INTRODUCTION- Private label brands are on the rise right now everywhere in the world and command a higher unit share than the strongest of national brands in 77 out of 250 product supermarket categories which is an astonishing 31% and even in 100 of those categories, Private Label comes a close second or third position. However, manufacturers do not realize that sales of private labels sales vary with the economic conditions of the country they are operating in. Their share goes up when the economy is suffering and tanks in stronger growth periods. The proof of this claim is evident from the following fact- During the last 20 years, Private Label share of markets has averaged out at a decent 14% of the U.S dollar supermarket sales. This share was 17% during 1981-82 at the peak of the recession and in the year 1994, this share dropped to 14.8% despite receiving media adulation. Private labels have managed to pressurize strong national and international brands but brands must also assess the threats that are possible from private labels and whether they will decline or mature in the future. European Markets have seen quite success with Private Label Brands and compared to USA supermarkets which has only 15% of their sales come from Private Label Brands, European supermarkets has 54% of their sales from PLBs. This is because in Europe, the television markets are highly regulated and hence advertising is limited. Also, grocery chains dominate the entire European landscape and hence retailers hold more power in relation to manufacturers than in the United States of America.

1. 3/8/2021 Retail
Management
Report
Brands Versus Private Labels-
Fighting to Win
Submitted By-
Group 6
Akshit Saxena (UM19133)
Ameeya Kumar (UM19137)
Anant Tomar (UM19144)
Biswadeep Ghosh Hazra (UM19148)
Devark Chauhan (UM19152)
Hemant Hotchandani (UM19156)

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Introduction
Private label brands are on the rise right now everywhere in the world and commands a higher
unit share than the strongest of national brands in 77 out of 250 product supermarket categories
which is an astonishing 31% and even in 100 of those categories, Private Label comes a close
second or third position. However, manufacturers do not realize that sales of private labels sales
vary with the economic conditions of the country they are operating in. Their share goes up
when the economy is suffering and tanks in stronger growth periods.
The proof of this claim is evident from the following fact- During the last 20 years, Private
Label share of markets has averaged out at a decent 14% of the U.S dollar supermarket sales.
This share was 17% during 1981-82 at the peak of the recession and in the year 1994, this share
dropped to 14.8% despite receiving media adulation. Private labels have managed to pressurize
strong national and international brands but brands must also assess the threats that are possible
from private labels and whether they will decline or mature in the future.
European Markets have seen quite success with Private Label Brands and compared to USA
supermarkets which has only 15% of their sales come from Private Label Brands, European
supermarkets has 54% of their sales from PLBs. This is because in Europe, the television
markets are highly regulated and hence advertising is limited. Also, grocery chains dominate
the entire European landscape and hence retailers hold more power in relation to manufacturers
than in the United States of America
Major Frameworks and Concepts Covered
The article covers a wide variety of concepts beautifully; however, due to the concise nature of
this report, we are covering the Ten most impactful concepts covered in this article.
We have tried to give a brief understanding of the concept and have provided suitable examples
apart from the article where ever applicable. They are as follows in no particular order-
1) Private label
A private-label merchandise is one that a retailer gets manufactured by a third-party but sells
under their own brand name. The retailer controls everything about them. That includes the
features of the product, packaging, price, SKUs and everything else.
Private label products are then sold by that particular retailer. As far as consumers are worried,
they're the business's brand' products. For instance, a seller of teamwork software might launch
a private label line of conference call hardware. Those products would get manufactured by
another firm. They'd get sold, though, under the initial business's brand name.
Example Stop from Shopper’s stop

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Source- https://pattern.com/blog/all-you-need-to-know-about-amazons-private-label-brands/
2) Brand strength
Brand strength is a worth given by a company. A brand can keep it up if it manages to build
positive customer price perception; its patrons share the standards of the company and associate
it with the best quality on the market.
Source- http://blog.mswarsresearch.com/the-brand-strength-monitor-rde-chart-of-the-week-
chocolate-candy/
3) National Brands
Brands that are available across the country, produced in large quantities and well known. It
has a pan country reach and sold under a definitive brand name.
Example- Amul

