How to make the most of niche brands

It's hardly news that small, niche brands are growing at the expense of mainstream brands. However, working with a small food market recently, I was surprised to see how many of them were matching or even outselling the mainstream brands, in unit let alone dollar terms. A visitor from another planet would have gained a very different view of which brands were mainstream.

Of course, this was an extreme example of the trend, but it does pose some practical questions for the traditional supermarket model that tries to cater for everyone.

First, how to manage the assortment size? The usual response has been to increase the number of products stocked, yet this can leave customers feeling overwhelmed at the shelf and create inefficiencies in the supply chain. It's noticeable that Tesco in the UK has recently announced a 30% reduction in items stocked, to improve the experience for customers.

Second, how to curate the assortment, if the item count is held steady? The obvious answer is to increase the variety of brands stocked by reducing the number of variants. However this can inadvertently reduce choice. For example, one fixture of pasta sauces I looked at recently had a wide array of brands, but there were few flavors to choose from beyond marinara.

Third, how to manage promotions? Many of these niche brands don't have the scale of trade marketing support behind them that mainstream brands enjoy. Yet if trade marketing drives the promotional program, then the program won't feature the products that customers increasingly want.

Technology can certainly help, by enabling the assortment to be fine-tuned at a local level, or by helping individual customers find the products and promotions most relevant to them. However, with the boundaries between mainstream and niche brands increasingly blurred, it needs an organizing principle to curate the assortment and promotions. Many options come to mind: a focus on a particular customer group, on health and wellness or on convenience, to name but three. But trying to be all things to all people is no longer one of them.

What has been your experience with stocking niche brands?

Simon Uwins is a former CMO of fresh&easy and Tesco UK, and author of Creating Loyal Brands (2014). Find him online at www.simonuwins.com.