Cost pressures lead to market diversification in cleaning sector
23 August 2013
Stuart Taylor, specialist in cleaning and janitorial products and services at Office Depot, explains how changing market conditions are impacting purchasing habits in the cleaning industry
As procurement departments continue to find ways and means to make cost savings, businesses are increasingly turning to own brand alternatives when sourcing their janitorial and cleaning requirements. And while previously, many might have questioned whether the quality of the products being sourced was affected as a result, this mindset is shifting. For the first time, businesses are recognising the true value of sourcing own brand or typically lower-end products and are now often favouring them over their branded counterparts.
Market conditions have been responsible for this changing dynamic. In austere times, customers are exploring all options to make their budgets work harder and go further and are consequently actively seeking out products and services that offer both good quality and best price, giving them greater value for money. This has led to a gradual, but noticeable, migration away from more familiar brands, particularly within the cleaning sector, and an evolution of own brand product ranges.
In some instances, suppliers offering own brand products have more than doubled their range in order to meet demand and as a result, their penetration in the market has grown. Where previously, there will have been only a handful of products on offer, it has become more of a level playing field, with own brand or lower-priced alternatives matching those sold from their manufacturer branded equivalent.
Not so long ago, many businesses faced the challenge of changing the perceptions that come with offering product solutions at a lower price point. The belief that a premium price point will equal a premium, market-leading product has been a hard one to break. In reality, own brand products are often the same or similar to those sold by the well-known brands – they are just cheaper. All products claiming to have bactericidal or sanitizing properties should be tested to, and pass, European standard EN1276. Where this is the case customers not wanting to compromise on quality and effective germ kill rates are thereby assured of the effectiveness of the alternative brand being considered.
For many brands, having a well-known, premium brand allows for the retail price point to be higher and despite the current climate, some brands have even increased their pricing structures, forcing an even greater disparity between the cost of branded products compared to own brand. This disparity means that currently, businesses can benefit from cost savings of around 30-40% per product if they choose own brand – a saving that has been extremely influential in driving sales.
As well as a rise in own brand purchasing, there has also been a noticeable shift towards brands at the lower pricing end of the market. As businesses recognise the value an own brand product can bring to business, it has gradually allowed for brands with less renowned customer affiliation to enter the market, gain greater recognition among potential customers and consequently, achieve greater market share.
Overall, the cleaning market has diversified greatly. Though a tough economic environment has forced procurement professionals to focus predominantly on cost reduction, it has paved the way for the development of more products, leading to more ranges and therefore more options for the customer. To have a wider range means that despite price pressures, customers can remain in control of purchasing decisions, and base their decisions on varying factors, not just solely cost.
As the economy recovers and businesses start to have more available cash for purchasing decisions, I envisage the market will stay the same. It’s not likely that this trend of own brand or lower-end product purchasing will just be a ‘flash in the pan.’ Instead, more and more businesses will have recognised the value they can bring, as well as the quality of their offering. Distributors should therefore continue to explore opportunities for growth in this area and identify ways in which they can provide a range of high-quality products that are reflective of customer requirements and can enter the market at a competitive price point.