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Retailing of Private Label Brands in India, Private label in Indian retail market

Retailing of Private Label Brands in India, Private label in Indian retail market

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    Private label report Private label report Document Transcript

    • Report on Retailing of Private Label Brands in IndiaSubmitted by:Group 2 1
    • ContentsINDIAN RETAIL SCENARIO ....................................................................................................................... 3PRIVATE LABELS ...................................................................................................................................... 4EVOLUTION OF PRIVATE LABEL BRANDS ................................................................................................ 5 Private Label Growth in India.............................................................................................................. 5COMMERCIAL OBJECTIVES BEHIND LAUNCHING PRIVATE LABELS ........................................................ 7 Higher Margins.................................................................................................................................... 7 Stronger Customer Loyalty ................................................................................................................. 7 Differentiation..................................................................................................................................... 7 Freedom with Pricing Strategy............................................................................................................ 7 Positioning during economic downturns ............................................................................................ 7PRIVATE LABEL MATURITY CURVE .......................................................................................................... 8PRIVATE LABELS – ADVANTAGES AND DISADVANTAGES ....................................................................... 8 PLR Disadvantage ................................................................................................................................ 8 PLR positive aspects ............................................................................................................................ 9COMPARING NATIONAL BRANDS AND PRIVATE LABEL BRANDS ......................................................... 1010 P’s OF PRIVATE LABEL BRANDS ........................................................................................................ 10TYPES OF PRIVATE LABELS .................................................................................................................... 11NEEDS, WANTS AND DEMANDS CATERED BY PRIVATE LABELS............................................................ 11PRIVATE LABEL BRANDS IN INDIAN RETAIL .......................................................................................... 13 PROMINENT PRIVATE LABEL BRANDS IN INDIA ................................................................................ 14 1. FUTURE GROUP ......................................................................................................................... 14 2. MORE ........................................................................................................................................ 16 3. SHOPPERS STOP ........................................................................................................................ 19PRIVATE LABELS IN E-COMMERCE INDUSTRY....................................................................................... 21OBSERVATIONS FROM RETAIL STORE SURVEYS ................................................................................... 22 SURVEY .............................................................................................................................................. 22 IMPLICATIONS FOR INDIAN RETAIL MARKETER ................................................................................ 26 CONCLUSION..................................................................................................................................... 27Appendix ............................................................................................................................................... 28References ............................................................................................................................................ 30 2
    • INDIAN RETAIL SCENARIOWith more than 12 million retail outlets, India has one of the highest retail densities in the world.The retail landscape in India is dominated by mom-pop stores and though organized retail isemerging, it still constitutes a minuscule 3 per cent of overall retail in the country. But last 4–5 yearshas seen many Indian companies making a entry into organized retail, with a few multinationalsentering in the cash-and-carry formats and others tying-up with Indian companies. Most prominentones are Reliance, Futures group, Spencer‘s, and A.V. Birla Group.The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail sales willgrow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the expanding middle andupper class consumer base, there will also be opportunities in Indias tier II and III cities. The greateravailability of personal credit and a growing vehicle population to improve mobility also contributeto a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales inIndia are forecast to undergo enormous growth over the forecast period. BMI further predicts thatsales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is aconsequence of Indias dramatic, rapid shift from small independent retailers to large, modernoutlets.China and India are predicted to account for almost 91 per cent of regional retail sales in 2010 andby 2014 their share of the regional market is expected to be more than 92 per cent. Growth inregional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual average of 14 percent. India should experience the most rapid rate of growth in the region, followed by China.Established retailers are tapping into the growing retail market by introducing innovative storeformats. Spencers Retail, More (owned by Aditya Birla Group) and Shoppers Stop (owned by KRaheja Group) already plan to expand. According to a McKinsey & Company report titled The GreatIndian Bazaar: Organized Retail Comes of Age in India, organized retail in India is expected toincrease from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market andreach US$ 450 billion by 2015. 3