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Source- https://www.marketing91.com/brand-strength/
4) Retail Margins
The retail margin percentage measures the retailer margin as a percentage (%) of the retail
price. This measurement gives a context for the contributions. For example, if you have a Rs
50 retail margin on two different products, but one costs Rs. 150 and one costs Rs 70; the
second product would have a much higher retail margin percentage
5) Brand Equity
Keller's Brand Equity Model, which is most commonly known as the Customer-Based Brand
Equity (CBBE) Model, is a pyramid.
Keller's reason behind the model is meek — to have a robust brand, one must create the right
product image, by constructing ideal brand meetings or experiences. Each involvement with
your brand should leave customers, or potential clientele, with positive thoughts, emotions, and
beliefs. When you are able to show that your brand can deliver value, then you've built brand
equity, and the customer's beliefs will spread to others.

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Source- https://thecadburychocolatier.wordpress.com/cbbe-pyramid/
6) Fighting Brands
A fighter brand is a lesser-priced offering launched by a business to take on, and ideally take
out, precise entrants that are attempting to underprice them. Unlike old-style brands that are
designed with target consumers in mind, fighter brands are created specifically to battle a
competitor that is threatening to take market share away from a company's main brand.
Example Rin by HUL
7) Price Spread
The price spread is defined as the change between the price paid by customers and the net price
received by the creator.
8) Price Elasticity
Price elasticity of demand is the extent of the change in consumption of a product in relation
to a change in its price. Stated mathematically, it is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

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Source- https://tutorstips.com/price-elasticity-of-demand/
9) Sales Promotion
Sales promotion is an advertising strategy where the creation is promoted using attractive short-
term initiatives to stimulate its demand and upsurge its sales.
Example- Flat discounts
10) Modern retail channels
Super & Hypermarkets — Walmart, D-Mart are some of the many hypermarket chains. These
departmental stores require hundreds of acres to whole and run their establishments. Even with
the rise of the digital era, the foot traffic at these stores remains consistent.
Retail Chains — Smaller in size associated to super & hypermarkets, but they have multiple
retail outlets across the city, state, and country. Names such as Reliance Fresh, Big Bazaar,
VMart belong to this category. They may not have acres for their formations, yet they are big
enough to sell your merchandise and promote your brand.
Pop Up Shops —Pop Up shops allow customers to experience a brand’s products. Apple,
Unilever, Coca Cola, and even smaller brands have taken advantage of the pop-up model. The
subchannel is here to stay. Enhance your execution strategy to suit this business model.
Key Learnings
Private Label producing companies have to answer three extremely important questions-
➢ What is the contribution from private label products in their portfolio?

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➢ Will producing private labels cannibalize the national level brands of the company? If
yes then by how much?
➢ What are the fixed costs that are attributable in the production of private labels?
The image below is an example of the comparison between a National Brand and a Private
Label Brand in a packaged foods MNC called Consumer Corporation. As it is evident from the
picture below, the profit is less for Private Labels than for National Brands which is a given at
this point. The contribution from a popular product was found to be $0.40 per pound for the
National Brand and $0.23 for the Private Label. There is a $0.30 difference in the selling price
and as other components are more or less the same for both National Brand and Private Label
brands, profit nosedives and thus making Private Brands only 26% as profitable per unit as
National Brands
What should National Brands do to combat the influence of Private Label Brands
Whether National Brands currently manufacture Private Label Brands or not, there are some
strategies that they can follow to nip the Private Label Brands in their bud-
1) Investing in Brand Equities
Brand Names are the most important asset for a national brand organization and it is one of the
edges that a National Brand has against a Private Label Brand. James Burke, once CEO of J&J
has aptly described brands as “the capitalized value of trust between company and its

