Report on

Retailing of Private Label Brands in India

Submitted by:

Group 2

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ContentsINDIAN RETAIL SCENARIO......................................................................................................................3

PRIVATE LABELS.....................................................................................................................................4

EVOLUTION OF PRIVATE LABEL BRANDS...............................................................................................5

Private Label Growth in India............................................................................................................5

COMMERCIAL OBJECTIVES BEHIND LAUNCHING PRIVATE LABELS........................................................7

Higher Margins..................................................................................................................................7

Stronger Customer Loyalty................................................................................................................7

Differentiation...................................................................................................................................7

Freedom with Pricing Strategy..........................................................................................................7

Positioning during economic downturns...........................................................................................7

PRIVATE LABEL MATURITY CURVE.........................................................................................................8

PRIVATE LABELS – ADVANTAGES AND DISADVANTAGES.......................................................................8

PLR Disadvantage..............................................................................................................................8

PLR positive aspects...........................................................................................................................9

COMPARING NATIONAL BRANDS AND PRIVATE LABEL BRANDS.........................................................10

10 P’s OF PRIVATE LABEL BRANDS.......................................................................................................10

TYPES OF PRIVATE LABELS...................................................................................................................11

NEEDS, WANTS AND DEMANDS CATERED BY PRIVATE LABELS...........................................................11

PRIVATE LABEL BRANDS IN INDIAN RETAIL..........................................................................................13

PROMINENT PRIVATE LABEL BRANDS IN INDIA...............................................................................14

1. FUTURE GROUP.......................................................................................................................14

2. MORE.......................................................................................................................................16

3. SHOPPERS STOP.......................................................................................................................19

PRIVATE LABELS IN E-COMMERCE INDUSTRY......................................................................................21

OBSERVATIONS FROM RETAIL STORE SURVEYS...................................................................................22

SURVEY............................................................................................................................................22

IMPLICATIONS FOR INDIAN RETAIL MARKETER...............................................................................26

CONCLUSION...................................................................................................................................27

Appendix.............................................................................................................................................28

References...........................................................................................................................................30

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INDIAN RETAIL SCENARIO With 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 is emerging, it still constitutes a minuscule 3 per cent of overall retail in the country. But last 4–5 years has seen many Indian companies making a entry into organized retail, with a few multinationals entering in the cash-and-carry formats and others tying-up with Indian companies. Most prominent ones 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 will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period. BMI further predicts that sales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's dramatic, rapid shift from small independent retailers to large, modern outlets.

China and India are predicted to account for almost 91 per cent of regional retail sales in 2010 and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual average of 14 per cent. 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 store formats. Spencer's Retail, More (owned by Aditya Birla Group) and Shoppers Stop (owned by K Raheja Group) already plan to expand. According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organized Retail Comes of Age in India', organized retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015.

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PRIVATE LABELS Private labels are brands owned, merchandised and sold by retailers themselves. These can be categorized into store brands, store sub-brands &Umbrella brands. They are also called in-store or own brands. Private labels are unique to a particular retailer and they can be divided into a number of categories where the retailer‘s name is evident on packaging. From apparel, healthcare products and furnishings to consumer items, they are making their presence felt in a variety of retail items in India. 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 brands representation in their stores, respectively. Private label penetration in the United Kingdom is close to 37 per cent currently, and is forecast to exceed 40 per cent by 2011. In Germany private label has shot 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 sell only private label brands.

Private labels are getting retailer attention due to profitability promise. Emulating international counterparts, where private label are increasingly gaining significance, most department stores, supermarket chains, hypermarket chains and discounters in India are promoting private label products. The fundamental reason for this is the much higher margin and profitability on such products, compared with branded alternatives. Indian retailers are increasingly hoping to ride on the attractive proposition of private label products that promise higher quality, lower prices and 100 percent availability to consumers and at the same time offer up to three times higher operating margins to the retailer.

The increase in market share of private label brands has been attributed to growth of organized retail. In the United States, private label brands account for 20 percent of sales in super markets and mass merchandisers. The overall share of private label brands as a percentage of the total consumer packaged goods in North America and Western Europe is expected to grow from 20 percent in 2000 to 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 labels is 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 power in the hands of customer. Though initial growth of private label brands in India has been limited to certain categories like grocery and apparel, it is expected to expand into many other categories as well. The Central Statistical Organization estimated the economic growth of India for the second quarter of 2010 to be 8.9 percent. Currently, organized retail in India is estimated to have only 5 percent share. In the total retail market, it is expected to grow at 25-30 percent. Thus, with the growth of organized retail in India, the private label brands are also expected to grow as experienced in other developed countries. The growth of private label brands in India presents an interesting opportunity for the retailer to understand the motivations of consumers behind choice of private label brands.