    • PRIVATE LABELSPrivate labels are brands owned, merchandised and sold by retailers themselves. These can becategorized into store brands, store sub-brands &Umbrella brands. They are also called in-store orown brands. Private labels are unique to a particular retailer and they can be divided into a numberof categories where the retailer‘s name is evident on packaging. From apparel, healthcare productsand furnishings to consumer items, they are making their presence felt in a variety of retail items inIndia. Globally, private labels contribute 17% of retail sales with a growth of 5% per annum.International retailers like Wal-Mart of USA and Tesco of UK have 40% and 55% own label brandsrepresentation in their stores, respectively. Private label penetration in the United Kingdom is closeto 37 per cent currently, and is forecast to exceed 40 per cent by 2011. In Germany private label hasshot up from 12 per cent of sales to 34 per cent over the last decade. And apart from the multi-brand retail stores, a category of retailers like Ikea, Toys ‗R‘ Us, Zara has also been created who sellonly private label brands.Private labels are getting retailer attention due to profitability promise. Emulating internationalcounterparts, where private label are increasingly gaining significance, most department stores,supermarket chains, hypermarket chains and discounters in India are promoting private labelproducts. The fundamental reason for this is the much higher margin and profitability on suchproducts, compared with branded alternatives. Indian retailers are increasingly hoping to ride on theattractive proposition of private label products that promise higher quality, lower prices and 100percent availability to consumers and at the same time offer up to three times higher operatingmargins to the retailer.The increase in market share of private label brands has been attributed to growth of organizedretail. In the United States, private label brands account for 20 percent of sales in super markets andmass merchandisers. The overall share of private label brands as a percentage of the total consumerpackaged goods in North America and Western Europe is expected to grow from 20 percent in 2000to almost 30 percent in 2010. For some countries in Western Europe like United Kingdom,Switzerland, and Germany where organized retail has consolidated presence, share of private labelsis already more than 30 percent and it is expected to go even higher.Growth of organized retail chain in India has also led to growth of private label brands in India.Indian economy has seen average growth rate of 6.8 percent since 1994, putting purchasing powerin the hands of customer. Though initial growth of private label brands in India has been limited tocertain categories like grocery and apparel, it is expected to expand into many other categories aswell. The Central Statistical Organization estimated the economic growth of India for the secondquarter of 2010 to be 8.9 percent. Currently, organized retail in India is estimated to have only 5percent share. In the total retail market, it is expected to grow at 25-30 percent. Thus, with thegrowth of organized retail in India, the private label brands are also expected to grow as experiencedin other developed countries. The growth of private label brands in India presents an interestingopportunity for the retailer to understand the motivations of consumers behind choice of privatelabel brands. 4
    • EVOLUTION OF PRIVATE LABEL BRANDSWith continued economic expansion and retail growth, India is set to become US $ 450 billion retailmarket by 2015, comparable in size to Italy (US$ 462 billion) and much larger than Brazil (US$ 258billion today). What‟s more, India is perhaps the last „virgin‟ BRIC market for organized retailers.The game here has just begun, with organized retailer accounting here for just 5 percent of today‟smarket and likely to expand anywhere between 14 to 18 percent by 2015. By that year, it is expected65 million household will patronize organized retail, amounting to over 300 million shoppers. Severalretailers in India are focusing on private labels in fresh foods, home products, apparels, cosmeticsand appliances. India is a highly unbranded market. In most categories branded players hold 10percent of the total market, compared to 40 to 60 percent in other markets. This is a uniquephenomenon suggesting that the India brands of tomorrow will be retailer brands. Private labelbrands continue to do well in the grocery sector as families remain focused on low-cost products. In2008, private label gained popularity due to escalating concern over the economy and rising foodprices. In spite of prices stabilizing in 2009, consumers have continued to purchase lower-cost items.Private label becoming more acceptable to the mainstream; a trend that we anticipate will linger.Studies show that 8 out of 10 consumers are driven mainly by price, which is reflected in thescrutinizing of brands in contrast to private label for the best deal and seeking sales offering thelowest priced. Brands, however, are not necessarily giving up market share easily and are ready todo battle. They continue to lead in innovation and value and should not be underestimated.Meanwhile, data shows that heavy buyers, a relatively small group of consumers, constitute the bulkof private label sales (about 62 percent). This provides evidence that there are many moreopportunities to reach consumers who are subject to brand influence. Manufacturers, who deliveron the brand promise, while also offering coupons, can salvage migrating customers.Private Label Growth in IndiaAnd now, the role of private labels is gaining significance in the developing markets too. In Indiathere is a growing trend towards acceptance of private label brands and thus their penetration is onthe rise especially in the apparel, consumer durables, home care and FMCG segments. India is still anunder-branded country and in each category there is still a lot of scope for growth, this is where theprivate label comes in and the story is looking good so far.For instance, Future Group has already tasted the success with its Tasty Treat brand which is justbehind Frito Lay in the potato chips segment. Its Care Mate in the baby diaper segment has leftbehind Huggies in the in-store sales. At Spencers, diapers and agarbattis sell more than marketleaders across the store chain.Experts comment that when it comes to local tastes and preferences,private label brands have an advantage over national brands and this reflects in the increasingpercentage share of these goods in Indian retail chains.As the figure shows, among the major Indian players, the degree of private label penetration is thehighest in Trent with 90 per cent, followed by Reliance Retail (80 per cent) &Pantaloon (75 per cent) 5
