IMPACT OF ORGANIZED RETAILING ON BRANDS

ORGANIZED RETAILING
Retailing according to Kotler (1973) includes all the activities involved in selling goods or services directly to the final consumer for personal, non business use. Retailing which presupposes a retailers’ ability to manage or more importantly influence a set of supply chain variables in a commercially viable and sustainable way is called organized retailing - Raghu Pillai
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BEFORE ORGANIZED RETAILING
The unorganized retail channel served as an entry barrier for brands that do not have mass appeal. Stuck in the vicious cycle of product placement and product pull. No touch-n-feel of the product before purchase
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IMPACT ON BRANDS
Breaking the vicious cycle: Interface with the customer directly Focus on distribution strategy: Modern Organized retail chains are brands in themselves (Own target segments) Eg: Nilgiris & FoodWorld

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Brands without mass appeal: The segmentation has also ensured that niche brands also survive in the market at higher as well as at the lower end. Eg: Shahnaz Hussain & Health and Glow Direct contact with the customers: Most of the organized retail chains allow the customer to touch-n-feel the product before it is purchased.
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Promotions and consumer schemes: The direct access has also marked a considerable increase in the promotion and consumer schemes • Communication strategy: This is an unprecedented opportunity for the brands to communicate to the consumers and influencers and not just customers

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PRIVATE LABELS AS BRANDS
Private label is by definition, is the store label, developed and designed by the store. Marketers have long derided “store” brands and “private label” offerings, viewing them as clearly distinct from – and markedly inferior to – traditional “name” brands Product marketers and retail chains don’t decide what a “real” brand is – consumers do
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WHY PRIVATE BRANDS
Great margins: The private label offers a terrific opportunity to the retailers to increase their margins and still offer great prices to the customers along with good quality. ETIG’s study on the private labels have found that on average, the private label margins are 30 to 50 percent more than the margins provided by the national brands
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Better Brand Image: Improved Flexibility: The higher margins of retailers increases their flexibility. The other major benefit is that it helps the retailers in clear positioning of the brand. Eg: SHOPPERS STOP

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CASE STUDY: THE EBONY EXPERIENCE
“Keep pace with the customer’s expectation and meet their requirements; create differentiation and yet earn better margins.” Ebony ETC – Private label across streetwear, outerwear & basic merchandise in apparel for men, women and kids. Key emphasis area to build private label Supply chain & logistics
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Tracking customers
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• Firm grip on “BUY” aspects include Right infrastructure Supply chain Identification of product category Customers Market segments Pricing structure Promotion

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ACNIELSEN RETAIL AUDIT OF PRIVATE BRANDS 2005
Through parallel online survey by ACNielsen of 21,262 consumers in 38 countries, including India, we now know exactly what customers feel about own store brands. A good 56 per cent of them consider private label to be a good alternative to manufacturer brands. Yet, if that figure is lower than the global average of 68 per cent, it is because it points to the differences between the Indian retail environment and the ones abroad
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Supermarket own brands are a good alternative to other brands Asians are still hesitant about private label brands

G L O B A L A V ER A G E 28 S O U T H A F R IC A 28 L A T IN A M E R IC A 2 4 N O R T H A M E R IC A EU R O P E P A C IF IC A S IA 1 2 0% 20% 36 37 36 39

40 44 40 41 41 42 32 40% 60%

21 15 24 15

8 3 9 4 7 5 61 15 5 2 13 6 2 13 4

AG REE S TRONGLY AG REE S L IG H T L Y N EIT H ER A G R E E NO R DIS AG REE D IS A G R E E S L IG H T L Y D IS A G R E E S TRONGLY

80%

100%

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The quality of most supermarket brands is good A lack of private label exposure shows up in Asian answers

G L O B A L A V ER A G E 2 1 S O U T H AF RICA 28

41 44 41 40 42 45 39 20% 40% 31 60%

23 14 19 18 20 15

12 3 11 4 13 5 7 3 10 3 11 4 16 3

A G R EE S TRO NG LY A G R EE S L IG H T L Y N EIT H ER A G R E E N O R D IS A G R EE DIS A G REE S L IG H T L Y DIS A G REE S TRO NG LY

L A T I N A M ER IC A 2 3 N O R T H A M E R IC A EU R O P E P A C IF IC A S IA 1 0 0% 32 26 25

80%

100%

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Can’t trust store brands where quality matters The Asian consumer is more quality sensitive than average global consumer

G L OBAL AV ERAG E12 S O UTH AFRICA L ATIN AM ERICA NO RTH AM ERICA7 EUROP E 10 P ACIFIC 13 AS IA 0% 14 20 21 20

28 27 30 25 25 28 34 20% 40% 28

29 19 27 28

20 21 13

11 12 9 20

AGREE S TRO NG LY AGREE S LIG HT LY NEITHER AGREE NOR DIS AG REE DIS AG REE S LIG HT LY DIS AG REE S TRO NG LY

23 23 33 60% 80%

14 11 15 4 100%

25

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I just don’t know enough about these Retailer brands A lack of awareness seems to be the problem in Asia.