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EVOLUTION OF PRIVATE LABEL BRANDS With continued economic expansion and retail growth, India is set to become US $ 450 billion retail market by 2015, comparable in size to Italy (US$ 462 billion) and much larger than Brazil (US$ 258 billion 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‟s market and likely to expand anywhere between 14 to 18 percent by 2015. By that year, it is expected 65 million household will patronize organized retail, amounting to over 300 million shoppers. Several retailers in India are focusing on private labels in fresh foods, home products, apparels, cosmetics and appliances. India is a highly unbranded market. In most categories branded players hold 10 percent of the total market, compared to 40 to 60 percent in other markets. This is a unique phenomenon suggesting that the India brands of tomorrow will be retailer brands. Private label brands continue to do well in the grocery sector as families remain focused on low-cost products. In 2008, private label gained popularity due to escalating concern over the economy and rising food prices. 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 the scrutinizing of brands in contrast to private label for the best deal and seeking sales offering the lowest priced. Brands, however, are not necessarily giving up market share easily and are ready to do 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 bulk of private label sales (about 62 percent). This provides evidence that there are many more opportunities to reach consumers who are subject to brand influence. Manufacturers, who deliver on the brand promise, while also offering coupons, can salvage migrating customers.

Private Label Growth in India And now, the role of private labels is gaining significance in the developing markets too. In India there is a growing trend towards acceptance of private label brands and thus their penetration is on the rise especially in the apparel, consumer durables, home care and FMCG segments. India is still an under-branded country and in each category there is still a lot of scope for growth, this is where the private 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 just behind Frito Lay in the potato chips segment. Its Care Mate in the baby diaper segment has left behind Huggies in the in-store sales. At Spencers, diapers and agarbattis sell more than market leaders 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 increasing percentage share of these goods in Indian retail chains.

As the figure shows, among the major Indian players, the degree of private label penetration is the highest in Trent with 90 per cent, followed by Reliance Retail (80 per cent) & Pantaloon (75 per cent)

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COMMERCIAL OBJECTIVES BEHIND LAUNCHING PRIVATE LABELS There are certain objectives that a retailer has in mind before getting into private label goods.

Higher Margins Private label goods are cheaper to produce than branded goods. Besides, due to the lack of advertising and marketing expenses they provide double advantage to the retailer when it comes to the profit margins. While majority of branded goods provide margins in the range of 6-12%, private label goods can offer margins up to 40% . Not only they give a higher margin to the retailers, private labels have also changed the balance of power between brand manufacturers and retailers, giving the latter a decided advantage when negotiating terms with the brand manufacturers.

Stronger Customer Loyalty As the private label offerings increase and the quality is assured, a high sense of loyalty is cultivated among its customer base. This customer loyalty is the result of an affinity with the retailer brand which implies that the development of private label brands can tangibly enhance the retailer‘s brand itself. So in the long run, the private labels become an important tool for the retailer to establish its positioning and strategically attract the target customers to its outlet. Numerous studies have also shown that private label buyers are more store-loyal and not as easily influenced as brand buyers.

Differentiation Through private labels, retailers get a chance to bring in unique products in their supply chains that have not been branded before. So if a retailer can cater to the local tastes and preferences of the consumers well by top quality private labels then they can differentiate themselves from other stores and become destination stores. In effect, it‘s a win-win situation even for the producers who get a chance to display their produce.

Freedom with Pricing Strategy A retailer promoting a private label has the added benefit of greater freedom to play with pricing strategies, 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 own private label, the retailer has the freedom to create its own marketing strategy and have more control over its stock inventory. This command of all the stages that a product goes through, gives the retailer high flexibility in pricing.

Positioning during economic downturns The 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 advantage of private labels leads to the belief that these score in times of economic meltdown, and further that this newly-acquired market share is maintained even as the recession swings out. Even after the economy bounces back, consumers will naturally gravitate towards products marked at lower prices yet offering the same quality, especially where the retail name is a trusted national or regional player.

