The cooperative way out of retail strife

Co-branding could be a way around some of the crippling issues facing small retailers. It's something the big players like Hard Yakka and VB are doing with great success.

There is no doubt family businesses in retail have been doing it hard. Australian Bureau of Statistics retail sales data for April showed that a slowdown in the rate of sales growth was evident in the first quarter of 2014, even before the Federal Budget hit consumer confidence.

As Robert Gottliebsen points out, the worst is yet to come with motor industry retrenchments, the end of the mining investment boom, retail retrenchments (which will come as retail shopping swings further to online trading) and shift allowances rise on July 1 (Trouble in store for Australian retailers, June 23).

One possible solution for family businesses in retail is co-branding, which allows one company to work off the halo of another entity. It’s a solution where the whole can be greater than the sum of the parts.

VB and Hard Yakka recently rolled out their co-branding initiative by offering a $30 Hard Yakka voucher inside specially marked cartons of Victoria Bitter and advertising the two alongside one another. Done well, co-branding cuts costs, attracts new customers and strengthens existing relationships.

Family business consultant John Stanley says it could be the future for family businesses.

“One of the things we have to look at is the consumer and the consumer is looking for solutions, not products,” Stanley says. “By co-branding or networking, the small business can start providing the solutions rather than just the product.

“A lot of family businesses are not in that space. They are product thinkers rather than solution thinkers. I think that’s a fundamental change they have to go through. It’s a major shift in mindset.

He says family businesses could seek out “cluster businesses” of the same size. It is dangerous for them to do it with larger business as their message to the customer would just get absorbed and they wouldn’t be able to build their customer base.

“Let’s say for example someone was planning a wedding, a florist could advertise with someone providing a wedding dress,” Stanley says.

Collaboration specialist and head of advice at the Harridge Group, Adrian Shaw, says the model could work well but family businesses need to be careful if, for example, they co-branded for a local wedding.

“If a cake shop and dress shop got together, they could make a decision and implement it fairly swiftly,” Shaw says.

“But it’s also about making sure they maintain their identity if that’s really important to the family business.

“For example if the cake shop has been around for three generations, they don’t want its reputation to be tarnished by having something go wrong with the dressmaker or the photographer.”

He says it also depends on the size of the business. “For some family businesses, the key issue is not only survival but legacy,” he says. “If they enter into a co-branding or joint venture, they have to ask what that means for their brand and reputation.”

Consultant Roger Powell from Whitespaces Management and Marketing Services also thinks family businesses should tread with caution.

“It’s hard enough to get a family to agree to something, but to get two families to agree might be even more difficult,” Powell says.

“In the context of a marketing program it would be viable but I think there would be a whole heap of issues that you need to get around.

“The biggest concern would be is it an equal branding arrangement? Is there one brand that will override another? The other problem with co-branding is you do bring in the baggage of the other brand to your brand as well. So you have to be careful that with any co-branding exercise, you have to be comfortable that what that other brand is bringing with it will reflect well on your brand.”

He says the VB-Hard Yakka exercise works because there are synergies in their target market: the macho male working on a building site. The challenge for any family business, he says, would be to identify those synergies.

“You need to have a reality check: is my brand aimed at the same target, are we working in areas where we have synergies rather than differences?”

And even then, he says, it would have been hard work for VB and Hard Yakka. “I would hate to think of the number of hours of discussion that would have gone between the management and marketing groups of those two organisations,” he says.

Co-branding could be an option for family businesses. Used sparingly and judiciously, it could generate excitement around products and services in a retail market that will need all the help it can get.