What makes the Indian Retailer Smile ? The Fat Margins available for him in Private Labels replacing other brands on his retail shelves. For the Organized Retail industry, the Worldwide average of Private Labels sold through their stores is 20%. In India, Private Labels already make up 10% of the business.
How Private Labels Help on Margins ?
Private labels provide the benefit of lower advertising spends as well as savings of margins which is lost in traditional value chain from manufacturer to distributor to retailer. It leads to it results in lower inventory turns and capital efficiency ratios. They also help the retailer bargain with other FMCG producers for higher margins and retail shelf space.
Future Group’s (FG) Private Labels
In Lifestyle segment, private labels form 80% of apparel sales in Pantaloon as well Big Bazaar (Fashion@Big Bazaar). Following table details the private label brands of PF in Lifestyle, Food as well as FMCG categories. Somf oe the Private Label Brands are – John Miller, Lombard, BARE, KnightHood, DJ&G, RIG, Chalk, Honey, Scullers etc
In the Value format, FG has private label brands comprising 5‐30% of sales across Food, FMCG and Personal care categories. Some of the key private label brands in this space include Tasty Treat, Fresh & Pure, Sach, Clean Mate, Care Mate etc. For FY10, FG’s FMCG private brands have registered a whopping 75% YoY growth. FG’s major initiative in enhancing the private brands portfolio was the launch of the Ektaa brand, offering community‐specific food products across the country.
In the Electronics space, FG has Koryo Private Label (Value for Money) and Sensei (as the Premium Offering). FG is facing tremendous competition from LG, Samsung, Sony etc.
Private Label Strategy:
Brand loyalty in Food and home categories is lowest and typically a consumer doesn’t hesitate to experiment. There is limit to which private label strategy can be stretched, given the entrenched presence and strong brand recall of most of the existing domestic as well as MNC consumer companies in India. Success will be category specific and would require humungous efforts from retailers to drive the private label business in areas where competition from branded manufacturers is severe.