GLOBAL AV ERAGE6 S OUTH AFRICA 6 LATIN AM ERICA 10 NORTH AM ERICA 9 3

16 14 19 34 23 35 23 20%

32 36 27 22 22

21 20 20

25 24 24 32 35

AGREE S TRONGLY AGREE S LIGHTLY NEITHER AGREE NOR DIS AGREE DIS AGREE S LIGHTLY DIS AGREE S TRONGLY

EUROP E 4 11 P ACIFIC 2 13 AS IA 9

25 39 40% 60% 20

25 9 100%

0%

80%

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Store brands are meant for people on tight budgets Low priced is equal to low end? Asians think so

100% 80% 60% 40% 20% 0%

9 18 27 32 14 ASIA

29 25 20 20 6 PACIFIC

28 22 22 18 10 EUROPE

15 18 23 26 18 NORTH AMERICA

15 18 23 26 18 LATIN AMERICA

26 26 19 17 11 SOUTH AFRICA

21 21 24 23 11 GLOBAL AVERAGE

DIS AGREE S TRONGLY DIS AGREE S LIGHTLY NEITHER AGREE NOR DIS AGREE AGREE S LIGHTLY AGREE S TRONGLY

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Retailer brands are poorly packaged Packaging is not big issue in Europe and North America

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
S IA A

8 24 30 28 10
IC IF

21 24 23 24 8
E O P

24 26 23 20 7
R IC A M E

22 24 27 21 6
A IC A M E R

15 20 26 26 14
R IC A

19 18 18 25 19
R A G E

18 24 26 23 9

DISAGREE STRONGLY DISAGREE SLIGHTLY NEITHER AGREE NOR DISAGREE AGREE SLIGHTLY AGREE STRONGLY

A C

F A TH G L O B A L

P

U R

A

E

TH

IN

O R

A T

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N

L

S

O U

A

V E

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Private label is value for money A majority of Indians but not to same extent as Malaysians
9 0 8 2 8 0 7 6

7 4 6 6 6 2 6 1 Mla s a y ia P illip e h in s 5 1 5 1 4 8 S gpr in a oe In o e ia dns In ia d Hn k n o go g Kr a oe C in h a T iw n a a Jpn aa 2 5 Ta n h ila d

7 0

6 0

5 0

4 0

3 0

2 0

2 1

1 0

0

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Private label quality is as good as manufacturer brands A significant 60% of Indians think so
7 0 6 2 6 0 6 0 5 5 5 5 4 9 5 0 4 5 4 3 4 1 4 0 3 8 3 8 P illip e h in s In ia d Mla s a y ia S gpr in a o In o e ia dns Jpn aa Kr a oe 3 0 2 7 C in h a Hn k n og og Ta n h ila d 2 0 T iw n a a

1 0

0

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Private label is for the poor Yes, again say Indians.
4 0 3 9 3 9 3 7 3 5

3 0 2 6 2 5 2 4 2 4 2 3 2 1 2 0 1 6 1 5 1 3 S gpr in a oe Jpn aa In ia d C in h a Ta n h ila d Hn k n og og P illip e h in s Kr a oe Mla s a y ia In o e ia dns T iw n a a 1 0 6 5

0

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Private label packaging sucks Yes, say 68% of Indians and that inhibits purchase
4 2 4 0 3 8 3 7

4 5

3 5

3 2

3 1 In o e ia dns 2 8 Jpn aa 2 6 2 5 2 4 Kr a oe In ia d 2 3 S gpr in a oe Hn k n og og c in h a T iw n a a P illip e h in s Mla s a y ia Ta n h ila d

3 0

2 7

2 5

2 0

1 5

1 0

5

0

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Private label is a good alternative More consumers in India say so compared to China, but hey are still a wary lot
7 0 6 4 6 2 6 0 6 1 5 6 5 2 5 0 4 8 4 8 P illip e h in s In o e ia dns 3 9 4 0 3 9 3 5 3 0 3 5 S gpr in a oe In ia d C in h a Hn k n og og T iw n a a Ta n h ila d Kr a oe M la s a y ia 2 0 Jpn aa

1 0

0

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THREE KEY LESSONS
Lesson#1: Not all private labels are made equal Lesson#2: Pay attention to packaging Lesson#3: Invest in Building Brand and Awareness

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CONCLUSION
Organized retailing is a significant upcoming trend for the brand strategist. Organized retailing also poses some challenges for manufacturing brands. This too is a blessing in disguise for the customers as it forces the brands to innovate continuously and offer higher value to the customer. With the proliferation of organized retail chains one can be sure that maximum gains would accrue to the owner of the brand – the customer.
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THANK YOU

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CONTRIBUTION TO ORGANIZED RETAILING
3% 10% 36% 3% 4% Clothing and textiles watch/jewelry Food /grocery Footwear 13% Durable Home Books, music 14% 17% Health, pharma &entertainment

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Source: ETIG

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NATIONAL BRAND Fabric cost ( 2.2 metres of Rs 100 per Metre Fabric ) Fabrication cost Direct cost 27% Manufacturer Mark up Direst cost to Retailer Indirect costs Cost price to Retailer without duties Excise Sales tax Cost price to Retailer Trade margins (%) Trade margins MRP 220 100 320 86 406 41 447 61 27 536 33 293 825

PRIVATE LABEL 220 100 320 0 320 13 333 47 21 400 39 288 675

Source: ETIG
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SHARE OF PRIVATE LABELS IN TOTAL SALES

120 100 80 60 40 20 0 SHOPPERS STOP* EBONY PANTALOON LIFESTYLE GLOBUS WESTSIDE %

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* 50 Percent of womens wear is private label Source: companies, ETIG

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