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Rationale
As organized retail is growing by leaps and bounds in India, private labels gaining share in each and
every category. However performance of private labels varies with category. Building a successful private-label
brand is one of the important concerns for retailers. So it is essential to understand the category variation of
factors which affects the sales growth of private labels. The study will serve the purpose by revealing the
comparative perception of retailers towards impact of factors After sales service, Promotion, Price, Perceived
Risk, Packaging and Brand Image of store towards sales growth of private labels amongst Food and Non Food
FMCG, Apparel and Consumer Durables categories. Since not enough study has been done on private labels in
India, this study will open the doors for the new research area, which will also help the retailers to successfully
handle the private labels and in developing an effective strategy.
I. INTRODUCTION
Indian organised retailing has been roaring since the opening of the large store formats in the early
1990s. The country has progressed from a savings-driven economy to a consumption-driven economy. As of
2008, expenditure on private consumption was valued at $350 billion. Experts‟ approximate that an
supplementary spending value of another $40 billion will be spawned every year. This mounting consumption
provides the prevalent business chance for the retailers in India with the impending intensification in key classes
such as food (62%), fashion (9.5%) and entertainment (7.9%).
With the revolutionize in consumption, Indian organised retailing is on the brink to cross the threshold
into a new epoch with its muscular economic growth, constructive demographics and media exposure. It
engages 7% of the Indian retail in 2010 and is expected to reach 14%–18% by 2017. Organised retail occupied
nearly 16 million sq.ft. of retail space in 2008, an increase from just 1 million sq.ft. in 2002. It has created
employment for about 2.2 million people by 2010 and fuel the economic growth of the country. Bearing in mind
high prospective in the Indian retail sector, since the opening up of the economy in 1991, big business houses
such as Future Group (Pantaloons), K. Raheja Group (Raheja Group) and Tata Group, etc., came up with huge
format retailing stores. Raheja Group‟s Shopper‟s Stop has pioneered modern retail in India by opening a large
format departmental store at Mumbai in 1991. Followed by PRIL‟s Pantaloons in 1996, and Tata Group‟s Trent
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ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 11, November 2017, Page 159-163
Ltd. in 1998, etc., which are the early large format retailers in India. These early on movers have grown
hurriedly flattering the leading retailers in India, arresting sizable markets.
Private Labels (PLs), being a innovative occurrence in the Indian retail, gained forceful momentum
along with the expansion in organised retailing. PLs engage just 5% of the organised retail business in India,
having remarkable potential to breed. PRIL was the first retailer to launch its own brands (PLs) in India. It
started its operations in 1987 by launching its first brand „Pantaloons trouser‟ followed by Bare (jeans), John
Miller (shirts) in the fashion apparel category of retail. PLs shape a noteworthy component of the group‟s
business and have developed noticeably over the years. Besides PRIL, other retailers such as Shopper‟s Stop,
RPG Enterprises, Westside, Reliance Retail, Lifestyle and Globus have all launched their own brands. Trent‟s
PLs occupy 90% of their merchandise followed by Reliance and Pantaloon in their respective product categories
Consumer buying behavior is primarily affected by many determinant factors and its difficult to understand and
identify the important determinant factors affecting the consumer buying behavior towards private label apparel.
Private label brands are exceptionally victorious because they propose many advantages to the consumers.
Consumers are mainly affected by many internal factors like demographic, personality and lifestyle and many
other factors while purchasing apparel. Consumers are also affected by many external factors like brand image,
price, design and quality while buying private label apparel brands. India is a young nation with preponderance
of population being young people, and also the rising income levels are changing the consumer attitudes and
buying behavior to a great extent. The shift in cultural practices also has impact on change in the behavior of the
consumers. The consumers while making buying decisions regarding apparel are affected by many factors, viz.,
brand awareness of store, brand image of store, brand awareness of, private label brand, brand image of private
label brand, price, discounts, comfort, durability etc. As the private labels offer the best available choice to the
consumers, majority of them are purchasing private label apparel brands. In Indian organized retail, all the big
players have their own private label brands, posing threat to the manufacturer brands.
Previously PLs were launched in the fashion apparel category and later stretch to food, personal and
home care, consumer durables & electronics and general merchandising categories. Future Group has numerous
private brands such as John Miller, DJ&C, Bare and Rig, etc., (apparel and fashion accessories); Tasty Treat,
Fresh & Pure, Clean Mate and Care Mate (FMCG category); Dreamline (home segment) and Koryo (consumer
durables). Food World, the retail chain of RPG Group has private label „Select‟ in its staples category, Reliance
has „Reliance Select‟ for grocery and eatables and „Expelz‟ for toilet cleaners, etc. The retailers are escalating
their labels penetration in dissimilar product categories to progress their margins. Retailers put on 30%–40%
margins on the PLs. These margins became an exhilarating opportunity for retailers. The retailers achieve 15%–
20% margins in FMCG category, 20% in electronics and about 30%–70% in apparel through private labels
compared to the national brands. To illustrate the case, if a branded apparel product grants a margin of 30%–
35% to the retailer, then the retailer can amplify his margin to 60%–65% with his label in the category. The
retailers can also gain margin from the low-value items.
