Walgreens: Marketing Private Label Cosmetics

Just to be clear on this, we're seeing a stable decline in footfall for the stores and, therefore, as you’re not growing the units, you need to increase the profit and change the mix to increase the profit by linear foot. So that’s changing the mix but they've underestimated the ability to get consumers to purchase private label brands.

Yes, to close the sale. Because now they're having to put their own brands on deal and that's the worst thing that could happen. You put your own brands out there and then you start putting them on deal 26 weeks of the year. You're doing slightly better, maybe your profit is 10% better than what it was, but you still don't have the pull through. You're trying to increase trial by reducing the price of your own brand, and now you've created another behavior which is, "I'm only going to buy these brands when they're on sale." They haven't changed the value equation. It was very self-serving in the beginning; it wasn't customer driven. I'm going through Black Belt Lean Six Sigma training, and I love it because you're squarely focused on customer demand and customer pool. You don't do anything unless you know that you're going to get paid for it. You use modeling and all that kind of stuff to do it. There's so much waste associated with these decisions. So much waste that's happening in the market.

They're looking for transformation for their own self-serving needs versus getting the customer in that mindset and moving them along. All the brands have to be deeply focused on consumer data and insights. Instead of saying, "I need to get a duplicate. I'm inspired by such and such brands. I'm going to copy it and put it out in the market."

That is not deeply rooted in anything other than a self-serving mechanism of the company. In the end profitability, if they have to end up marking this stuff down and deleting it, then it has a drain on the profit. There is no one they can ask to offset the price of their markdown. It's the retailer. You’ve got to think about this a little more to change their economic model.

What exactly are they getting wrong? Is it that they're not focusing enough on the customer? Is it that the product quality is wrong or the marketing story is wrong?

Yes, the marketing story. It's all about marketing in beauty as you can imagine. The product has to work, number one. In beauty, it starts and ends with products. It has to work. It has to do whatever the package says it's going to do and it has to be a good product. Number two, there is virtually no storytelling that happens from these own brands. They don't know about social. They don't know the power of the voice of the community which they're trying to break into. They don't have much following whatsoever. The big brands do and so do the indie.

The independent brands, that were born digitally, have a great following. Think about Glossier, which here in the States is a fast-growing brand. The products aren't really that great, but their consumers think they are. In their head, they think these products were made for me because, "I gave her my opinion about what needs to be done and she took it and I'm going to be loyal to her forever."

They're not that great, technically. They're not that great, they’re ok, but they believe they are. That is priceless. The believability of what a brand is able to do for their community drives loyalty and purchase and profit. More than, I'm just going to do a national brand comparison, like the old-school way of doing national brands, where it's next to Dove. That is a transactional relationship. They'll buy Dove when it's on sale and they'll buy the national brand when Dove isn't on sale.