning the QR code, or even better by looking through it by Google glass. The ordered goods get delivered to them the next days

Instant Distribution
Instant, 100% distribution of new products is possible. Take Nespresso for example. This coffee brand is able to do a global, synchronized launch of its annual limited edition range, in a way conventional brand owners can only dream of.

Free market testing
Test new products and get consumer feedback free of charge in real market conditions. Take the example of the billboard again. Put one at Amsterdam Central Station with a mark-up of 10% and one in Rotterdam in with a 10% discount. Measure what happens and you can determine the price elasticity of your products.

When it comes to consumer interaction, brand owners of the future will no longer let retailers rule the distribution channel. They will re-take control of the route to consumer to drive superior growth and stronger brand equity. In future weblog, I will discuss some background and aspects of the revolution that is taking place in the distribution channel from manufacturer.

John Greijmans

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