PRIVATE LABEL IN

INDIAN RETAIL INDUSTRY –

HALLENGES AND OPPORTUNITIE
SUBJECT – RETAIL MARKETING

SUBMITTED TO: GROUP MEMBERS:

Prof. VINAY CHOUHAN HEEYA GUPTA (16)
MUSKAN BHALLA (26)
NIHARIKA GUPTA (30)
WHAT ARE PRIVATE LABEL?
 A private label product is manufactured by a contract or third-party
manufacturer and sold under a retailer’s brand name.
 Private label brands managed solely by a retailer for sale in a specific chain of
stores are called store brands.
 Hair salons often create their own branded line of shampoos, conditioners, and
styling products for their customers to buy and take home. Restaurants often
decide to private label condiments or mixes that have become popular with
customers.
CLASSIFICATION OF PRIVATE LABEL

 Individual Brands / Quasi Brands:

These are invented controlled labels with no store association, work most successfully in a
limited assortment environment to create the illusion of selection. Specific brand names are
created for specific market segments and/ or categories. eg. Aldi, Lidl, Netto.

 Store Brands:
Store brands, where all private labels carry the name of the store, have been very successful at
driving high levels of private label penetration in supermarkets. It carries the retailer’s name,
such as Westside, Food World, Big Bazzar, Sainsbury Albertson’s and Safeway.
It offer a choice to the end consumer, for the retailer, they are tool for increasing business and
winning customer loyalty. Retailers have realized that while consumers can buy a national brand
anywhere; they can only buy their store brand at their store.
 An Umbrella Brand / Group Brands:
Group brands, where all private labels carry a common non-store
name, are most commonly used by retailers with more than one store
fascia where a common brand name is used across multiple categories
– e.g. Splash (Lifestyle), Bare (Pantaloon).
ADVANTAGES OF PRIVATE LABEL
Control over production - Third-party manufacturers work at the retailer’s
direction, offering complete control over product ingredients and quality.

Control over pricing - Thanks to control over the product, retailers can also
determine product cost and profitable pricing.

Adaptability - Smaller retailers have the ability to move quickly to get a private
label product in production in response to rising market demand for a new feature,
while larger companies might not be interested in a niche product.

Control over branding - Private label products bear the brand name and
packaging design created by the retailer.

Control over profitability - Thanks to control over production costs and pricing,
retailers therefore control the level of profitability its products provide.
DISADVANTAGES OF PRIVATE LABEL

Manufacturer dependency - Since production of your product line

is in the hands of a third-party manufacturer, it’s important to
partner with well-established companies. Otherwise, you could miss
out on opportunities if your manufacturer runs into problems.

Difficulty building loyalty - Established household brands have

the upper hand and can often be found in a variety of retail outlets.
Your product will only be sold in your stores, limiting customer
access to it. Of course, limited availability could also be an
advantage, giving customers a reason to come back and buy from
you.
NEED OF PRIVATE LABEL
Retail stores are able to make more profit because the margins are high
and the dependability on established brands decreases.
Branding of the store increases due to in-house brands and customer
awareness increases.
Established brands are also giving a strong fight by opening separate
retail store especially for their brands
Price conscious customers are also attracted for getting branded
products in affordable prices.
The variety of brands also increases which give retailer a large diversity
of products to sell.
Because of backward integration done by retailers the quality control
and the bargaining power of buyer increases
Local products can also be designed by the retailer according to the need
of the specific region and the customer base.
LONG-TERM GROWTH DRIVERS OF PRIVATE LABEL

The underlying drivers for private label growth are scattered over a number of
trends/strategies. . The arguments for private label growth are summarized below:

 Consumer acceptance levels for private label are rising, due to price sensitivity
(economic recession or hard discount competition).
 Continued industry consolidation in developed food retail markets (Western Europe,
the US and Australia). Economies of scale in logistics, procurement, marketing, store
opening strategies and private label will continue to fuel sector consolidation. Larger
operating scale provides more opportunities to launch private label.
 Adoptions of modern retail i.e. more professional and larger scaled procurement
organizations in developing markets (Central and Eastern Europe, Russia and
Turkey).
 Growing share of hard discount due to increase price awareness, a consumer trend toward
demand polarization (indulgence versus value for money) and ongoing expansion in
developing countries.
 Hard discount competition is driving value private-label growth. Service oriented
supermarkets are expanding their value private-label offering, aiming to retain traffic and
prevent customers defecting to hard discounters.
 Need for diversification among service oriented supermarkets.
 More comprehensive private-label strategies of larger retailers.
 Need for diversification among smaller supermarkets. Smaller, regional food retailers need
private label to help them carve out a niche position in a rapidly consolidating market.
 Increased professionalism of private-label suppliers. The emergence of specialist private-
label suppliers is increasing professionalism and quality levels, thus improving the image of
private label among retailers and consumers.
WHY ARE COMPANIES GOING FOR
PRIVATE LABEL ?
DIFFERENTIA
TION

