iconimg Sunday, August 30, 2015

Himani Chandna Gurtoo, Hindustan Times
New Delhi, July 25, 2012
Abhinav Thanti, 36, recently purchased a Koryo airconditioner from a from Big Bazaar outlet. The software engineer saved at least 40%  on his purchase on this compared to a big brand selling a similar product. For him, private labels are a value-for-money alternative to much-hyped global and local brands that spend a bomb on advertising and marketing.

And the other winner in the game: Big Bazaar.

For hypermarkets like the Pantaloons-owned chain, selling their own stock of "store brands" is one way of boosting profit margins.

An economic downturn and high interest rates are making private labels right for hypermarkets and electronic stores on the one hand and consumers on the other because the twain meet at lower price points.

In the interiors of large format retail stores, store brands are perched not far from big brands such as Sony and Samsung. The showcasing and the packaging are comparable, and often, the price pull is irresistible for the buyer. Also, private labels often tweak products to offer a feature or two that adds to the pull.

"The prices of own labels can be 4-5% cheaper to as much as 40% less than known brands purely on account of direct sourcing from local vendor  and the absence of any branding or marketing costs as they are sold only within the store," said Ankur Bisen, associate vice-president at retail consulting firm Technopak.

Industry watchers say retailers typically enjoy 30% margin on private labels compared to 5-10% margins on branded products.

“Private labels cure issues of affordability because of which the response is phenomenal. We may expand the portfolio for private labels if such transition continues,” said a spokesperson for Reliance Digital.

The company already offers a variety of private brands for television, air conditioners and small appliances.

Retailers are also strengthening after-sales service through their outlets or outsourced stores.

“Private labels account for 30% of total sales — which is very encouraging,” said Ajit Joshi, chief executive officer at Tata’s retail outlet, Croma.

“Customers are even trusting private labels while buying high price point electronics including front loading washing machines or high feature refrigerators,” he added.

Smarter buyer alternative?
Private labels are commonly known as “store brands”, and represent  products manufactured for sale under a specific retailer’s brand. They are often designed to compete against branded products. Retailers spend less on promotion but offer discounts to lure customers to the store brands.