Retail Session 16 Private Labels

PRIVATE LABELS
Dr. Archana. B. A [Course: Retail Management]

1 [Topic: Private Labels]
Learning Objectives
Topic: Private labels
➢ Concept of the private label

➢ Categories of Private Labels
➢ Need of private labels
➢ Evolution of private labels
➢ Process of private label creation
[Course: Retail Management]
Private Labels
In 2020, private label sales grew by 11.6%
23% of all grocery dollar sales in 2020 landed in the private label
https://plma.com/about_industry/store_brand_facts
3 [Course: Retail Management]

[Topic: Private Labels]
What is Private Label?
❖also called store brands, house brands or own brands
Sell products or line of merchandise which is owned,

controlled, merchandised and sold by the retailer in
their own store/ chain of stores

Buy the Merchandise: Brand alternatives
Well-known national brands Private-label brands
• National (Manufacturer) Brands • Private-Label (Store) Brands
• Designed, produced, and marketed • Developed by a retailer and

by a vendor and sold by many only sold in the retailer’s
retailers outlets
• Example: Van Heusen, TATA Example: Shoppers Stop private

labels brands
5 [Course: Retail Management]
Concept of the Private Label
❖ Definition of store brand products as:
“All merchandise sold under a retail store’s private

label. That label can be the store’s own name or a
name created exclusively by that store.”

• Private Label Manufacturers Association
• Founded in 1979
• A non-profit organization
Objective : To promote store brands.

https://plma.com/
7
Concept of the Private Label
❖ Definition of store brand products as:
“Consumer products produced by, or on behalf of,

retailers and sold exclusively by them under their own
name or trademark within their own chain of stores.”
- Baltas
• Store brands or private brands are Private labels or store brands exist
generally brands owned, controlled, in a wide variety of industries:
and sold exclusively by retailers. From Apparel – Food to health –
Beauty aids…
Store Brand: Examples
National or Private-Label Brands?
• Shoes (Nike v/s Local brand)
• Salt (TATA v/s local supermarket brand)
• Formal Shirt (Arrow versus STOP)
➢ What are the reasons behind these differences in perceived

brand reputations and quality?
➢ When does it not matter if the brand was a manufacturer

brand or a private label brand?
Categories of Private Brands
• Comparable to, even superior to, manufacturer’s

Premium brand quality, with modest price savings
• Imitate the manufacturer’s brand in appearance

Copycat and packaging, perceived as lower quality, offered
at a lower price
• Developed by a national brand vendor and

Exclusive Co-Brands sold exclusively by the retailer
• Target a price-sensitive segment by offering

Generic Brands a no-frills product at a discount price
Copycat Brands: Example
Exclusive Co-brands: Example
Example: Skin cosmetics lines, developed by Estee

Lauder for sale exclusively at Kohl’s Department Stores
Generic brands: Example
Products are typically for commodities like milk and eggs
Need for a Private Label?
Create
unique
merchandise
Need to Address a
Earn create a gap in the
higher private market
margins label
Create
customer [Course: Retail Management]
loyalty [Topic: Private Labels]
Private Labels
Advantages Disadvantages
• Unique merchandise not

• Require significant investments
available at competitive outlets in design, global manufacturing
• Exclusivity boosts store loyalty sourcing
• Need to develop expertise in
• Difficult for customers to developing and promoting
compare price with competitors brand
• Higher margins
• Typically less desirable for
customers
Private Label as a retailer’s strategy
Adds value through

Create customer loyalty
convenient pricing
Can buy a national brand anywhere,
can ONLY buy their store brand at their store
Differentiate from
competition
Evolution of Private Labels
Continued…

• Retailers have realized while consumers can buy a national brand anywhere, they can ONLY
buy their store brand at their store.
• In the developed markets, private labels started out of economic necessity for providing
cheap alternative for low involvement goods such as butter, eggs, sugar.
• Generics, products distinguishable by their plain and basic packaging were the first type of
private labels to appear, largely associated with low price and low quality.
• There are 4-tiers of retailer own brands ranging from→ low-quality, no-name generics to
medium quality, quasi-brands to comparable quality, me-too products to premium quality
and high value-added own brands.
• Growth was driven by factors such as the need to cut costs during the economic downturn.
• Now the expansion of large grocery retailers has led to the development of more
sophisticated private label lines that command higher prices.
• The incorporation of private labels into retailer’s strategic vision is evident in the shift
among many retailers from a me-too to an added value approach.