FREEDOM
LOWER
TO CREATE
PRICE BUT
THEIR OWN
HIGHER
MARKETING
MARGIN
PLAN

FREEDOM STRONG
WITH CUSTOMER
PRICING POSITIONIN
STRATEGY G

SAFEGUARD
AGAINST
ECONOMIC
DOWNTURN
GROWTH OF PRIVATE LABEL IN INDIA
 The Indian Retail Market is growing at an astonishing pace. The retail market is estimated at
Rs 46,15,000 crore (US$ 710 billion) in 2017, and is expected to grow at a CAGR of 9 percent
to reach Rs 1,08,58,000 crore (US$ 1,672 billion) by 2027.
 Share of unorganized sector in retail market is 89 percent, whereas organized brick-and-mortar
retail accounts only for 9 percent and e-retail has share of 2 percent.
 The dynamics of Indian retail market is changing at a phenomenal pace. After the
implementation of unified taxation under GST regime, it is expected that the share of organized
retail will increase at higher rate. Apparel sector has one of the highest percentages of
organized penetration at approximately 24 percent.
 Higher penetration of supermarkets/hypermarkets in urban areas has resulted in steady growth
in private labels. Earlier, private labels were considered to be an imitation of branded apparel
with inferior quality and lower prices. But now-a-days, private labels focus on providing good
quality at competitive rates.
 GROWTH DRIVERS PUSHING
RETAILERS TO PRIVATE LABEL SPACE

Access to Data – Cost Empowering Filling the Gap –

Private labels are
Retailers have access Competitiveness Retailers – Earlier Market Reach – launched to fill gaps
to exhaustive – As private labels the market was driven With the popularity of
in the current product
informative data to have fewer by the brands. They multi-brand outlets,
portfolio offered by
consumer purchases, distribution were the decision the retailers have a
the brands. With a
preferences and overheads, lesser makers. But better customer base
better knowledge of
behavior. Retailers are number of emergence of private as they have already
consumer’s desires
in direct contact of intermediaries and labels has enhanced built their market
and purchasing
consumers and negligible marketing the bargaining power presence across
insights, private
understand their cost, they are able to of the retailer while different retail
labels focus on
psychology, which sell products at lower negotiating with formats and different
products as per the
gives them an edge rates than their manufacturers and geographies.
demand of the
over the retail brands. branded counterpart. brands. market.
OPPORTUNITIES
Continued Rise of Corporatized Retail – Indian fashion retail is transforming rapidly and is witnessing a shift from
unorganised to corporatized sector. The structural reforms by Indian government like GST are expected to accelerate the
penetration of organised retail at a higher rate in the Indian retail market. Factors like rise in middle class with increase
in disposable income, change in consumer preference and increasing fashion awareness due to mass media penetration
and social media in the country are the driving force for growth of corporatized retail and private labels. Due to
changing consumer behaviour, they are ready to experiment with fashion and thus they look for updated trends in
apparels. Private labels give them opportunity to experiment with their fashion without spending much compared to
retail brands. This transformation has provided an opportunity to the private label retailers to cater to these consumers.

Increasing Reach of Retail Market to Tier -II and -III Cities – Fashion is no more restricted to metros
and tier -I cities only. With increasing exposure of tier -II and -III cities to latest fashion trends, the
consumers are well aware and are willing to spend more on latest fashion. Retailers have realised this
opportunity and have started catering to consumers residing in these cities. Private label provides an
alternative to the consumers without compromising on quality and fashion as private labels are launched
keeping in mind the gaps in market, especially those between price, style and quality.

Growth of Digital Penetration – With the proliferation of digital devices in the country coupled with
increasing internet penetration, online retail has witnessed a tremendous boost in the recent years. E-tail
fashion giants have already started establishing their private labels. They provide ample options along
with convenience to their consumers. As e-commerce retail has better reach to tier -II and tier -III cities in
addition to metros and tier -I cities, they have an opportunity to cater to larger customer base across
different geographies. The data available with these retailers provide them an edge over brick-and-mortar
retailer to create the product and pick and choose the exact audience for whom it’s made.
 CHALLENGES
Price and Quality
Conscious Indian
Consumer – The private
Changing Consumer labels are not cheap but
Individuality of Private Behaviour – Ever are cheaper in
Labels – Customers do changing shifts in comparison to their
not prefer private labels consumer demands and branded counter parts.
over retail brands. preferences is another The consumer’s purchase
However, if the private challenge for private decision is not only driven
label is available from a labels. With rapidly by the price factor but is
well-known retailer outlet, changing profile of influenced by the quality,
the brand name of the consumer in term of their value for money and
retailer weighs on private demands and fashion trend. Private
label. So, the success of preferences, it has labels have to maintain
private label is highly become challenging for quality at competitive
dependent on their retailers to keep up with rates. With the
retailer. shifting consumer emergence of private
demand. labels by different
retailers, competition has
increased among the
private labels too.
CASE STUDY
 Private labels constitute over 25-30 per cent of the merchandise mix of most global
fashion retail companies and modern retail in India, too, is beginning to go the
private label way

