Private Labels - Chapter 1 : Introduction to Retailing

Chapter 12 : Private Labels

Learning Objectives

• Concept of a Private Label and national brand

• Advantages of Private Labels vis-à-vis advantages of national brands

• Overview of the Private labels being used in India

• How to create a Private Label successfully

Chapter 12 : Private Labels 2

What is a Private Label?

• A private label consists of products or a line of merchandise which is owned, controlled and sold by a specified retailer in his own store or chain of stores.

• Private label brands are also referred to as own brands or store brands.

• Private labels are widely used in all product categories, be it apparel, beauty, cosmetics, food and health.


Private Labels

Characteristics of Private labels :

• Production quantity for private labels maybe small.

• These are marketed by retailer and sold only in that retailers stores.


Types of Brands

• Store Brands carry the retailers name itself.

• Thus the consumers perception of the store brand is dependent on their perception of the store itself.

• Eg; Westside, Big Bazaar


Types of Brands

• Umbrella /family brand is a common brand name used for multiple product categories.

• It is associated with a company and may have a sub-brand.

• Eg ; Colgate Total toothpaste. Colgate is the company name while Total is the sub brand.


Types of Brands

• Individual Brands are specific brand names created for a specific market segments.

• These are used for different products without associating them with a company.

• Lux, Hamam, Surf, Lakme products are all individual brands of the company Hindustan Unilever.


National Brands

• National Brands or manufacturers brandsare designed, produced and marketed by a manufacturer and then sold to different retailers.

• Mass produced, huge quantities

• Marketed by manufacturer and not retailer

• Wide distribution in different retail formats

• Manufacturer is responsible for product quality


Types of Private labels

• Premium private label is comparable to a manufacturers brand quality but may be slightly lesser priced.

•



• Copycat brands imitate the manufacturers brand in a number of ways, especially appearance and packaging. These are perceived to be of lower quality and priced lower. Retailers modify new national brands thus they look similar to the national brand.



• Exclusive brand is sold exclusively by the retailer even though it may be designed and manufactured by a national brand. It will have slightly different features and model numbers for the same product being sold in different retail stores. Thus consumers cannot compare features and prices. Eg; Canon digital cameras.



• Generic brands offer a no frills product at a lower price for price sensitive customers. They are perceived as low in quality and price, receive secondary shelf locations, have little or no promotions and have a plain packaging. Thus generic brands are usually visible in basic products like milk, eggs, flour.



Exclusive brand Premium private label

Generic brands Copycat brands

Types of Private Labels


Benefits of a Private Label

• Filling the need gap : It enables the retailer to clearly see gaps in the market and design product to fill that gap.

• Unique product : Exclusivity decreases when stores sell national brands which is very important in some product categories, especially fashion. Retailer offer a unique and differentiated product by introducing a private label, thereby creating a competitive advantage.



• Fast customization : Retailer can respond to changes in consumers tastes and preferences faster and customize products because it has direct control over its marketing mix.

• More variety : Private labels offer allow the consumer more choice to purchase same or comparable product as the national brand.



• Better margins due to reduced costs, elimination of middlemen and freedom with pricing decisions.

• Branding : A private brand ensures a strong brand identity for a retailer.

• Customer loyalty : Offering more variety in a unique product that is branded at lower priced will obviously create strong customer loyalty.


Benefits of Private Labels

Benefits of a

Private Label

Branding

Customer loyalty

Fast customiza

tion

Better margins

More variety


The Private Label Market in India

• Globally, own label brands contribute to 17 percent of retail sales with a growth of 5 percent per annum.

• Trend of private labelling has caught up in Indian retail.

• Share of private labels in India is about 7% .

• Food segment dominates the private label market.

• Online retailers are also launching private labels.


Private Labels of Future Group (Big Bazaar)

• Apparels: John Miller, Bare, DJ&C, Indigo Nation, RIG

• FMCG: Tasty Treat, Fresh n Pure, Premium Harvest

• General merchandise: Dream-line

• Homecare and toiletries : Cleanmate, Caremate

• Consumer durables & electronics: Sensei and Koryo

• Future Brands, the group’s wholly-owned subsidiary, plans to launch sportswear, lingerie and beauty products.


The Process of Private Label Creation

Define the objective

Define the gaps in the market

Decision on Make-or-buy and sourcing

Determine the marketing and sales strategy

Determine the measure of performance



• Step 1 - Define the objective of introducing private labels.

• It could be to gain a competitive edge, build customer loyalty or improve margins.



• Step 2 - Define the gaps in the market

• Understand the consumers needs by doing a need gap analysis

• Then design a product and its retail mix.



• Step 3 - Decision on Make-or-buy and sourcing procedure has to be taken

• Will the production be outsourced?

• Who will design the merchandise – producer or retailer?

• Plan other terms of sourcing, price, volume and timelines.



• Step 4 - Determine the marketing and sales strategy , proposed brand image and promotion plans.

• All decisions have to be in accordance with firms objectives and strategies.



• Step 5 - Determine the measure of performance to monitor sales and quality.

• This may vary with product type.


Private Labels - Chapter 1 : Introduction to Retailing

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