    • 6
    • COMMERCIAL OBJECTIVES BEHIND LAUNCHING PRIVATE LABELSThere are certain objectives that a retailer has in mind before getting into private label goods.Higher MarginsPrivate label goods are cheaper to produce than branded goods. Besides, due to the lack ofadvertising and marketing expenses they provide double advantage to the retailer when it comes tothe profit margins. While majority of branded goods provide margins in the range of 6-12%, privatelabel goods can offer margins up to 40% . Not only they give a higher margin to the retailers, privatelabels have also changed the balance of power between brand manufacturers and retailers, givingthe latter a decided advantage when negotiating terms with the brand manufacturers.Stronger Customer LoyaltyAs the private label offerings increase and the quality is assured, a high sense of loyalty is cultivatedamong its customer base. This customer loyalty is the result of an affinity with the retailer brandwhich implies that the development of private label brands can tangibly enhance the retailer‘s branditself. So in the long run, the private labels become an important tool for the retailer to establish itspositioning and strategically attract the target customers to its outlet. Numerous studies have alsoshown that private label buyers are more store-loyal and not as easily influenced as brand buyers.DifferentiationThrough private labels, retailers get a chance to bring in unique products in their supply chains thathave not been branded before. So if a retailer can cater to the local tastes and preferences of theconsumers well by top quality private labels then they can differentiate themselves from otherstores and become destination stores. In effect, it‘s a win-win situation even for the producers whoget a chance to display their produce.Freedom with Pricing StrategyA retailer promoting a private label has the added benefit of greater freedom to play with pricingstrategies, as a result of which these are overall cheaper than brand leaders. For instance, in USA,some private labels are 25 percent cheaper than leading brands . In addition, since it is an ownprivate label, the retailer has the freedom to create its own marketing strategy and have morecontrol over its stock inventory. This command of all the stages that a product goes through, givesthe retailer high flexibility in pricing.Positioning during economic downturnsThe growth of private labels is likely to continue in the current financial environment as cash-strapped consumers perception of the products as a cheaper option changes. The price advantageof private labels leads to the belief that these score in times of economic meltdown, and further thatthis newly-acquired market share is maintained even as the recession swings out. Even after theeconomy bounces back, consumers will naturally gravitate towards products marked at lower pricesyet offering the same quality, especially where the retail name is a trusted national or regionalplayer. 7
    • PRIVATE LABEL MATURITY CURVEPRIVATE LABELS – ADVANTAGES AND DISADVANTAGESThe share of private labels is related to the level of retailer sophistication and concentration in thecountry. In economies where retail is more consolidated, private label shares are both higher andexpected to grow faster. However, the Indian retail industry is highly fragmented at the moment andorganized retail is in its nascent phase presently with contribution of about 5% to the whole market.In this stage, the private labels that are launched play mostly the price game to compete with thebranded products. At this stage, most private labels which have acceptance are at the bottom of thepyramid of retail products. However, as the retailers mature and gain experience they want to moveup the pyramid where realizations are higher. As the figure depicts, over a period of time as themarket matures, the retailers shift their focus from price to product quality which leads them to astage where they can launch their own brands in the premium category expecting to capture thebrand equity and the customer loyalty built over years of good service. The consumers too, at thispoint, have enough trust and confidence to accept premium products from the retailer.PLR DisadvantageThe only downside of PLR articles is that these series of articles that you simply obtain arent unique,since these are quite often sold to a number of people, though the numbers of articles sold arerestricted.Then again, since you might be permitted to alter the articles’ content, youve got the capability tomake the articles unique, and even arrange it in an extremely numerous manner and tone that willresult to be an original piece.Merely put, when you have a smart thing with words and also the talent for writing, the outcomewith the article that you simply will sell is totally distinct from everybody elses and instead of 8