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PRIVATE LABEL MATURITY CURVE

PRIVATE LABELS – ADVANTAGES AND DISADVANTAGESThe share of private labels is related to the level of retailer sophistication and concentration in the country. In economies where retail is more consolidated, private label shares are both higher and expected to grow faster. However, the Indian retail industry is highly fragmented at the moment and organized 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 the branded products. At this stage, most private labels which have acceptance are at the bottom of the pyramid of retail products. However, as the retailers mature and gain experience they want to move up the pyramid where realizations are higher. As the figure depicts, over a period of time as the market matures, the retailers shift their focus from price to product quality which leads them to a stage where they can launch their own brands in the premium category expecting to capture the brand equity and the customer loyalty built over years of good service. The consumers too, at this point, have enough trust and confidence to accept premium products from the retailer.

PLR Disadvantage The only downside of PLR articles is that these series of articles that you simply obtain aren't unique, since these are quite often sold to a number of people, though the numbers of articles sold are restricted.

Then again, since you might be permitted to alter the articles’ content, you've got the capability to make the articles unique, and even arrange it in an extremely numerous manner and tone that will result to be an original piece.

Merely put, when you have a smart thing with words and also the talent for writing, the outcome with the article that you simply will sell is totally distinct from everybody else's and instead of

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competing with some 400 other people who've the incredibly identical “private label rights” as yours, by simply changing

the 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 one's 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.

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COMPARING NATIONAL BRANDS AND PRIVATE LABEL BRANDS

NATIONAL BRANDS PRIVATE LABEL BRANDS1. Product recognition — almost everyone recognizes the names of the leading nationally branded coffees. Millions of dollars are spent advertising these products, making them easier to sell.

2. People can choose between various familiar labels.

3. A buyer interviewing a private label salesman and a national brand salesman is likely to have more confidence in the latter, all other aspects of their presentations being equal.

4. Consistent quality control

5. The nationally branded companies help promote sales with and for you, albeit sales for their own brand.

6. Nationally branded products are generally available in constant supply from local wholesalers with short lead times on ordering.

1. You have control over your pivotal product, and that means over your business.

2. It is the only way to be able to market high quality products, if you so choose.

3. Retailer save substantially in product cost. You can spend these savings on anything you please, including higher product quality.

4. You have no competition for the brands that you carry. No one can trade on your name legally. This is a strong motivational plus for your salespeople.

5. With your exclusive brand you can, if you wish, enters the entire Out-of- Home market supply.

6. You can sell the mystique as well as the real quality of your brand, enabling you to achieve a higher average selling price (though many operators make the mistake of sellingtheir private label for a lower price than the national brands).

10 P’s OF PRIVATE LABEL BRANDS1. 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

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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.

TYPES OF PRIVATE LABELSStore brands - The retailer's name is very evident on the packaging.

Store sub-brands - Products where the retailer's 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 been trying to imitate national brand competitors rather than looking at consumer needs directly. The only differentiating factor would be to sell the goods at a lower price. The branded labels would then be forced to reduce their own price to survive the competition, thereby erasing the margins for themselves and for private labels alike

That‘s why, it is more important for private labels to innovate and customize to stay in the market and retain margins and it is imperative for them to find out the customers’ needs and then create wants and desires based on those needs

Private labels are not only beneficial for retailers but are equally beneficial for the customers. Private labels cater the needs, wants and demands of the customers by making them available to customers at 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, green and

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 catchments

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Needs: Needs are basic human requirements. The products like wheat, rice, sugar are the necessary for human and that‘s why can be classified as needs. Retailers often find it difficult to make successful 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 beneficial for the retailers as it shields them from the fierce competition. But it is also beneficial for the customers as private label products of same quality are available at lower prices. Consider for example, 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 the customers, 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. For example, television can be classified as wants as it will satisfy the need for entertainment. Private label brands have entered into the segments like Microwave ovens, TVs to cater the wants of the customers. For example, Big Bazaar has developed Koryo brand for catering the demand of the customers in the category Microwave ovens and television.

Demand: Demands are wants for specific products backed by an ability to pay. When a private label becomes highly successful, it grows from private label to private brand. The superior quality at lower price creates demand for the product. Private labels also create the demand for the product because of their lower price. For example, John Miller from Pantaloon might sound like a classy garment from Western world to untrained ears is a substitute for a big brand like Peter England, because it offers same quality at lower price. The price range of John Miller is in the range of Rs 300-600 and is affordable for the customer who may not afford Peter England. Thus, by the principle of higher quality-lower price, private labels cater the demand for the masses.

