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It's in to flaunt a private label
Urmila Rao, Outlook Money | December 24, 2007
Do names like Mario Zignoti, Wongs, Tatva and Vitra ring a bell? Not really? Well, very soon they may replace your favourite brands. Popularly known as private labels, these are brands owned, merchandised and sold by retailers. They are also called in-store brands. These and several others are set to give a tough competition to the established brands and would appeal to the value buyer.
From apparel, healthcare products and furnishings to consumer items like soaps, private labels are making their presence felt in a variety of retail items.
Catching up fast: Though private labels are late entrants, they are catching up fast. In the last couple of years, private labels have seen unprecedented growth with the entry of retailers such as Future Group, Shopper's Stop and Vishal Megamart. At present, in-store brands constitute just about 5 per cent of the total organised retail business, say experts.
Since doing business in private labels is fetching huge profit margins to retailers, the interest in these products is growing rapidly. The margins range from 15-20 per cent in the FMCG sector, around 20 per cent in electronic goods and 30-70 per cent in apparels as compared to established brands. "For retailers like Future Group, it accounts for 70-75 per cent of its sales," says Purnendu Kumar, senior retail consultant, Technopak Advisors, a consulting firm specialising in the retail sector.
Affordable choices: In-store labels are at least 5-20 per cent cheaper across various categories. This is because they cut out middlemen and other charges and pass on the benefit to the consumer. Says Kumar, "For apparel, the price difference could be 15-20 per cent." These also give enough choice to today's evolved consumers. Apart from apparel, in-store brands in categories like food and grocery, personal care products, home appliances, home furnishing and lifestyle products have seen a spurt of growth, say industry experts.
'Life' T-shirts for men from Shopper's Stop range from Rs 349-699, while 'Stop' ladies western wear is available for Rs 299-699. In categories like food items, Subhiksha tags its 'Just Pure' spices between Rs 17 and Rs 20 and Vishal Megamart's salt and toothbrush is priced between Rs 10 and 40 under its `Vneed' brand.
Private labels are no more considered `down market' substitutes for established brands. That they are cheaper and do not compromise on quality attracts a lot of urban consumers.
The road ahead: Will the private label market see growth in big-ticket items too? Says Mohit Khattar, president (marketing), Subhiksha, "The answer really lies in whether retailers would be able to win over consumer trust. If they are able to reassure the customers of superior or even parity product quality and good after-sales services, one sees no reason why private label in big ticket items wouldn't work."
The private labels market abroad has matured. Tesco and Sainsbury, leading UK-based retail chains, sell a variety of goods. But, what's the future of private labels in India? Says Khattar, "As customers mature, one would see the emergence of high-quality private label products."