[Herald Interview] Homeplus eyes market expansion with private brand, global sourcing

Private brands -- exclusively manufactured for a retailer -- have for long been making strides, although they are still concentrated in the developed markets of Europe, North America and Australia.

While still in a nascent stage in South Korea, the private brand market has shown exponential growth in recent years, with brand loyalty for large retailers reigning the landscape.

How well a retailer builds trust with its consumers is the key to success, and a lot of that comes from the quality of products, according to Neil Maffey, head of private brands and global sourcing at supermarket chain Homeplus.

“Don’t put anything in your brand that you are not proud of. What is the reason you are proud of the product?” said Maffey in an interview with The Korea Herald.

“Tell people. Tell them what you have done (to be proud of the product). Don’t just let them guess.”

He noted that Homeplus has recently launched a premium private label, Homeplus Signature Shield -- an upgraded version of its original Homeplus Signature brand.

While the private brand items are made to provide good value to customers, the retailer has added a new shield label to accentuate that they are carefully and selectively chosen to give the best value.

“There are items that we reject, that are not good enough (for shield), because you cannot be good at some things and disappoint people in some others. You have to be consistent if you want to build trust.”

To underscore its efforts to please customers, the company chose the storytelling method -- giving details of the product development process on packages.

Maffey, a UK citizen, worked for some 30 years in the retail industry with over 20-year experience in Asia. He first came to Asia to work at Costco Korea in 2000, and moved to other firms such as Tesco Thailand, Watsons Malaysia and Walmart Asia, before joining Homeplus in April 2019.

The retail expert highlighted that there are three “Rs” -- recognition, reputation and referrals – that need to be fully satisfied for private brands to prosper.

The senior executive also said it is important to provide customers with new and pleasant experiences that make them talk about the products with their friends and family.

Over concerns that traditional retailers have been struggling against the rapid e-commerce growth, Maffey explained it is indeed a challenge, but the real focus ultimately comes back to what customers really want.

“Korea is one of the high-ranking countries in terms of online shopping. But underneath that, it is just a way of getting goods to the customers,” Maffey said.

“There’s still a real need to focus on ‘are we selling the things that they want?’”

Also an expert in global sourcing, Maffey has been pushing to break the boundaries to bring quality goods from Europe to Korea.

Homeplus set up an overseas global sourcing office in England in September, the first among rival companies to have such an overseas unit focusing mostly on food items.

The team -- headed by Andy Clarke and consisting of three local European retail experts -- gives the company advantages in terms of efficiency, communication with the locals given their language fluency, and directly importing to remove distribution costs, he said.

Homeplus has been making efforts to strengthen its global sourcing, joining European Marketing Distribution, a prominent European retail alliance of independent retailers in January 2019 -- the first Asian company to do so.

“What I like about Europe is that each country has its own history tradition and style. So for example, you are going to see 12 to 15 different types of biscuits from Europe in Homeplus stores over the next six months,” Maffey said.

For instance, Homeplus exclusively rolled out 14 chocolate products from Frey, a prominent Swiss company in December.

According to the company, it aims to raise the revenue from global sourcing to reach 1.7 trillion won ($1.4 billion) by 2021 -- about 15 percent of total sales.

“Three quarters of our private brand items will be made in be Korea anyway. So it’s really about giving people some choices, helping them to understand that we are prepared to go anywhere in the world to find them good products.”

By Jo He-rim (herim@heraldcorp.com)