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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)

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PROMINENT PRIVATE LABEL BRANDS IN INDIA

1. FUTURE GROUPPrivate labels owned by Future Group outsold several national brands in home care and packaged food categories at their retail stores as value conscious consumers opted for best bargain in an uncertain economic condition and soaring headline inflation despite consumer goods companies aggressively 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 the best sellers in at least a dozen product segments. Future Group Chairman Kishore Biyani believes its brands such as Tasty Treat and Clean Mate are now established. “Three years ago, our private label sales grew mainly because of experimentation and trials by consumers. But now, sales are driven by repeat purchases,” says Biyani.

a) Big BazaarBig Bazaar currently has seven different private labels including Tasty Treat, Fresh & Pure, Care Mate, Clean Mate, Quit, Wow and Maniarrs, offering 47 different product lines. Food Bazaar undertakes 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 was the increase in consumption of the private label Tasty Treat making it the largest selling snack brand with 16% market share. It is disputable whether they might have reached such sales figures if they still stocked Lays. Yes, the power is shifting slowly from the manufacturer and is increasingly aided by private labels.

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Big Bazaar aims at a diversified product portfolio with specific lines of niche goods that cater to the local 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 the niche markets through their community foods brand Ektaa.

According to Big Bazaar executives, private labels mean a 15% savings in retailer margin, 7% in distributor margin and 5% in marketing costs – this translates to 27% net savings which is transferred to 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 that visibility is increased and there is an effort to gauge the merits of the private label against the major brand. There is high emphasis on the price aspect, in fact, the labels are distinctly categorised as opening 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 instance noodles and sauce in a combined offer – this way it is also easier to get relevant feedback regarding the 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 brand

Success Story

John miller is the first private label apparel brand of the future group. It is a brand is a decade old brand which came into existence in 1995.It is the perfect example of a private label which has not only survived for more than a decade but has also improved its brand image. In fact, John miller has

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grown from private label to private brand. The future group has more than twenty stores. The John Miller has helped the Future group in following aspects:

1. Differentiation: John miller was one of the very first private label apparel product that came into existence in India. The brand which provides higher quality at lower price is a tough competitor for brands like Peter England. The brand‘s success can be estimated from the fact that Future Group has opened more than twenty stores only for selling the apparel brands. John Miller has stepped out of Pantaloon's shadow. John miller helped Future Group in differentiating from the contemporary Retail 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 has turnover of more than Rs 100 crores per annum. Overall, John Miller is an attractive option for value buyers. 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 a south based supermarket chain and ventured into the food and grocery retail sector and

expanded its presence under the brand “more.‟ with two formats Supermarkets and Hypermarkets.

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Private Labels of More

Feasters, Kitchen's Promise, Best of India, Enriche, 110%, Pestex, Paradise, Germex.

a) Feasters Corn flakes

Segmen tation strategy for “Feasers corn Flakes” - a MORE p rivate b ran d (Privat e Lab el).

S. No. Base Type SegmentationCriteria

Explanation Segments

1 Geographic City Different tier of citieshave different needs, buying patterns, culture and other differences.

Tier 1, Tier2,Tier3, Metros

2 Demographic Age Different age groupshave different food requirement and eating habits.

Under 6 yrs, 6-11,12-19,22-34,35-49,50-60,60+ yrs

Family size Family size matterswhen choosing a particular food product based on consumption levels.

Young-single,Young-married- no children, Young-married- children, Old- single, Old- married-no children, Old- married-children

Income Different income levelshave different spending capacity.

During economic crisis people tend to save money.

Low, LowerMiddle, Middle, Upper Middle, High

Occupation Occupation plays animportant role in choosing food products due to time constraints and timing variations of work.

Unskilledworker, Skilled worker, Petty traders, Shop owners, Businessmen, Industrialists,

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Targeting:S. No. Base Type Segmentation

CriteriaSegments Target Segment

1 Geographic City Tier 1, Tier2, Tier3,Metros

Tier 1, Tier2, Tier3

2 Demographic Age Under 6 yrs, 6-11,12-19,22-34,35-49,50-60,60+ yrs

6-11,12-19,22-34

Family size Young-single, Young-married-no children, Young-married- children, Old-single, Old-married-no children, Old-married- children

Young-single, Young-married-no children, Young-married-children

Income Low, Lower Middle,Middle, Upper Middle, High

Lower Middle, Middle

Occupation Unskilled worker,Skilled worker, Petty traders, Shop owners,

Skilled worker,Industrialists, Self employed

Position in g:

Taglines used by MORE: Hamesha extra

The main positioning strategy:

Privatelabel product

TargetCustomers

Benefits ValueProposition

Point ofParity

Point ofDifference

DifferentiationStrategy

Feasters– MORE food brand

Young peoplein medium income group with health conscious lifestyle, low loyalty status and white collar jobs.