    • competing with some 400 other people whove the incredibly identical “private label rights” asyours, by simply changingthe content, rearranging the chapters, adding new sections, deleting some irrelevant paragraphs,constructing a catchy title, altering the author’s name into yours, then you have an original post.PLR positive aspects 1. Saves time. For a nicely researched, informative and excellent superior write-up to be written, containing a few chapters and comprising of about fifty pages, it could fairly nicely take at least fifty hours of your time and effort. With PLR contents, you effortlessly get instant content material access. 2. No “outbound links”. With PLR articles, you will be not obligated to incorporate “outbound links” in the ending of ones articles. No distracting advertisements signify your readers can concentrate nicely on your articles. Take note that you can add links for your web site or your affiliates. 3. Expense effective. Hiring an individual to write articles for you possibly can be high-priced, costing about $17 apiece; so then in the event you want a 50 page article, then it is going to price about $850. Whereas PLR articles are a lot less expensive generally available for $29 - $30 for 200 PLR articles. 4. PLR articles might be revised or altered. You may add some chapters and delete some too. You may rephrase words and add your preferred keywords, which is a fantastic influence in achieving high search engine rankings. 5. It is possible to brand your personal name. Practically anybody getting one thing prefers to buy from an individual they trust and know. With your PLR articles, that you are in a position to display your name inside the write-up as the author then you might be supplying clients with valuable data. Then when prospects are pointed to your web page, seeing your name when much more, they instinctively have that certain feeling of realizing and trusting you. 6. PLR articles are entirely complete. At just a glimpse, “private label articles” articles offer 1 with the entire “view” in the contents issues and components involved. 7. Usually, nearly all “private label articles” are professionally written and compiled or collected using the most up-to-date research, investigation and data done by skilled writers. Whenever you obtain and then use “private label articles” from a trustworthy seller, then you will be guaranteed that you are getting good quality. Just remember that you look into the terms, creating certain that you are allowed to alter the content material, as this really is the only way that PLR articles may be employed with full benefit. 9
    • COMPARING NATIONAL BRANDS AND PRIVATE LABEL BRANDSNATIONAL BRANDS PRIVATE LABEL BRANDS1. Product recognition — almost 1. You have control over your pivotal product,everyonerecognizes the names of the and that means over your business.leadingnationally branded coffees. Millionsofdollars are spent advertising theseproducts, 2. It is the only way to be able to market highmaking them easier to sell. quality products, if you so choose.2. People can choose between variousfamiliar 3. Retailersave substantially in product cost. Youlabels. can spend these savings on anything you please, including higher product quality.3. A buyer interviewing a private labelsalesmanand a national brand salesman islikely to have 4. You have no competition for the brands thatmore confidence in the latter,all other aspects of you carry. No one can trade on your name legally. This is a strong motivational plus for yourtheir presentationsbeing equal. salespeople.4. Consistent quality control 5. With your exclusive brand you can, if you5. The nationally branded companies wish, enters the entire Out-of- Home markethelppromote sales with and for you, albeit supply.salesfor their own brand. 6. You can sell the mystique as well as the real6. Nationally branded products aregenerally quality of your brand, enabling you to achieve aavailable in constant supply fromlocal higher average selling price (though manywholesalers with short lead times onordering. operators make the mistake of selling their private label for a lower price than the national brands).10 P’s OF PRIVATE LABEL BRANDS 1. Product: quality is equal to national brand. 2. Partnership: work in extra mile in terms of support,marketing,merchandising, e.t.c. 3. Planogram:ensuring every product leads to sales and profit, delist the slow movers. 4. Packaging:reflect quality and performance of overall brand &from inside as first impression, as 70% of purchase decision only at pop. 5. Pricing:provides the high perceived value to customer without leaving profit. 6. Position:position mark the one that you want to compete directly against 7. Push: let the branded player spend money to develop category awareness, once customer in store, retailer have major impact. 8. Personnel:Same person promoting branded as well as PLs 9. Promotion: by display and through features to gain customer attention. 10. Pride: take pride in your brand, treat it and market it with the respect it deserves. 10
    • TYPES OF PRIVATE LABELSStore brands - The retailers name is very evident on the packaging.Store sub-brands - Products where the retailers name is low-key on the packaging.Umbrella branding - A generic brand, independent from the name of the retailer.NEEDS, WANTS AND DEMANDS CATERED BY PRIVATE LABELSHistorically, private labels have not been too keen on innovation. Private Labels had mostly beentrying to imitate national brand competitors rather than looking at consumer needs directly. Theonly differentiating factor would be to sell the goods at a lower price. The branded labels would thenbe forced to reduce their own price to survive the competition, thereby erasing the margins forthemselves and for private labels alikeThat‘s why, it is more important for private labels to innovate and customize to stay in the marketand retain margins and it is imperative for them to find out the customers’ needs and then createwants and desires based on those needsPrivate labels are not only beneficial for retailers but are equally beneficial for the customers. Privatelabels cater the needs, wants and demands of the customers by making them available to customersat lower prices.How do Private labels bring out latent needs?The following Strategy should be followed by the private labels for bringing out the needs: Looking for gaps in the market that branded players cannot fill  "Tesco Finest". Tesco Finest introduced the idea of ready meals and chilled foods  Difficult for branded players to prepare and distribute Exceeding the effectiveness of similar products from big brands  Certainly less risky to duplicate a successful product  But if the products have a definitive differentiating factor that the original lacks, will work in their favour  More and more US retails introducing products that are USDA-certified, greenand support health and wellness. Targeting wants that ideally become needs  needs are more or less rational i.e. no emotions are involved  Wants are very emotional, and products and services addressing emotions will be more successful. Ethnic Merchandizing - depending on the demographics of a store location  Bringing non regional products into right ethnic catchmentsNeeds: Needs are basic human requirements. The products like wheat, rice, sugar are the necessaryfor human and that‘s why can be classified as needs. Retailers often find it difficult to makesuccessful private labels in the categories where there are generic brands like Colgate or Tata Salt.Therefore, they enter in the categories like sugar, where there are no dominant brands. This is 11