Retailers are competent to make available labels of equal quality as national brands at low prices, as
they save on advertising and distribution costs. The selling price of national brands includes advertising and
distribution costs. For example, the manufacturer of an apparel brand spends about 35% on manufacturing, 7%–
20% on advertising, 6% on distribution and remaining small costs and also retains a margin of 15% (all these
increases the cost of the branded product). On the other hand, PLs have only production costs and its selling
price will not include any advertising and promotion costs. Esha Anand, head, Marketing and Visual
Merchandising, HyperCity, commented, “Private labels provide great value to customers as they do not have the
huge marketing spends of national brands and therefore can be retailed cheaper to the latter.”16 This helps the
retailers provide the labels at fewer prices to the consumer while retaining the same margin as the manufacturer.
The value proposition of PLs has been communicated to the customers through their promotion. Most
of the retailers opt for in-house promotion of their labels through Visual Merchandising (VM) 17 educating
consumers about the hygiene standards and ingredients of products. As per Point-of-Purchase Advertising
International (marketing association of retail industry), 72% of the purchase decisions are taken in the store.18
To attract these customers to their private brands, retailers are using clever marketing techniques such as
effective displays of their labels, sampling, bundled offers and promotion through in-store media channels
(radio, TVs, etc.) to increase their sales. For instance, Shopper‟s Stop‟s in-store radio provides shopping related
information to the customers and also entertains them by playing different genres of music. Retailers must
educate consumers about their labels to instil trust and gain their confidence. Therefore, to achieve this retailers
are investing in communicating their labels‟ value and delivering the same. According to Himanshu
Chakrawarti, GM, Trent Ltd., not just store brands, but the entire store concept has to be communicated to the
customers and price alone is not the value determinant. He comments that, “The key is make the customers
think whether they are getting the value for money and the value proposition has to be consistently delivered
over a period of time. The value proposition is the quality and style.”19 K. N. Iyer, CEO, Crossroads, highlights
and said, “The communication of the product especially for private labels inside the store is important, where
one highlights the attributes of the brand. Aspects like the description tags, which talks about the fabric along
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Pritam Chattopadhyay et al., International Journal of Research in Management, Economics and Commerce,
ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 11, November 2017, Page 159-163
with the packaging are essential to create brand recall for the private brands.”20 Retailers are taking the PLs
business as priority and making investments for the development of their labels in line with their expansion
plans. Retailers are expanding their store presence from the large cities and towns to tier II and tier III cities like
Nagpur, Vadodara, Vijayawada, Indore, Durgapur and Ambala. Retailers are even moving to rural markets to
capture the growing consumption needs of the rural population (which constitute 70% of the Indian population).
For instance, markets like ITC‟s e-Chaupal, Future Group‟s Aadhar and Tata Group‟s Kisan Sansar, etc.,
present the potential for the growth of modern retail along with the potential growth of retailers‟ PLs.
India has emerged as the third most attractive market destination for apparel retailers, according to a
new study by global management consulting firm A.T. Kearney. India comes after Brazil and China in the A.T.
Kearney Retail Apparel Index (See Table 1), which looks at ten drivers, including apparel consumption and
clothing imports/exports, to rank among the top 30 emerging markets for retail apparel investments.
In India, apparel is the second largest retail category, representing 10 percent of the $37 billion retail
market. It is expected to grow at 12-15 percent per year according to AT Kearney Consulting firm. The Indian
apparel retail industry generated a total revenues of $18.3 billion in 2005, this representing a compound annual
growth rate (CAGR) of 10.6% for the five-year period spanning 2001-2005.
Menswear sales proved the most lucrative for the Indian apparel retail industry in 2005, generating
total revenues of $8.4 billion, equivalent to 45.9% of the industry's overall value.The performance of the
industry is forecast to follow a similar pattern, with an anticipated CAGR of 9.8% for the five-year period 2005-
2010. The primary reason a consumer buys a private label is usually price, but with improving quality of the
products as well as labels and marketing, consumers tend to stick with these products rather than going back to
branded labels. Most private label products are priced 5-20% lower than regular items.
Globally, private label brands contribute to 17 percent of retail sales with a growth of 5 percent per
annum. International Retailers like WalMart of USA and Tesco of UK have 40 percent and 55 percent own label
brands representation in their stores, respectively. In India there is an increasing 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. Overall, in India, private labels constitute 10% of the organized retail product mix
and by 2012 it will increase to 13%.
