Posted by Sarah Rose on 29 May 2011
More and more retailers are turning to private labeling and exclusive products to drive revenue. With this move comes an investment in building internal product development functions. It is estimated that by 2013, 40% of retailers will generate half of their revenue from private labeling and exclusive products. At FEI11, Michael Kitz, of OfficeMax, talked about this model in his presentation, Retailer Driven Innovation - A Powerful New Business Model.
Here are some key points from Michael's presentation:
OfficeMax innovates "to make more money."
OfficeMax found, if they wanted to innovate, they need to do the customer research. The biggest change OfficeMax was to leverage design thinking by prototyping and using their retail locations to get into the marketplace.
OfficeMax strove to create brands that were meaningfully different. They started with writing instruments and conducted deep ethnographies. Did lots of looking at people shopping at pen aisle...talked to associates and store managers. They found people kept cups full of pens, but had "private stashes" of good pens because they didn't want anyone taking their good ones.
As a result of the research, OfficeMax created the TUL line of writing equipment. The name brand sounded German and evoked images of precision and an air of quality. OfficeMax added jewel tones (not plastic) then, expanded the line and found a manufacturer to make product.
The TUL line provides margins that are much higher than other brands.
All in all, OfficeMax found when people get a little happier in the office, productivity goes up. And, when retailers invest in internal product product development functions, revenue goes up as well.