    • beneficial for the retailers as it shields them from the fierce competition. But it is also beneficial forthe customers as private label products of same quality are available at lower prices. Consider forexample, Big Bazaar sells 5 kg sugar under the brand name of Renuka, which is around 15-20 %cheaper than other 5 kg packs available in the shop. In this way, by catering the needs of thecustomers, private labels create a win-win situation for both customers and retailers.Wants: Wants are needs directed to specific objects/services that might satisfy the need. Forexample, television can be classified as wants as it will satisfy the need for entertainment. Privatelabel brands have entered into the segments like Microwave ovens, TVs to cater the wants of thecustomers. For example, Big Bazaar has developed Koryobrand for catering the demand of thecustomers in the category Microwave ovens and television.Demand: Demands are wants for specific products backed by an ability to pay. When a private labelbecomes highly successful, it grows from private label to private brand. The superior quality at lowerprice creates demand for the product. Private labels also createthe demand for the product becauseof their lower price. For example, John Miller from Pantaloon might sound like a classy garment fromWestern world to untrained ears is a substitute for a big brand like Peter England, because itofferssame quality at lower price. The price range of John Miller is in the range of Rs 300-600 and isaffordable for the customer who may not afford Peter England. Thus, by the principle of higherquality-lower price, private labelscater the demand for the masses. 12
    • PRIVATE LABEL BRANDS IN INDIAN RETAIL  Bharti Retail Easyday/ Wal-Mart  Great Value (Grocery)  George (apparel)  Home Trends (Home Furnishing)  Mainstays (Plastic Containers)  Kid Connection (toys, clothing)  Tesco/Trent Star Bazaar  Tesco Value  Daisy  All About Men  Reliance Retail  Reliance Select  Reliance Value  Dairy Pure (dairy Products)  Future Group  Tasty Treat(Processed Food)  Sach (Toothpaste)  Ektaa (Community Food)  Premium Harvest (Staples)  Fresh n Pure (Dairy Products)  Cleanmate (Homecare)  Caremate (Personal Hygine)  Aditya Birla Retail  More(Staples)  Blue Earth(Apparels)  True(Footwear) 13
    • PROMINENT PRIVATE LABEL BRANDS IN INDIA1. FUTURE GROUPPrivate labels owned by Future Group outsold several national brands in home care and packagedfood categories at their retail stores as value conscious consumers opted for best bargain in anuncertain economic condition and soaring headline inflation despite consumer goods companiesaggressively betting on modern retail to drive future growth rate.In Big Bazaar stores, which started selling own brands four years ago, private labels are among thebest sellers in at least a dozen product segments. Future Group Chairman Kishore Biyani believes itsbrands such as Tasty Treat and Clean Mate are now established. “Three years ago, our private labelsales grew mainly because of experimentation and trials by consumers. But now, sales are driven byrepeat purchases,” says Biyani.a) Big BazaarBig Bazaar currently has seven different private labels including Tasty Treat, Fresh & Pure, CareMate, Clean Mate, Quit, Wow and Maniarrs, offering 47 different product lines. Food Bazaarundertakes below-the-line in-store promotions such as attractive dangle.From the time Big Bazaar had the run in with Frito Lay and was denied stock of their snack brand,what happened is an indication of the growing power of Private Labels - the only tangible effect wasthe increase in consumption of the private label Tasty Treat making it the largest selling snack brandwith 16% market share. It is disputable whether they might have reached such sales figures if theystill stocked Lays. Yes, the power is shifting slowly from the manufacturer and is increasingly aidedby private labels. 14
    • Big Bazaar aims at a diversified product portfolio with specific lines of niche goods that cater to thelocal taste, identified through the better contact they have with end users than manufacturers. Thus,apart from cornflakes, cheese, ghee, butter, toothpaste and even diapers, they have entered theniche markets through their community foods brand Ektaa.According to Big Bazaar executives, private labels mean a 15% savings in retailer margin, 7% indistributor margin and 5% in marketing costs – this translates to 27% net savings which is transferredto the customer thus ensuring higher sales even in categories without extremely high demand.Marketing efforts involve strategic placement of products next to the main competitor so thatvisibility is increased and there is an effort to gauge the merits of the private label against the majorbrand. There is high emphasis on the price aspect, in fact, the labels are distinctly categorised asopening price point labels, promotional labels, trade-up labels and deep-discount labels. Further,there are ads placed at eye-level to the customer and products are sold as a bundle, for instancenoodles and sauce in a combined offer – this way it is also easier to get relevant feedback regardingthe suitability of the products.b) John MillerFacts about John Miller: John Miller is a brand is a decade old brand which came into existence in 1995. Came as an extension of the Pantaloon in the executive segment. The John Miller brand is targeted at the premium segment customer Priced at a range of Rs 300- 600 It can be called as the first Indian private label to embark on mass media campaigns. The brand uses the tagline " makes it look easy " John Miller had grown from a private label to a private brandSuccess StoryJohn miller is the first private label apparel brand of the future group. It is a brand is a decade oldbrand which came into existence in 1995.It is the perfect example of a private label which has notonly survived for more than a decade but has also improved its brand image. In fact, John miller has 15
