The Retail Diversification Dilemma Of Stick Or Twist?

Should brands stick vehemently to what they know or is there space outside of their comfort zone?

Let’s look at this role of finding that space to diversify.

Marie Claire has recently expanded into bricks and mortar (in partnership with Ocado) and the new Fabled flagship store in London’s West End. Amazon has also announced its reach of a fresh food service, AmazonFresh to Amazon Prime members in 128 London postcodes.

2016 has been a year of dipping the brand toe into new areas, or in some cases, out of them.

Let’s discuss with our ongoing Resolution Interiors team viewpoint. This month includes the thoughts of Mike Langley (Sales & Marketing Director), Samantha Hunnybun (Project Coordinator, German Stores), Martin Worley (Commercial Manager) and Pippa Saunders (Marketing Manager).


Retail Diversification Works When You Understand Your Customer Base

“Being in the right place at the right time is key,” highlighted Martin. “It all comes back to the principals of knowing who your customer is and they know what you stand for.”

Pippa continues, “Take for instance a brand such as the Midcounties Co-operative. This is a brand where values are centred on a community with its roots originating during the industrial revolution of the 19th century.”

“Over the years we have seen a diverse portfolio include energy, travel, funerals to childcare. With multiple shareholders, strong regional values become key to the introduction of new product lines. The success of a diversification strategy also comes down to trust from a targeted audience.”

“You have to continually stay true to the essence of your brand and the promise that you make to others.”

Whilst association with a brand’s values and their DNA can enable opportunity, diversifying too far can mean losing authenticity.

Mike looking at Tesco’s journey added, “When you keep you brand promise strong, people make an association, such as the ‘every little helps strapline.’ However, by diversifying into new areas with new partners where the main focus is to amortise the cost of substantial rental fees, it doesn’t always work.”

Having been bought for £49 million in 2013, Tesco have recently sold its loss making Giraffe restaurant chain as they continue to dispose of non-core assets. “A different product to an existing audience has to have the right fit. This example highlights that when you move away from the core business, it doesn’t always work.” Mike claimed.

In the words of Tesco’s Chief Executive, Dave Lewis, “As we stabilise in the UK, we continue to focus on where we can best serve the needs of our customers, while ensuring our business remains sustainable for the long term.”


Clear Values Makes It Easier For Retail Diversification

Samantha highlighted, “When brands perfect what they know, it becomes easier.”

Pippa included, “When you perfect what you know, you add value to someone else. This helps brands have a direct relationship with an audience.”

“The Ted Baker & Moore store in East London, represents a brand who knows who they are. When they opened the store last year selling cycling equipment to eyewear, it didn’t feel unnatural.”

“If we are looking at a formula where diversification works,” highlighted Martin, “this equates to brand value versus brand presence. If a brand wants to be seen in a particular store, then there has to be a good fit, as well as footfall. For instance, look at what Vogue is currently achieving with their pop up café in The Village, Westfield.”


When New Product Lines Compliment The Main Source

When it comes to new product lines there has to be an understanding of the existing customer base. More importantly it serves a purpose.

Since 2012, the NHS has offered its Any Qualified Provider (AQP) scheme. This allows the public to receive selected health services for free from approved providers. This provided Specsavers with a new product opportunity which complimented its core business and could drive substantial growth, whilst also strengthening their brand value.

“When a brand sees a gap in the market and there is a customer fit, it can become a sensible addition,” added Mike.

New areas to explore have provided opportunity for other brands.

In 2013, HMV collapsed under £176m of debt and closed 80 of its 223 stores. In the past year the retailer has made a turnaround by bands performing live in their shops to promote their new albums.

“What this represents is the opportunity to excel in categories that were once staid but to reinvigorate and to do something better,” claimed Pippa. “As we have highlighted in previous articles, brands can now create destinations. When you introduce new product areas, that are relevant and timely, you can bring a brand back to life.”


Lets Round Up

The success of an approach to diversify starts and ends with the customer.

Brands are effectively clubs where people like to feel associated. As trust builds over time, then extension into new areas has to benefit the existing customer base and to build a further sense of kinship.

When a brand deviates from what they promised, this is when trust is lost. Brands who lose out are those who stretch themselves too far.

A brand that is closest to the consumer, will be the one who can gauge development into new areas.

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