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Pritam Chattopadhyay et al., International Journal of Research in Management, Economics and Commerce,
ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 11, November 2017, Page 159-163
The rise of national advertising made manufacturers‟ brands or national brands (NBs) to become
widely recognized by consumers who became loyal to them. Over the time, manufacturers exercised greater
influence over the demand for their products and secured a better bargaining position by dealing with retailers
(Grant 1987). Retailers saw their margins drastically reduced, and their power to determine the prices to
consumers depreciated (Borden 1967). In the Indian retail private label brands are in the danger of facing the
„Double Jeopardy‟ effect (Goodhardt, Ehrenberg and Chatfield 1984) where the small brands suffer twice – they
have fewer customers and these customers buy the brand less often (Ehrenberg, Goodhardt and Barwise, 1990).
This pattern has been observed in a variety of markets, in a variety of conditions (different lengths of time,
different points in time) and in various contexts (Pare, Dawes and Driesener 2006).
The main determining factors affecting consumer buying behavior are: quality, price, trust, availability
of alternative packaging, frequent advertising, sales promotions, imitations, availability, brand image, prestige,
freshness and habits (Dolekoglu et al. 2008), Packaging (Wells, Farley, Armstrong 2007), perceived risk (Batra
& Sinha 2000; Bettman, 1973; Dunn et al., 1986; Richardson Jain, & Dick 1996; Shannon and Mandhachitra
2005), price consciuosness, price-quality association (Batra and Sinha 2000), advertising-pricing (Karray and
Martin-Herran 2008), price, quality, risk perceiption (Ashok Kumar and Gopal 2009), price and quality
(Ailawadi, Pauwels and Steenkamp 2008).
Private Label‟s growth varies across product categories so it is critical to understand broader category
dynamics for private labels. Inter-category differences are an important source of variation in private labels
share (Batra and Sinha, 2000; Dhar and Hoch, 1997, Sethuraman 1992; Hoch and Banerji 1993; Dunn et al.,
1986). Batra and Sinha (2000) suggested that examining inter-category differences may provide further insight
into the development of private labels. More than a decade ago, Hoch and Banerji (1993) reported that the
performance of private brands varied across different product categories, and this inter-category difference in
private branding still exists. Other studies indicate that category involvement also negatively influences
consumer attachment to private label brands (Baltas and Doyle, 1998). KyoungNan (2008) shed light on the
inter-category differences in private brand sales, and reveals the effects of product characteristics across
different levels of consumer value consciousness. Identifying product categories in which private brands are
most likely to succeed is critical for retailers, especially in the current US context of changing private brand
trends.
Glynn and Chen (2009) examined the category-level differences of both risk perception and brand
loyalty effects on consumer proneness towards buying private label brands (PLBs). The results indicate that
quality variability, price consciousness, price-quality association and brand loyalty influence consumer
proneness to buy private label brands. Sethuraman (1992) showed that retail promotion on national brands
reduces private label share and that share of private labels is smaller in categories with greater price competition
among national brands. Jin, Suh and Gu (2005) examined the significant relationship and relative importance of
the factors influencing private labels attitude and purchase intention in two product categories food and
household appliance. It reveals that depending on the product category contribution of the factors varies. Dhar
and Hoch (1997) found that brand competition is a much more important determinant of private label share than
retail competition. Raju, Sethuraman and Dhar (1995) proposed an analytical model to understand what makes a
product category more conducive for store brand introduction. Model given by them helps in understanding
cross category differences in market share of store brands. Ailawadi and Keller (2004) stated that store brands
success is more categories driven than consumer driven. Dick, Jain and Richardson (1995) documented that
perceived risk as an important factor in store brand purchasing behavior. Findings show that there is a
significant difference between store brand prone and non-store brand prone shoppers with respect to the
perceived risk associated with buying store brands. Narasimhan and Wilcox (1998) argued that the degree of
perceived risk increases with the degree of perceived quality variation across brands in that category. d'Astous
and Saint-Louis (2005) observed that store-branded clothes like national brands, use advertising, celebrity
endorsements, designer names, and other promotional retail techniques in order to create a distinct personality.
III. CONCLUSION
Retail industry is one of the flourishing sectors in Global economy. The concept is emerging drastically
with new formats like hyper markets, supermarkets, malls, departmental stores, and specialty stores. Retailing
industry has seen phenomenal growth in the last five years. Organized retailing has emerging from the shadows
of unorganized retailing and is contributing significantly to the growth of Indian retail sector. The “India Retail
Sector Analysis (2006-2007)” report, analyze the opportunities and factors critical to the success of retail
industry in India. Western Style mall culture is started appearing in Indian markets. Now the Indian consumer is
enjoying world class shopping experience. The industry is in inflexion point, where the growth of organized
retailing and rising in consumption levels by the Indian population is turning towards a higher growth trajectory.
According to the market research reports 2007, in depth comprehensive cross industry review on Indian Retail
Industry which explores the macro economic scenario of Indian economy which coupled with growth of GDP
led to the shift of consumer purchase patterns and build up confidence in the retail sector there by giving shape
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ISSN 2250-057X, Impact Factor: 6.384, Volume 07 Issue 11, November 2017, Page 159-163
to the Government allowance for FDI in the Indian Retail Sector. In recent times the organized retailing by
Indian players emerging with multi formats retail in India.
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