    • grown from private label to private brand. The future group has more than twenty stores. The JohnMiller has helped the Future group in following aspects:1. Differentiation: John miller was one of the very first private label apparel product that came intoexistence in India. The brand which provides higher quality at lower price is a tough competitor forbrands like Peter England. The brand‘s success can be estimated from the fact that Future Group hasopened more than twenty stores only for selling the apparel brands. John Miller has stepped out ofPantaloons shadow. John miller helped Future Group in differentiating from the contemporaryRetail stores.2. Lower Pricing-Higher Sales: The Price range of John miller shirts are in the range of Rs 300-600,significantly lower than branded shirts like peter England. The private labels of future group hasturnover of more than Rs 100 crores per annum. Overall, John Miller is an attractive option for valuebuyers. Over the years, John miller has matured as private label maturity label as shown below:2. MOREIn 2007 the retail arm of Aditya Birla Group known as Aditya Birla Retail Limited acquired asouth based supermarket chain and ventured into the food and grocery retail sector andexpanded its presence under the brand “more.‟ with two formats Supermarkets andHypermarkets. 16
    • Private Labels of MoreFeasters, Kitchens Promise, Best of India, Enriche, 110%, Pestex, Paradise, Germex.a) Feasters Corn flakes Segmentationstrategy for“Feasers corn Flakes” -a MORE private brand(PrivateLabel). S. No. BaseType Segmentation Explanation Segments Criteria 1 Geographic City Different tierof cities Tier1, Tier2, havedifferent needs, Tier3, Metros buyingpatterns,culture and otherdifferences. 2 Demographic Age Different agegroups Under 6yrs, 6- havedifferent food 11,12-19,22- requirementand eating 34,35-49,50- habits. 60,60+yrs Familysize Familysizematters Young-single, whenchoosinga Young-married- particular food product no children, based on consumption Young-married- levels. children, Old- single, Old- married-no children,Old- married-children Income Different income levels Low,Lower havedifferent spending Middle,Middle, capacity. Upper Middle, High During economiccrisis people tend to save money. Occupation Occupation plays an Unskilled important role in worker, Skilled choosingfood products worker, Petty dueto time constraints traders, Shop and timingvariations of owners, work. Businessmen, Industrialists, 17
    • Targeting:S. No. BaseType Segmentation Segments Target Segment Criteria1 Geographic City Tier1, Tier2, Tier3, Tier1, Tier2, Tier3 Metros2 Demographic Age Under 6yrs, 6-11,12- 6-11,12-19,22-34 19,22-34,35-49,50- 60,60+yrs Familysize Young-single,Young- Young-single,Young- married-nochildren, married-nochildren, Young-married- Young-married- children, Old- children single, Old- married-no children, Old- married- children Income Low,Lower Middle, Lower Middle, Middle Middle,Upper Middle, High Occupation Unskilledworker, Skilled worker, Skilled worker, Industrialists, Petty traders, Shop Self employed owners,Positioning:Taglines used byMORE:Hamesha extraThemain positioningstrategy:Private Target Benefits Value Pointof Pointof Differentiationlabel Customers Proposition Parity Difference StrategyproductFeasters Youngpeople Lower Aproduct Comparable Lower Readily– inmedium Price, that quality Price, available onMORE incomegroup Compar provides Better shelf,Lowfood with health able same value Shelf Price,brand conscious quality to customer Placing lifestyle, low at lower Strategy loyaltystatus price. and white collar jobs. 18
    • 3. SHOPPERS STOPShoppers Stop Limited is a chain of Retail stores in India owned by K. Raheja Corp.Group - The Company houses a host of many international & domestic brands across variouscategories such as apparel, accessories, cosmetics, home & kitchenware as also its own privatebrands.SS started in 1991 with its first store in Andheri, Mumbai.SS has built robust management systems tocapitalize on the growth potential in the organized retail space, particularly the department storesegment.With a Gross Retail Turnover of Rs. 8996 million, Shoppers Stop has become the highestbenchmark for the Indian Retail Industry.Of the 204 brands stocked by the Rs 400-crore (Rs billion) Shoppers Stop, only five are private tags.Private labels contribute to 20% of the sales.These include: Stop: the oldest and the strongest of the in-house brands, caters to the youth segment Mario Zegnoti: Men’s Casual Wear. Austin Reed: International brand, exclusively sold in SS Life: for youth and the mid segment Kashish: the premium ethnic ladies wear Vittorio Fratini: a premium mens wear EllizaDonatein: an exclusive brand for ladies formal and casual wear Features of private labels 19
    • Price tag: These products are priced substantially lower than the other brands.Depth ofassortment: The private labels are not limited to a particular category, it isextended from apparel for men, women to children.Store Space: These products are not differentiated from the other brands in terms of storespace. They operate in 18-20% space only.Since private labels are not advertised as much as the other brands the costs of the privatelabels are lower enabling the store higher margins as well as permitting them to offer theircustomers quality products at lower price points.Shirkhande explains, “Getting a product iseasy, but the fundamental objective of a private label is to expand the category per se and nottake market share from established players.Shoppers Salil Nair says, "The objective is not tooutsmart competition. We have to give value to the consumer." 20