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customer”. Brand Managers must make sure to nurture the Brand Equity so that a National
Brand has the trust of consumers and remains ahead of any and all Private Brands
2) Wise innovation
Line extensions are never the answer to increase sales and presence on shelves but all they do
is end up diluting brand value of existing brands of the company and also add extra costs to
burden the company with. Line extensions confuse customers as there are simply too many
brands to choose from. This in turn provides the very base for Private Label Brands to exist
and come into the limelight
3) Sparing use of fighting brands
Managers have to be wary of brands that exist between the National Brands and Private Label
brands. These fighting brands give price sensitive customers a lower cost alternative to other
brands in the market. Sufficient care has to be invested to ensure that fighting brands do not
compete with National Level Brands as it will lead to losses and product cannibalization
4) Managing the Price Spread
The price gap between the distributor and the end consumer has to be monitored at all costs as
consumers will stop buying once products feel they are priced more than their worth or
usefulness. Also, knowing the shape of a brand’s price elasticity curve is extremely essential
to maintaining profitability through smart pricing
Source- Article

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Linkage with the Retail Management course
Consumers are increasingly considering various private labels to be as good as
national(manufacturer) brands. The consumer shift toward private labels benefits retailers as
well since private labels are typically more profitable for them. Furthermore, high-quality
private labels can gain a devoted following and become a powerful driver of customer loyalty
to the retailer. Private labels come in various forms but always offer some local exclusivity for
the retailer that carries them. For instance, some retailers carry private labels that provide an
exclusive trademark, either the retailers’ own name or another name, that only they can sell in
their market. Exclusive marks are the province of large retailers that have the economies of
scale necessary to justify a substantial investment in label inventory.
Brand Alternatives available to Retail chains while buying merchandise:
1. National (Manufacturer) brands - Designed, produced, and marketed by a vendor and
sold by many retailers.
2. Private Label (Store) Brands / House Brands - Developed by a retailer and only sold in
the retailer’s outlets. Similar to national brands, retailers use their name to create a private
label for merchandise.
The Advantages of Private-Labelling for retailers
1. Increased Margins - Typically, since retailers are bypassing upon the brand name of the
private-labelled manufactured product, this has no effect on the added cost for vendors. The
vendors have to spend the money to promote their branded products, but you have to pay
only the incurred product cost without paying a premium for the brand name or the
expensive marketing campaign that goes with it.
2. Reduced Competition - If the retailer who matches prices internally and competitively,
private-labelled products will provide a great deal of benefits. In many cases, the retailer
can get the supplier to make them the same product as their own, but without putting on
their label on to it. Then the vendor can still charge full price for the manufactured product
when the retailer's competition puts the branded version on sale. The retailer also has full
control over the manufactured product, depending on your supplier, such that it can alter
the product to meet or address any customer complaints.
3. Customer Loyalty - If the customer loves the retailer's private-label or private
manufactured products, they will want more from them, and the only place the customers
can purchase their products is in its store. This is a major way to keep for the retailers' to
keep their customers returning time and again.

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Source- https://www.nielsen.com/ssa/en/insights/report/2018/the-rise-and-rise-again-of-
private-label/
Strengths of brands (National brands) for retailers
1. The purchase process favours brand-name products as consumers still require quality
assurance.
2. Brand name goods have a solid foundation on which to build current advantage as they
have already built their customer equity over decades of advertising and quality.
3. National brands have value for retailers as consumers may switch stores if they do not
carry strong brands.
Assortment and pricing of private label – As retailers have not done high marketing for their
private labels. Therefore, customer's impressions are influenced by what they see on store
shelves which results in retailers not making a good impression in the customer's mind. When
the retailer is not able to set up a systematic process for their assortment architecture, they
might pile up on missing out on opportunities like various pack sizes, or flavours.
Retailers need to keep a check on their price measures by keeping a tab on internal and other
competitive benchmarks, as customers would be attracted towards the price gapping and the
perceived value of the product.

