Taking Market Share In Travel Retail

Brands and retailers can sometimes find themselves at odds. This means that they are inadvertently working against each other. Whilst both parties are looking to grow their business, each have a very different perspective and agenda.

A brand may be focused on achieving growth by challenging the competition. For them, stealing business from their competition might be a motivating factor. For a brand, it can be about outsmarting the competition and taking their shoppers.

For a retailer, the focus is about growing store sales. It isn’t in their interest to have brands competing and stealing each other’s customers. It can be commercially painful for them.

Let’s use an example.

Retailer Z sells 1,000 bottles of Gin A at $30 at 60% margin. They generate $18k of cash margin.

Seafire Gin (a brand that our team came up with when we did a Dragon’s Den / Apprentice style away day!) has Gin A in its sights. Seafire think that they can steal some of Gin A’s customers. They pitch the Retailer Z with a product that is a little cheaper than Gin A but offers the same Margin %.

They want to appeal to an audience that sees the Gin A price point as a little too high and therefore walk out without buying anything. Seafire, will capture the lost sales.

Retailer Z agrees to give it a go. Retailer Z were expecting flat sales Q2 vs Q1. The results are in.

In this fictious scenario, Seafire DID drive unit sales. Retailer Z achieved more than they expected and saw a 10% unit uplift.

So, who were the winners out of this?

Gin A suffered significantly in terms of unit sales and cash sales.

Seafire did well. It stole sales from Gin A and established the dominant market position.

Retailer Z? Well, it is a mixed story. Yes, unit sales grew but cash sales declined and cash margin declined. Retailer Z did more work (handled more volume, processed more transactions and made less cash). The retailers commercial position has been eroded.

There are a couple of options for Retailer Z that spring to mind:

  • Put the price up
  • Reduce the cost price and achieve more margin % and therefore more cash
  • Increase volumes even further

There are of course other options available.

The key message here is that attacking a rival brand to steal share may benefit your brand however, it can lead to lost sales and margin for the retailers. Why would they knowingly do it?

So, when retailers are asking for support, better margins, rebates and various other means, it is likely that they are needing to recover a potential loss in cash margin.

So what should brands do?

  • Focus on what your products can do to attract new shoppers.
  • Focus on how your products can drive incremental sales for the retailer.
  • Consider how your brand can support the retailer in other ways.
  • Never focus on stealing market share (even if that is part of what you are trying to achieve)
  • Understand the retailer perspective and the pressures they are under.

If your products and brands are not seen to be growing the basket, the category and the overall sales, you are going to find the relationship a little challenging.

Have a great week.


Founder & Managing Director
One Red Kite Limited

Author of “Travel Retail : The Insider’s Guide”
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