    • PRIVATE LABELS IN E-COMMERCE INDUSTRYIndia’s largest e-commerce venture Flipkart.com has forayed into private label for digital accessories,such as laptop bags and camera pouches, under the brand Digiflip. Digiflip is starting with 10-12SKUs, with laptop bags priced between Rs 500 and Rs 1,100, laptop skins ranging from Rs 350-Rs400, camera bags priced at Rs 1,099 and camera pouches costing Rs 200-Rs 500.It seems that the branded products in these segments are more expensive than those of Digiflip’s.Similar but branded camera bags usually cost Rs 2,100-Rs 6,500 while good laptop bags may costanything between Rs 700 and Rs 4,900. However, branded laptop sleeves seem to cost as much asDigiflip products.Flipkart, which has been aggressively expanding into various product categoriesover the past one year, is not the first e-commerce player to launch private label, but its moves aremost keenly watched, given its depth of category penetration. Keep track of this space to find outwhen and how Flipkart is expanding its private labels to other categories.Private label is a key area of interest for both offline and online retailers globally and also in India.Such products are sourced by retailers from third party suppliers and sold under fresh brandscreated by the retail chains.Typically, these products are sold at a lower price, compared to the branded products, which helppush volumes in the value-for-money segment. Such products also ensure higher margins. Apparel isone of the main categories where various e-commerce firms have launched their private labels.Says Mr Vivek Gaur, CEO of e-commerce site Yepme.com, which has just launched a new range ofprivate label fashion-wear for men, “We decided to focus on private labels when we realised thatlarge external brands were handing down last seasons or end-of-lifecycle products to us. This isespecially true in the apparel business.” He contends that online retail continues to get a step-sisterly treatment from large brands.Mr K. Vaitheeswaran, Founder and CEO, Indiaplaza.com, a pioneer in the e-commerce industry,agrees that private labels have become the bread-and-butter products for online retailers. “But thissituation has arisen because online retailers created an image of discount retailers,” he says. Andbrands that did not want to either offer large discounts or create the ‘discount image decided tooffload end-of-lifecycle stocks to online retailers.Launched in 2011, Zovi.com is building its business model on private labels, as compared to otherswhich mostly sell known brands. The site has developed its own courier services and supply chain incities where it has good traction. “We know it is a challenging task to make a brand well known. Butif you create a good brand online, you set a high entry barrier for newcomers,” says Kavindra Mishra,founder-member and VP, sales. “Our design team has senior people with a successful track recordand great understanding of consumers.” 21
    • OBSERVATIONS FROM RETAIL STORE SURVEYSDuring the course of this project, we visited several such retail outlets and also found somesecondary information from internet. Here is a pen picture of what we found: 1. Store space: Nearly 40-50% of the store space was dedicated to store brands. These products shared the shelf space with other branded products. For example, in the Reliance store that we visited, its curd brand Dairy Life was placed next to the other brands, such as Amul. 2. A number of store brands: This is especially true for apparel. Shoppers Stop has several in house brands. For example, in the women‘s wear category itself it has STOP, Kashish, Remika etc. Similarly, in the men‘s wear category, it has STOP, Life, VettorioFratini, and so on. These products are not differentiated from the other brands in terms of store space. 3. Price tag: These products were priced substantially lower than the other brands. For example, Reliance‘s tea brand sported a price tag of Rs 118 for 500 gms, whereas Brooke Bond, which was placed just next to it, was available for Rs 132 for 490 gms. 4. Catered to a number of categories: In these stores, the store brands were not limited to a particular category. For example in Shoppers Stop, it extended from apparel for men, women and children to crockery, kitchenware, and even furnishings. Similarly, in a Reliance store, it extended from pulses to spices, noodles and even dairy products.SURVEYA total sample of 100 was taken and convenience sampling was used to get those surveys filled. Thefirst question asked was whether you purchase Private Label brands or not. Out of 100, 87 peopleresponded in favor and 13 said that they have never purchased any PL Brand. These 13% could bethose who are very brand conscious and purchase only the national brands. Do You Purchase PL? No 13% Yes 87% Yes No 22
    • Out of the 87% people who purchase PL, 36% purchase PL for Apparels and another 36% for FMCG.These mostly include the low involvement product category. For most people, Shopping Malls werethe highest rated area from where they could conveniently purchase PL Brands. Category Purchase for PLs Source of PLs Internet Others Grocery Other 9% 0% 13% 0% Speciality FMCG Stores 36% 32%Apparels 36% Shopping Mall Consume 59% r Durables 15%When people were asked to rate PLBs on a scale of 1 to 5 as to whether they agree to followingcharacteristics of them as strongly disagree to strongly agree, people rated the following -> Confidence in PLBs Economical to Buy PLBs Strongly Strongly Strongly Strongly Disagree Disagree Agree Disagree Disagree 3% 0% Agree 7% 14% 10% 17% NeutralNeutral 20% 28% Agree 48% Agree 53% 23
    • PLB association with luxury PLB’s good for image Strongly Strongly Strongly Strongly Disagree Agree Disagree Agree 0% 10% 7% 10% Disagree 30% Disagree 23% Agree Agree 30% 33% Neutral Neutral 27% 30% PLBs have youthful image It is securing to use PLBs Strongly Strongly Strongly Disagree Agree Disagree Disagree 3% 10% 7% 0% Neutral Strongly 17% Agree Agree 36% 23%Disagree 44% Neutral Agree 20% 40% I find PLBs simple to purchase It’s reasonable to buy PLBs Strongly Strongly Disagree Strongly Disagree Strongly Disagree Agree 7% Agree 0% Disagree 17% 17% 20% 10%Neutral 13% Neutral 30% Agree 33% Agree 53% Warranty is provided with PLBs I think that PLBs are innovating 24