LowerPrice, Compar able quality

A productthat provides same value to customer at lower price.

Comparablequality

LowerPrice, Better Shelf Placing Strategy

Readilyavailable on shelf, Low Price,

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3. SHOPPERS STOP

Shoppers' 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 various categories such as apparel, accessories, cosmetics, home & kitchenware as also its own private brands.

SS started in 1991 with its first store in Andheri, Mumbai.SS has built robust management systems to capitalize on the growth potential in the organized retail space, particularly the department store segment. With a Gross Retail Turnover of Rs. 8996 million, Shopper's Stop has become the highest benchmark 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 men's wear Elliza Donatein: an exclusive brand for ladies formal and casual wear

Features of private labels

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Price tag: These products are priced substantially lower than the other brands.

Depth of assortment: The private labels are not limited to a particular category, it is extended from apparel for men, women to children.

Store Space: These products are not differentiated from the other brands in terms of store space. They operate in 18-20% space only.

Since private labels are not advertised as much as the other brands the costs of the private labels are lower enabling the store higher margins as well as permitting them to offer their customers quality products at lower price points. Shirkhande explains, “Getting a product is easy, but the fundamental objective of a private label is to expand the category per se and not take market share from established players. Shoppers' Salil Nair says, "The objective is not to outsmart competition. We have to give value to the consumer."

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PRIVATE LABELS IN E-COMMERCE INDUSTRY

India’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 10-12 SKUs, with laptop bags priced between Rs 500 and Rs 1,100, laptop skins ranging from Rs 350-Rs 400, 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 cost anything between Rs 700 and Rs 4,900. However, branded laptop sleeves seem to cost as much as Digiflip products. Flipkart, which has been aggressively expanding into various product categories over the past one year, is not the first e-commerce player to launch private label, but its moves are most keenly watched, given its depth of category penetration. Keep track of this space to find out when 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 brands created by the retail chains.

Typically, these products are sold at a lower price, compared to the branded products, which help push volumes in the value-for-money segment. Such products also ensure higher margins. Apparel is one 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 of private label fashion-wear for men, “We decided to focus on private labels when we realised that large external brands were handing down last season's or end-of-lifecycle products to us. This is especially 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 this situation has arisen because online retailers created an image of discount retailers,” he says. And brands that did not want to either offer large discounts or create the ‘discount' image decided to offload end-of-lifecycle stocks to online retailers.

Launched in 2011, Zovi.com is building its business model on private labels, as compared to others which mostly sell known brands. The site has developed its own courier services and supply chain in cities where it has good traction. “We know it is a challenging task to make a brand well known. But if 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 record and great understanding of consumers.”

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OBSERVATIONS FROM RETAIL STORE SURVEYS

During the course of this project, we visited several such retail outlets and also found some secondary 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, Vettorio Fratini, 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. The first question asked was whether you purchase Private Label brands or not. Out of 100, 87 people responded in favor and 13 said that they have never purchased any PL Brand. These 13% could be those who are very brand conscious and purchase only the national brands.

Yes87%

No13%

Do You Purchase PL?

Yes No

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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 were the highest rated area from where they could conveniently purchase PL Brands.

Category Purchase for PLs Source of PLs

FMCG36%

Con-sumer Durab

les16%

Ap-parels36%

Grocery13%

Shopping Mall59%

Speciality Stores32%

Internet9%

When people were asked to rate PLBs on a scale of 1 to 5 as to whether they agree to following characteristics of them as strongly disagree to strongly agree, people rated the following ->

Confidence in PLBs Economical to Buy PLBs

Strongly

Agree

14%

Agree

48%

Neu-tral28%

Dis-agre

e7%

Strongly Disagree3%

Strongly Agre

e17%

Agree

53%

Neutral20%

Disagree10%

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PLB association with luxury PLB’s good for image

Strongly Agree10%

Agree33%

Neu-tral27%

Dis-agree30%

Strongly Agree10%

Agree30%

Neutral30%

Dis-agree23%

Strongly Disagree7%

PLBs have youthful image It is securing to use PLBs

Strongly Agree10%

Agree23%

Neu-tral20%

Dis-agree43%

Strongly Disagree3%

Strongly

Agree37%

Agree40%

Neu-tral17%

Disagree7%

I find PLBs simple to purchase It’s reasonable to buy PLBs

Strongly Agre

e17%

Agree

53%

Neu-tral13%

Dis-agre

e17%

Strongly Agree

20%

Agree33%

Neutral30%

Dis-agree10%

Strongly Disagree7%

Warranty is provided with PLBs I think that PLBs are innovating

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Strongly

Agree

13%

Agree

43%

Neu-tral27%

Dis-agree17%

Strongly

Agree14%

Agree45%

Neu-tral28%

Dis-agree10%

Strongly Disagree3%

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IMPLICATIONS FOR INDIAN RETAIL MARKETER