 The profitability and market cap of modern retail companies has been rising and the
e-commerce onslaught is not really impacting them any longer and for this to
happen the modern retail companies have changed their strategies in order to be
able to attract more consumers. Offering great products under their own private
label is one such strategy

 Private labels are no longer restricted to offering a basic shirt or a kurta, retailers are
investing a fortune in building their own private brands. Melange and Code from
Lifestyle, Bombay Paisley from Westside, Avaasa, Netplay and Rio from Reliance
Trends are a few examples
 SHOPPERS STOP-
 Shoppers Stop Limited is a chain of Retail stores in India owned by K.
Raheja Corp. The Company houses a host of many international &
domestic brands across various categories such as apparel, accessories,
cosmetics, home & kitchenware & also its own private brands. The
private brand tags include:
 Stop: caters to the youth segment
 Mario Zegnoti: Men’s Casual Wear
 Vittorio Fratini: a premium men’s wear
 Life: for youth and the mid segment
 Kashish: the premium ethnic ladies wear
 Austin Reed: International brand exclusively sold in SS
 Elliza Donatein: an exclusive brand for ladies formal and casual
wear
 Interestingly, the private labels account for 18 to 20 per cent of turnover.
These products are priced substantially lower than the other brands &
are not limited to a particular category, it is extended from apparel for
men, women to children. These products are not differentiated from the
other brands in terms of store space. They operate in 18-20% space only.
 LIFESTYLE-
 Lifestyle, a part of the Dubai-based retail and hospitality conglomerate
The Landmark Group, is planning to expand its footprint by adding 10
more stores in India. It already has nine private labels & plans to
launch new categories under these private labels. The brand recently
made omni-channel presence to make a stronger reach to its
consumers. Lifestyle’s private labels include:-  
 MELANGE
 STRINGS
 FAME FOREVER
 CODE
 UCLA
 GINGER
 KAPPA
 SMILEY
 BOSSINI
 PANTALOONS-
 Pantaloons today retails over 200 licensed & international brands,
including 24 exclusive in-house brands. Brand wars are inevitable in any
retail market. So what is the secret weapon to survival in an overcrowded
brand scenario? Retail major Pantaloons thinks it is private labels
 The Pantaloons exclusive brand bouquet
includes Rangmanch, Ajile, Honey, Akkriti,
Chalk, Annabelle, Trishaa, Alto Moda,
Poppers, Chirpie Pie. The company launched
six new brands in FY'15, including Alto
Moda, SF Jeans, Byford, Poppers and
Chirpie Pie

 Private labels are priced 20-30% lower than

other branded products & are created
primarily to fill need gaps of the consumer.
While the typical FMCG margin on MRP is
about 10-15%, on an average, Pantaloons
works on a 25% margin
IMPACT OF COVID19 OUTBREAK

The Indian retail sector faces

unprecedented circumstances owing to
the Coronavirus (Covid-19) outbreak
leading to a nationwide lockdown
announced by the Central government
along with other stringent restrictions
imposed by several state governments on
movement of men and material. The
impact is likely to vary depending on
whether the consumption pattern is
discretionary or essential utility.
 On the cost front, given the high fixed cost nature of
the retail business (rental & employee expense: 10-
15% each), a fall in footfalls would result in a more
than proportionate decline in profitability for players
 Major retail chains are in negotiations with mall
owners for exemption or rebate in rentals to overcome
the decline in revenues
 With a continuous change in fashion season cycles,
apparel retailers may indulge in higher discounting
strategies (impacting gross margins) in a bid to reduce
old season inventory
 Post normalization, discretionary categories like jewellery, apparel
and footwear could see some revival of revenue growth due to pent
up consumer demand. However, given the discretionary nature, the
entire revenue loss may not be entirely recouped in FY21

 Retailers will have to:

 change business models
 focus more on online delivery of goods
 liquidate stocks once they tide over the lockdown, say industry
executives

 Retailers are pitching for a comprehensive stimulus from the

government, apart from other measures, to prevent job losses in the
sector