    • Strongly Strongly Strongly Strongly Disagree Agree Disagree Agree Disagree Disagree 3% 0% 13% 14% 17% 10% NeutralNeutral 28% 27% Agree Agree 43% 45% 25
    • IMPLICATIONS FOR INDIAN RETAIL MARKETER1. Identify the needs of your customer baseThe private label should provide the required functional as well as emotional attributes and benefits.Keeping in mind that it already has a price advantage, this ensures that it takes into account needsthat are important to consumers and hence, offers a reliable point of difference from other categoryplayers. By offering a differentiated value proposition, a private label utilizes the approach thatnational brands use to arrive at a holistic benefit proposition rather than the specific positioningthey use. This furthers its promise that has been already informed by the competition, confirming itscategory membership, but is clearly not a me-too expression. It is also successful as it demonstratesa commitment to offer consumers multiple choices and varieties with distinct attributes, benefitsand price points.2. Leverage the Consumer ConnectionA successful private label has the ability to own the consumer connection and has the capacity tostrike a chord with consumers in multiple categories of products. Unlike national brands, privatelabels are offered exclusively through a specific retailer and can easily surpass specific categoriesbecause they have a consumer focus rather than a product focus as their brand foundation. Thesebrands instigate trustworthiness and allegiance from their loyal consumers that the parent storebecomes their conscious and obvious retail source for certain categories. Moreover, thesecategories may be the reason that consumers are initially drawn into the store, but once they getthere, the store also has the prospect of encouraging them to spend more on impulse purchases.Therefore, the private labels not only reinforce enduring loyalty and positive feelings for the retailbrand, they also enable the retailer to capture a more significant share of the consumers‘ heart,wallet, mind space and lifestyle than a national brand.3. Communicate at the Point Of SaleRetailers need to be more cognizant of the significance of the communication with the consumer atthe point of sale. They own the canvas consumers shop on and thus, through store environments, in-store messaging (like signage), merchandising systems, and packaging as well as external messaginglike circulars, catalogs and advertising in a congruent manner, the retailer is able to create a lastingimpression in-store, at shelf, at the time of purchase and during usage. Retailers need to make surethat they send out the right message at these interaction points. Moreover, many of these messagesdo not require revolutionary change for extended periods of time, so they perpetuate a persuasivebranded voice and don‘t require constant investment from the retailer.4. Collaborative category managementCategory management is instrumental for a retailer to realize its own-brand goals and aspirations. Tomaximize the efficiencies of product flow throughout the distribution system, a retailer must be 26
    • aligned with the supplier. The relationship between the retailer and trade should becomeincreasingly about cooperation and lesser about the retailer negotiating with the manufacturer orsupplier on price. By joining hands, they can strengthen their trade relationships and ensure that thecategory as a whole remains profitable and emotionally appealing to the customer resulting in bothprivate label and branded goods as winners. They can collaborate in understanding and decidinghow to optimize the product lines and Stock Keeping Units (SKUs) that will progress the categorydefinition as a whole and determine planograms and shelf allocations to rally the greatest degree ofcategory interest and excitement from consumers.5. Manage Brand Architecture the right wayBrand architecture is a critical consideration for private label marketing. Once the brand propositionsolidifies, the brand architecture strategy enables decision makers to promote this promise at thestore level in order to stimulate a sense of familiarity, recognition and trust. Also, private labels havebroader set of aisles than national brands. Because of this, it becomes more and more important todifferentiate its attributes and benefits on an aisle, category and product basis. So the implicationfor the retailer is to strike the right balance of similarities and differences with brand messaging andportfolio offerings.CONCLUSIONThe growth of private labels in the Indian retail industry is inevitable but retailers do need to keep afew things in mind. Promotion of own label and allocation of large shelf space at the expense ofwell-marketed national brands can depress the overall size and value of the category while on theother hand, joining hands with them and following principles of category management can create awin-win situations for both. Retailers need to realize the importance of consistent brand messageand should ensure that the product quality backs it well. Moreover, when used as an umbrellabrand, the brand portfolio should be managed properly as to avoid any negative impact on the storebrand. To conclude it is quite evident that as the Indian retail industry consolidates over nextdecade, retailers will look to differentiate among themselves and private labels will form a highlysignificant part of their strategies. 27
    • Appendix QuestionnaireSurvey on Private Labels* RequiredDo you purchase private label brands? * Yes NoGenerally in which category you purchase private label brands? * FMCG Consumer Durables Apparels Grocery OtherWhere do you buy the private label brands from? * Shopping Mall Specialty Stores Internet Other:Mark the following statements with 1 if you strongly agree to, 5 if you strongly disagree * 1 2 3 4 5I feel confident when I use PLBs I find economical to buy PLBs PLBs may be associated to luxuryI find PLBs good for one’s image PLBs have youthful image 28
    • 1 2 3 4 5 It is securing to use PLBs It is securing to use PLBsI find PLBs simple to purchaseIt’s reasonable to buy PLBsWarranty is provided with PLBsI think that PLBs are innovating It is convenient to purchase PLBsName *Age * 15-20 21-25 26-30 Above 30Gender * M F 29
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