For long, private labels have projected themselves as lower cost alternative to the national brands to gain consumer attention and grab market share. However, after making the initial splash, it’s clear they need to think beyond ‘cost’ (to sustain their long-term growth.
If you’d visited any of these retailing outlets or malls like Big Bazaar, More, or Reliance Fresh, recently, you might have stumbled across not-so-familiar brands such as Tasty Treat (ready-to-eat foods), John Miller (clothing), Feasters (biscuits) and Sudz (detergent). But as organized retail continues its rapid growth in the country, get ready to see more of these in-store brands, more popularly known as private labels.
However, after making initial splashes have these private brands been able to really make much of an impact on the market share of national brands or manufacturers’ brands? It seems so as a latest survey from Nielsen shows that the awareness about private labels among consumers improved to 78% in 2010 from 64% in 2009. The survey titled, Shoppers Trend Study, was conducted across 11 cities in the country. According to Nielsen Director (retail services) Siddharthan Sundaram, “Over the last three to four months, we found an increased awareness of private labels in categories such as staples, household products, personal care products such as soaps, biscuits and packaged groceries.” As a result, private labels now account for nearly 6% of their overall sales (for the one year period, October 2009-September 2010) for retailers like Big Bazaar, Spencer’s and Reliance Fresh, the Nielsen survey found.
This figure, though, pales in comparison with the success of private labels in Europe – home to private labels - where they account for more than 50% of the overall sales for retailers such as Aldi (98%), Tesco (50%), and Carrefour (36%). Even in America, Wal-Mart derives almost two-fifth of its sales from private labels. This shows that Indian retailers have a long way to go as far as their private label penetration is concerned. But for that to happen they need to look beyond the cost aspect and focus more on product innovation, quality, better or attractive packaging, and, in fact, they can also create their own niche categories besides continuing to make inroads into generics or no-brands segments like pulses, spices, dry fruits etc.
Besides, a lot would also depend on how they promote these in-store brands. Many times you may find these private labels are not showcased properly in the stores. Often they would be stacked in a big basket in some corner and a customer would just overlook them as he or she finds them an assortment of rejected goods! Go to any Big Bazaar outlet and chances are that you might find packets of Tasty Treat snacks kept hastily in some baskets and placed in some remote corners where you are less likely to have a look at or at worst you may just overlook them. And this is the case with most of the organized retailing players which though have a slew of private labels under their belt but have not paid much attention on how to position them inside their stores to gain maximum attention and convert an unlikely visitor into a loyal customer. But it’s time they should paid attention to these aspects as well and focus on putting up electronic display boards, asking staff to guide consumers about their own private labels and encourage them to give it a try and so on; in other words, get the in-store promotion and positioning right guys. Retailers can even introduce loyalty programs or give higher loyalty points on the purchase of private labels. They can even try to make these products available in the local kirana stores in and around the retailer’s mall or outlets to improve visibility and reach.
However, this is largely observed in case of FMCG products and is not the case in segments like clothing where retailers have been quite aggressive in marketing these private labels.
Notwithstanding, they need to be a bit more aggressive when it comes to private labels in FMCG segment too to compete effectively with the nationals brands.
Amy, Chief Editor
You can contact the author at businessbanter@gmail.com
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