Whether you are transitioning into the direct-to-consumer (D2C) sphere, or simply want to build a better relationship with your retail customers, your assortment is the key to making your brand stand out from the rest of the competition. In fact, it’s the ultimate do-it-all tool that helps you build a better brand experience, get consumer data, improve your relationships with retail customers, and more.
But how do you make your assortment the ultimate tool in your toolbox?
In this post, we’ll explore differentiated assortments — what they are, how brands can use them, examples, and more — and give you some actionable tips on building assortment strategies that make your brand shine.
Curious? Keep reading to learn more.
Why should brands differentiate their assortments?
Differentiating your assortment is a way to manage your relationships with retailers and consumers at the same time. At its core, the strategic move to differentiate your assortment will help you build better relationships with your retail customers through strategic partnerships and clear expectations of who makes sales in which channels.
Differentiating your assortment is also beneficial when you open a direct-to-consumer channel. Opening a direct-to-consumer line has numerous benefits, but it also creates friction between your brand and your biggest customers: the retailers who buy your products from you and sell them to consumers.
If you sell the exact same products as your retail customers, it’s easy to see the reason for tension. If you price yourself lower than the market average, you effectively undercut your retail customers. And while that lower price can earn you more sales through your D2C channel, you risk damaging overall price perception and your relationship with your customers.
But differentiating your D2C assortment from what you sell to your retailers reduces channel conflict and protects your relationship with your biggest customers.
How brands can differentiate their assortments
There are 3 specific ways that brands can differentiate their assortments, depending on your end goals.
1. Build unique SKUs
Best for: Brands with strong retail partnerships and connections.
One way to differentiate your assortment is by leveraging your relationship with retailers. In this strategy, you’ll build a unique SKU to sell through retail channels and forge a strategic partnership with retailers as a result.
With unique SKUs you can:
- Build better relationships with retailers
- Enrich your own market knowledge with retailer insights
- Reach consumers through channels they already know and understand
In this setup, you can still control your brand image, but you also build a strategic partnership with a retailer who has demonstrated an excellent ability to sell your products. The retailer will be more likely to share their market knowledge with you to build a more profitable relationship.
There are two ways to go about using unique SKUs to your advantage:
1. Unique SKUs for particular market segments
The first way to use the unique SKU strategy is to focus on a particular market segment. If you know a certain segment of the market is more likely to buy certain features, you can build a model of your product specifically for that market segment. You can then push that product through retailers who cater specifically to that segment and who have a history of high sales.
Say you sell notebooks, for example, and notice that the red version of a particular model sells especially well on a certain retailer’s webshop. You can use those insights to create a unique version of the notebook that consumers can only find in that retailer’s store.
This strategy is a win for both your brand and the retailer. Ultimately, the main benefit of this channel, beyond more sales, is a strengthened partnership.
The retailer will get a unique EAN code that is difficult to match, and can also leverage its connection with you to boost its own market image. They will also earn more sales and become the go-to retailer for this target segment.
A great example of a company that does this is Miele. According to Hidde Roelaffs-Valk, one of our consultants here at Omnia,
“That was one of the things I saw [while working at Simon Kucher and Partners as a consultant for Miele]. They would make a special product, a special SKU for specific retailers where maybe one feature is added or the color is a bit different.”
Miele taps into their retail customers’ knowledge bases and analyzes what consumers are buying through each retail channel. If they notice a strong pattern or trend, they will create a special SKU for that specific retail that has the features that consumers on that specific site tend to choose.
2. Unique SKUs for a limited time at high quality retailers
You can also create a SKU that is available through a selective partnership with one retailer for a limited amount of time.
An example of this might be a food item that comes in limited flavors and which are only available at certain retail locations, whether they are a physical brick-and-mortar store or an online retailer.
You don’t need to keep your SKUs limited to that specific retailer forever. You can also stipulate that you will roll the SKU out to the larger market after a certain period. In any case, your original partner will get the first-mover advantage and become known as the place that sells that version of your product.
