private label strategy

8/14/2019 Private Label Strategy

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Private label strategy

The differentiating factors in merchandise for retailers these days are the privatelabels. The transformation of store brands/ private labels has built a WHOLE NEWSCENARIO. 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, toapparel, food and groceries. This is found most suitable for supermarkets, harddiscount stores and specialty stores. The growth is found to be almost more than 60percents worldwide, more than manufacturers brand but these private labels lackin quality over market leaders.

Indian context

The old mom and pop store now provides home made wheat flour (Atta), ricespices, 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.

Spencers 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 1labels type 2 private labels have more value added to them. In terms of packagingbranding and contents.Ex- dadi ma pickles , smart choice jam both by Spencers.

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 onlydifferentiator for a retailer becomes the private labels and I strongly believe that inthe 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 costb. Low production cost.c. In store promotions.


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d. Cost effective supply chain more has a warehouse in Wagholi for Puneoutlets.

e. Store brands are cheaper than manufacturers brand by 30 to 40 percent.I believe retailing today is all about customization every customer walking inhas different requirements and the retailer can has an opportunity to

customize their needs and enhance its category offerings in much bettermanner. My suggestion to all the organized and unorganized retailer is tofollow category management which can provide them with a betterunderstanding of products / services which will be a boost for private labels.

Strategies for store brands1. Profiling the consumer.2. Understanding the reason behind their purchase.Studying these characteristics will help retailer to comprehend the readinessof 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 inlast few months across all the categories. Branding based on pricing andvalue proposition is the point of differentiation.Risk involved ---- if the private label is low in price than market leader canproduce a product which is further lower in price it will take no time forcustomer to switch over and the consumers who are quality conscious willfeel that the low priced product is of inferior quality.

My findings on this are the reduction in price beyond a limit does not lead toincrease in sale thus an optimal price gap between market leader and privatelabel has to be determined. On the other hand quality perception can beincreased in the consumers mind by providing detailed description on thepackage and by touch feel and fragrance/ aroma. This will help retailer tobuild the gap between product categories and secure him a better pricemargins.

Retailer can offer free sample trial this will enhance familiarity with the storebrand. Eventually these customers who are satisfied will become the ardentbrand advocates. Private labels are usually manufactured by a company andsold under the brand of another company. I have seen these practices inretail ex- most chains are promoting them aggressively because privatelabel/store brands portfolio provide them a powerful margin. Provides astrong tactical and strategic benefit to retailer.


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BRAND BUILDING STRATEGY

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

A. leverages the branding of chain and customers response.

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


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Indian context --

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

Its a chicken and egg story.


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private label strategy

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