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Source- https://www.baytechlabel.com/private-label-products-vs-name-brand-products
Packaging – Retailers are now focusing on a lot on the packaging and using it to differentiate
themselves from national brands. The retailers are not only conveying the functional benefits
but are utilizing their packaging to develop their brand language.
Based upon private labels, retailers are able to get higher sales resulting in higher average pre-
tax profits. Private labels offer both strengths and disadvantages to the retailers as based upon
the private label, retailers can boost store loyalty through exclusivity, as the brand is exclusive
– consumers could not compare prices of the products with competitors, and the most important
being the high margins. But the disadvantages linked with the private label include less
desirability of customers, high investments in design, global manufacturing and sourcing.
Retailers would need to do a high-level assessment such that they are able to look into strategy,
assortment and pricing, packaging, design and sourcing and develop an action plan for each
model.
Private label labels or house brands are those solely owned, controlled and sold by the owner
of the retail store. The Indian retail organization, which is basically stored brand driven are
Westside and Pantaloons. Diverse segments such as accessories, footwear, colas, grain juice,
noodles, snacks, fruit ready, air fresheners, floor cleaners, detergents, etc., are available. The
productivity of thes hop is improved by focusing more on private label brands.
The retailer's centre is shifted towards FMCG, grocery and electronics from apparels and
accessories departments. The progress of private-label brands in India is the main reason for
the growth of organized retailing in India. The Indian main retail market is stagnating at the
basic level, i.e. 9 - 10 per cent of all retail types10.

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Different promotional and positioning strategies are being searched by retailers to differentiate
private label brands in the mind of the consumer. The appropriate retail mix, national rivalry
of different brands and the availability of shelf spaces in the stores are the main challenges
faced by private retailers in India and other countries. The manufacturers usually deliver the
goods under the prescribed label and packaging of the retailer.
The contract makers and manufacturers do the same practice as well. Retailers buy private-
label goods from the supplier or from the manufacturer and then rename, repackage and sell as
a general practice under their own brand.
The name or name of middlemen of the retailer or the combination of the two sell their product
in the market is based on the cooperation between the business and the retailer.
In order to improve overall profitability, large retailers or wholesalers are used for private
labelling. Moreover, smaller retailers may not have sufficient marketing knowledge and funds
to compete with another large national player on the market.
BENEFITS OF PRIVATE LABEL BRANDS
• Due to the decreasing costs of advertising, Private label brands are very lower than the
manufacturer's brand. Therefore the customers can buy the same goods at a decreased
amount.
• In addition, private brand retailers can meet the rivalry and demand because they have more
price control and can still use the price with customer demand.
• It can likewise make the place to checkout publicizing for the client's consideration.
• The purchaser sees an incentive in private name to store reliability and worth. Private name
brand additionally requests to the purchaser concerned.
• Retailers can practice dealing control over makers and have more authority over rack space.
• The results of private brands ought to be advanced more.
• Clients ought to be educated regarding offers and plans identified with private name brand
items.
• The exceptional zone ought to be created to expand private mark deals. · Special VMs are
planned to draw in centre clients
The universe of marking can be isolated in approximately two different ways: marks that are
possessed and advertised by the organizations who really produce the items or administrations,
and brands that are claimed and promoted by organizations who sell these items or
administrations. Since brands are basic to how items or administrations are advertised and sold,
understanding the qualifications, suggestions, benefits and inconveniences for these two
marking approaches gets basic to the business system—regardless of whether you are a
producer, a wholesaler, or a retailer.
Brands that are possessed and showcased by makers are regularly alluded to as "public brands"
or "producer brands." Owners of these brands develop their focused on client base principally
by methods for publicizing straightforwardly to them. At the point when these brands are
showcased accurately, clients will search them out, consequently driving their thought and

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loading by the fitting circulation channels. Maker brands serve the interest of the producer first
and advantage the retailer who conveys them.
When all is said in done, we can infer that the private mark improves its serious situation at the
online channel more than the public brand. This is awful information for producers, and
uplifting news for retailers.