2. Embrace mass personalization
Best for: Brands selling high volumes of stock with relatively low costs for production alterations.
Mass personalization means you give consumers the chance to customize their product offers directly through your website, while leaving retailers the chance to sell the more “generic” versions of your product in-store.
The benefits of the strategy are numerous. For one, it lets retailers do what they are best at: selling to the masses. This keeps your biggest customers happy, while also opening up a direct line to the consumer market.
With mass personalization you can:
- Talk directly with consumers
- Gather more interesting (and specific) consumer data
- Exert more control over your brand image
- Build a better relationship with consumers
- Maintain relationships with retailers
The best examples of mass personalization come Nike, which allows consumers to make their own products on an easy-to-use website, while they sell generic shoes through their retail outlets. The company is successful in this because they have some great manufacturing processes which make it possible for consumers to order shoes in specific colors and styles and receive them in two weeks.
D2C differentiation isn’t just for brands with tons of money though. You can also look at smaller companies and see the same principle in place. An example of a small company doing something similar to Nike is Doppr water bottles. You can go into a store and buy a plain Doppr bottle, or you can order one online that’s customized with your name, logo, or design.
3. Provide a different service
Best for: Brands in the Fast-Moving Consumer Goods (FMCG) space whose products have a plethora of alternatives.
If your products can easily be replaced by a different brand’s offering, it can be hard to stand out in the market. Differentiating your product based on color or the materials can help, but in many cases it’s just not enough.
This is where differentiating your brand based on additional services is especially useful. With a service differentiator you can:
- Stand out from the crowd
- Disrupt the traditional D2C channel
- Create a unique brand experience
- Foster your relationship with local retailers and service outlets
- Gather more consumer data
There are a few ways to do this. Subscription models are on the rise in the FMCG space, with companies like Harry’s Razors and the Dollar Shave Club disrupting the traditional razor blade market.
Philips also did something similar with their razor and shaving category. The company had an electric razor for women which was a great success and highly coveted, but the high cost of the product created a barrier for many women who wanted to buy. Philips decided to adopt this monthly subscription model for the razor and gave women the product for a low monthly payment. After several months of payment, the consumers would then own the razor outright.
Sales exploded because people were able to afford the lower monthly payment instead of the high upfront cost.
Subscription models are also on the rise in fashion, whether it’s from the brand itself offering a monthly subscription plan to receive more products or through some sort of monthly boxed assortment.
If the subscription model doesn’t sound right for you, you can also think about product maintenance as a way to differentiate your assortment. This can be done in your physical stores, or through strategic partnerships with local repair and maintenance companies. This model can work for a variety of categories, from offering free in-store tailoring services for fashion or discounted repairs at local experience centers.
Can price be a differentiator?
When it comes to your D2C channel, price can be a differentiator, if you wish. But you should be strategic about it. Undercutting your retail customers not only hurts your relationships with your biggest customers, but it also undermines your brand price perception.
So if you want to use price as a differentiator for your assortment, there’s one key thing to remember: your price should differentiate you from other brands selling similar products, not the retailers selling your products.
In other words, your price should follow the retail market, but stand apart from your direct brand competition.
To keep your prices aligned with the rest of the retail market, you need to follow the market and update your prices multiple times per day. But following the market takes significant time and resources if you do it manually.
That’s why dynamic pricing is so important for retailers who are opening their own D2C sales channels. A software like Omnia will automatically check your product prices against the retail market, meaning your prices will always align with what retailers charge.
This not only protects your brand perception, but it also protects your relationship with your retail customers.
Brands: increase your sales, reduce tension with retailers, and maintain your brand image with Dynamic Pricing.
Curious about how to use your price as a strategic tool in the consumer market? Try Omnia free for two weeks and see for yourself. Click the button below to get started.
Grace Baldwin is a pricing and marketing specialist at Omnia Retail. Before Omnia, Grace gained experience in content management at EDIA and through a freelance content management business. She holds a B.A. in Government from Colby College.