1. Identify the needs of your customer base

The 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 needs that are important to consumers and hence, offers a reliable point of difference from other category players. By offering a differentiated value proposition, a private label utilizes the approach that national brands use to arrive at a holistic benefit proposition rather than the specific positioning they use. This furthers its promise that has been already informed by the competition, confirming its category membership, but is clearly not a me-too expression. It is also successful as it demonstrates a commitment to offer consumers multiple choices and varieties with distinct attributes, benefits and price points.

2. Leverage the Consumer Connection

A successful private label has the ability to own the consumer connection and has the capacity to strike a chord with consumers in multiple categories of products. Unlike national brands, private labels are offered exclusively through a specific retailer and can easily surpass specific categories because they have a consumer focus rather than a product focus as their brand foundation. These brands instigate trustworthiness and allegiance from their loyal consumers that the parent store becomes their conscious and obvious retail source for certain categories. Moreover, these categories may be the reason that consumers are initially drawn into the store, but once they get there, 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 retail brand, 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 Sale Retailers need to be more cognizant of the significance of the communication with the consumer at the 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 messaging like circulars, catalogs and advertising in a congruent manner, the retailer is able to create a lasting impression in-store, at shelf, at the time of purchase and during usage. Retailers need to make sure that they send out the right message at these interaction points. Moreover, many of these messages do not require revolutionary change for extended periods of time, so they perpetuate a persuasive branded voice and don‘t require constant investment from the retailer.

4. Collaborative category management

Category management is instrumental for a retailer to realize its own-brand goals and aspirations. To maximize the efficiencies of product flow throughout the distribution system, a retailer must be

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aligned with the supplier. The relationship between the retailer and trade should become increasingly about cooperation and lesser about the retailer negotiating with the manufacturer or supplier on price. By joining hands, they can strengthen their trade relationships and ensure that the category as a whole remains profitable and emotionally appealing to the customer resulting in both private label and branded goods as winners. They can collaborate in understanding and deciding how to optimize the product lines and Stock Keeping Units (SKUs) that will progress the category definition as a whole and determine planograms and shelf allocations to rally the greatest degree of category interest and excitement from consumers.

5. Manage Brand Architecture the right way

Brand architecture is a critical consideration for private label marketing. Once the brand proposition solidifies, the brand architecture strategy enables decision makers to promote this promise at the store level in order to stimulate a sense of familiarity, recognition and trust. Also, private labels have broader set of aisles than national brands. Because of this, it becomes more and more important to differentiate its attributes and benefits on an aisle, category and product basis. So the implication for the retailer is to strike the right balance of similarities and differences with brand messaging and portfolio offerings.

CONCLUSION

The growth of private labels in the Indian retail industry is inevitable but retailers do need to keep a few things in mind. Promotion of own label and allocation of large shelf space at the expense of well-marketed national brands can depress the overall size and value of the category while on the other hand, joining hands with them and following principles of category management can create a win-win situations for both. Retailers need to realize the importance of consistent brand message and should ensure that the product quality backs it well. Moreover, when used as an umbrella brand, the brand portfolio should be managed properly as to avoid any negative impact on the store brand. To conclude it is quite evident that as the Indian retail industry consolidates over next decade, retailers will look to differentiate among themselves and private labels will form a highly significant part of their strategies.

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Appendix

Questionnaire

Survey on Private Labels

* RequiredDo you purchase private label brands? *

 Yes

 No

Generally in which category you purchase private label brands? *

 FMCG

 Consumer Durables

 Apparels

 Grocery

 Other

Where 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 5

I feel confident when I use PLBs

I find economical to buy PLBs

PLBs may be associated to luxury

I find PLBs good for one’s image

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1 2 3 4 5

PLBs have youthful image

It is securing to use PLBs

It is securing to use PLBs

I find PLBs simple to purchase

It’s reasonable to buy PLBs

Warranty is provided with PLBs

I think that PLBs are innovating

It is convenient to purchase PLBs

Name *

Age *

 15-20

 21-25

 26-30

 Above 30

Gender *

 M

 F

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