Retail
Snapshot:
Kroger

Kroger: The Private label advantage
• Fortune 100
• Largest retailers based on annual sales.
• Founded in 1883 - operated 2,764 supermarkets.
Solution for customers who did not want to have to

examine the label to understand the product ingredients
• 2012, Kroger launched the ‘Simply Truth brand’

• All the ‘Simple Truth’ items → Free from more than 101
ingredients that customers mentioned that they did not
want in their food
• offers more than 14000 natural and organic products,
including grocery, meat, bakery, baby and household
essentials, personal care and fair trade certified items.

Private Labels in India
o In India, most of the large department stores have their own private labels
o Spectrum of verticals including food and grocery, apparel, electronics and

even beauty have their own private labels
o The emergence of private labels - compete with the bigger brands.
o ‘Private label brands constitute 10-12% of organized retail in India’

- As per the KPMG report Indian Retail: Time to Change Lanes

Private Labels Offered by Key Retailers in India

• Shopper’s Stop – Department Store

• Opened its first outlet in Mumbai in 1991.
• The store initially offered apparel, imitation
jewellry, cosmetics, and perfumes and
home fashion.
• It also had a customer loyalty programme

• Nilgiri’s, the popular supermarket

chain in South India, is also one of
the oldest supermarket chains in
India, with origins dating back to
1905.
• Hence all its products are sold under

the brand name of Nilgiris 1905.
Growth of ecommerce has further fuelled the

growth of private labels brands in the country
Flipkart: Growing the private label business
• In 2019 –Launch of another private label brand Adrenex, a sports and

fitness brand.
• Launched a small offering during their Big Billion Day sale in October
Retail 2018.
• Targeted at the health and fitness conscious Indians.
Snapshot: • Use of analytics (data from customer reviews) are enabling retailers
Flipkart enter segments where a niche can be carved out in terms of the
private label.
• Flipkart had forayed into private labels in the year 2017.
• The company has seen a 7 times year on year growth in the number of
customers shopping for its private label which now cover over 150
verticals and estimated to contribute around 500 crore to the turnover.

Retail Growing the private label business???
Snapshot:
Nykaa Nykaa.com India’s largest multi-brand beauty
platform

Growing the private label business
Retail
Snapshot:
Nykaa Lipstick Index?
In 2019, Nykaa has launched one new product every week [Course: Retail Management]
Private-Label (Store) Brands
• Products developed by retailers
Case 1
→ Retailers develop the design and specifications for their private-label
products and then contract with manufacturers to produce those products.
Case 2
→ National brand vendors work with a retailer to develop a special version
of its standard merchandise offering to be sold exclusively by the retailer. The
manufacturer is responsible for the design, specification and production of the
merchandise.
Process of Private Label Creation
The stages involved in private label creation are as follows:
❖Stage 1: Defining the Objective
❖Stage 2: Defining the Gaps in the Market
❖Stage 3: Decision on Make or Buy and Sourcing
❖Stage 4: Determine the Marketing and Sales Strategy
❖Stage 5: Determine the Measures of Performance

❖Stage 1: Defining the Objective
✓ The first step towards creating a private label is to start by defining the
reason the retailer wishes to create the private label.
✓ Some common reasons for creating a private label are the need to create a
competitive differentiation, or to offer a wide and unique product range.
✓ The need to create a private label may also be enhancing the margin or to
build customer loyalty.
Continued…

❖Stage 2: Defining the Gaps in the Market
✓Understanding the target profile of the customer
✓This also helps the retailer address issues with respect to the sensitivity of
price of the target audience, the level of experimentation within the
segment and the level of brand loyalty, if any.
❖Stage 3: Decision on Make or Buy and Sourcing

✓The method in which the sourcing of the product is to be done needs to be
sourced.
✓This will involve a decision on make or buy.
✓If the retailer decides to source the product, decisions with respect to the
vendor or supplier needs to be tackled
❖Stage 4: Determine the Marketing and Sales Strategy
❖Stage 5: Determine the Measures of Performance

Retail
Snapshot:
Subhiksha
Subhiksha: What went wrong for this retailer?

