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Private label strategy

The differentiating factors in merchandise for retailers these days are the private
labels. The transformation of store brands/ private labels has built a WHOLE NEW
SCENARIO. The UK and Belgium lead the list of private labels with over 43 percent
in terms of volume. Private labels range from aluminum foil, tissue paper, to
apparel, food and groceries. This is found most suitable for supermarkets, hard
discount stores and specialty stores. The growth is found to be almost more than 60
percents worldwide, more than manufacturer’s brand but these private labels lack
in quality over market leaders.

Indian context

The old mom and pop store now provides home made wheat flour (Atta), rice
spices, and even wafers (namkeen). Sweet shops in India like k.c. das rasogulla of
Kolkata and panchi petha of Agra , chirag din of Mumbai. In apparel.

Spencer’s RPG group has ready to eat food with 25 % private labels.

Big bazaar hypermarket. Generates a turnover of 200 crores from private labels.
Nilgiri in Bangalore offers private labels in Dosa and Idli

aditya birla group--more offers non liquor beverages.

These days most for the space is occupied by private labels mainly known as type 1
labels type 2 private labels have more value added to them. In terms of packaging
branding and contents.Ex- dadi ma pickles , smart choice jam both by Spencer’s.

More examples

The differentiating factor.

As the competition is pacing up retailers all the retailers are left with similar kind of
merchandise, services and store ambience. Under these circumstances the only
differentiator for a retailer becomes the private labels and I strongly believe that in
the coming time the private labels will be the pivotal on which branding strategies
will be formulated by retailers.

The business key rests on

a. low R&D cost

b. Low production cost.
c. In store promotions.
d. Cost effective supply chain more has a warehouse in Wagholi for Pune
e. Store brands are cheaper than manufacturer’s brand by 30 to 40 percent.
I believe retailing today is all about customization every customer walking in
has different requirements and the retailer can has an opportunity to
customize their needs and enhance its category offerings in much better
manner. My suggestion to all the organized and unorganized retailer is to
follow category management which can provide them with a better
understanding of products / services which will be a boost for private labels.

Strategies for store brands

1. Profiling the consumer.
2. Understanding the reason behind their purchase.
Studying these characteristics will help retailer to comprehend the readiness
of customer to accept private labels.
a. What does the brand name stand for?
b. what is its value proposition?
c. who are the competitors?

In more near warje the sale of private labels increased to 10 to 20 percent in

last few months across all the categories. Branding based on pricing and
value proposition is the point of differentiation.
Risk involved ---- if the private label is low in price than market leader can
produce a product which is further lower in price it will take no time for
customer to switch over and the consumers who are quality conscious will
feel that the low priced product is of inferior quality.

My findings on this are – the reduction in price beyond a limit does not lead to
increase in sale thus an optimal price gap between market leader and private
label has to be determined. On the other hand quality perception can be
increased in the consumer’s mind by providing detailed description on the
package and by touch feel and fragrance/ aroma. This will help retailer to
build the gap between product categories and secure him a better price
Retailer can offer free sample trial this will enhance familiarity with the store
brand. Eventually these customers who are satisfied will become the ardent
brand advocates. Private labels are usually manufactured by a company and
sold under the brand of another company. I have seen these practices in
retail ex- most chains are promoting them aggressively because private
label/store brands portfolio provide them a powerful margin. Provides a
strong tactical and strategic benefit to retailer.

The store brand products are benchmarked to the market leader in terms of
features and benefits and easily captures customer’s mind due to low price.

A. leverages the branding of chain and customer’s response.

Since the store brand and the market leader are of similar features but since the
store brand is low priced and promoted by retailer the chances of buying the store
brand increases drastically.

Ex - tea priced at 26 and brook bond at 40

Now if the product meets customer's expectation then it replaces the national brand

Flowchart ---

(Store brand / market leader brand --- similar features and benefits----- replaces the
market leader ----- becomes a brand.)

Branding strategy cont...

Private brands have unique

A. packaging,

B. design

C. pricing

This is the better best approach

3 segmented portfolio----

Good segment -- similar features low price

Better segment --- additional features to market leader low / similar pricing.

Best segment --- enhanced offerings and comprehensive with low cost.
Steps for branding

A. Use an unrelated brand name

B. Associate it with the store name for leverage.

C. Differentiation.

D . Segment Classification.

F. packaging Guidelines.

After this positioning has to be decided good better or best.

Why use an unrelated brand name

Consumers will not prefer a store name brand.

Why retailer should prefer private brands.

1. No manufacturing cost no fixed cost.

2. No research and development cost to be recovered.

3. No extra sales force is required.

4. Advertizing, marketing, transportation is not required since they have existing

infrastructure and promotion is in-house.

5. Increase sales for retailer in addition to margins the cost advantage helps retailer
to be flexible with the pricing of store brands.

6. Slowly Slowly customer shows brand loyalty and starts purchasing the other
offerings of same brand.

Ex- CFL introduced by leading private retailer.

Indian context --

In India it is largely based on pricing play marks and Spencer has only store brands.

It’s a chicken and egg story.