Retail Snapshot: Subhiksha
• Subhiksha was founded by R. Subramaninan, an alumnus of IIM Ahmedabad
• Theme was “Why pay more when you can get it for less at Subiksha?”
• The first store opened in March 1997 in Chennai with an investment of
around Rs. 4-5 lakh
• Company expanded rapidly
• Retail Strategy
Continued…

Retail Snapshot: Subhiksha
Subhiksha: What went wrong for this retailer?
Retail Strategy:
• Carpet bombing Carpet Bombing: A strategy of opening as many
stores as possible in the city that they chose to enter
• Moved across different sectors such as medicine, grocery, IT , mobile etc.
• While growth was steady, In Sep 2008, there were rumours that the staff did not get their
salaries.
• Subhiksha faced severe financial crisis
• Had to close its nationwide network of 1600 supermarket stores
• Defaulting on loans, vendor payments and staff salaries.
• Subhiksha had created one of the country’s largest retail chain of about 1600 stores
that collapsed under heavy debt.
Retail
Snapshot:
GUCCI
How to create a sensory digital shopping experience?

Retail Snapshot: GUCCI
• Italian luxury fashion company
Gucci • 2018: Gucci Hallucination campaign

Hallucination • Most artistic campaign - blend of fashion,
campaign digital art and technology
• Online: SENSORY EXPERIENCE
• Gucci collaborated with Spanish artist

Ignasi Monreal to recreate classical
masterpieces
Retail Snapshot: GUCCI
44
Retail
Snapshot:
GUCCI
Gucci Hallucination campaign
How to create a sensory digital shopping experience?
http://springsummer.gucci.com/
Summary of Private labels – Session 16
4. Evolution of private labels
1. Concept of the private label

5. Process of private label creation
• Stage 1: Defining the Objective
2. Categories of Private Labels
• Stage 2: Defining the Gaps in the Market
• Premium | Copycat| Exclusive Co-
brands |Generic • Stage 3: Decision on Make or Buy & Sourcing
• Stage 4: Determine the Marketing and Sales
3. Need of private labels Strategy
• Address a gap in the market • Stage 5: Determine the Measures of
• Create unique merchandise Performance
• Create customer loyalty
• Earn higher margins Retail Snapshot: Kroger, Shopper’s Stop,
Flipkart, Nykaa, Subhiksha, Gucci

Retail Session 16 Private Labels

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PRIVATE LABELS

Dr. Archana. B. A [Course: Retail Management]

Topic: Private labels

➢ Concept of the private label

In 2020, private label sales grew by 11.6%

3 [Course: Retail Management]

❖also called store brands, house brands or own brands

Sell products or line of merchandise which is owned,

[Course: Retail Management]

Well-known national brands Private-label brands

• National (Manufacturer) Brands • Private-Label (Store) Brands

• Designed, produced, and marketed • Developed by a retailer and

• Example: Van Heusen, TATA Example: Shoppers Stop private

“All merchandise sold under a retail store’s private

[Course: Retail Management]

Objective : To promote store brands.

“Consumer products produced by, or on behalf of,

• Salt (TATA v/s local supermarket brand)

• Formal Shirt (Arrow versus STOP)

➢ What are the reasons behind these differences in perceived

➢ When does it not matter if the brand was a manufacturer

• Comparable to, even superior to, manufacturer’s

• Imitate the manufacturer’s brand in appearance

• Developed by a national brand vendor and

• Target a price-sensitive segment by offering

Example: Skin cosmetics lines, developed by Estee

• Unique merchandise not

Adds value through

Can buy a national brand anywhere,

can ONLY buy their store brand at their store

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

Solution for customers who did not want to have to

• 2012, Kroger launched the ‘Simply Truth brand’

[Course: Retail Management]

o Spectrum of verticals including food and grocery, apparel, electronics and

o The emergence of private labels - compete with the bigger brands.

o ‘Private label brands constitute 10-12% of organized retail in India’

[Course: Retail Management]

[Course: Retail Management]

• Shopper’s Stop – Department Store

[Course: Retail Management]

• Nilgiri’s, the popular supermarket

• Hence all its products are sold under

Growth of ecommerce has further fuelled the

• In 2019 –Launch of another private label brand Adrenex, a sports and

[Course: Retail Management]

[Course: Retail Management]

❖Stage 1: Defining the Objective

❖Stage 2: Defining the Gaps in the Market

❖Stage 3: Decision on Make or Buy and Sourcing

❖Stage 4: Determine the Marketing and Sales Strategy

❖Stage 5: Determine the Measures of Performance

[Course: Retail Management]

[Course: Retail Management]

❖Stage 3: Decision on Make or Buy and Sourcing

❖Stage 5: Determine the Measures of Performance

[Course: Retail Management]

Subhiksha: What went wrong for this retailer?

[Course: Retail Management]

• Subhiksha was founded by R. Subramaninan, an alumnus of IIM Ahmedabad

[Course: Retail Management]