Private labels gain retail fancy

To generate more business volume, retailers are betting big on private labels that cost less than brands and yield better profit margins. Ruchi Hajela reports.

To generate more business volume, retailers are betting big on private labels that cost less than brands and yield better profit margins.

HT Image

Private labels are available across categories like food, apparel and even electronics. However, industry experts say consistency is yet to be achieved. “Private labels will be big for us. Some of these are up to 20 per cent cheaper and generate double the margins than branded items,” said Samar Shekhawat, vice president, marketing at RPG Group owned Spencer’s.

For instance, a food processing label Smart Choice occupies about 10 per cent of floor space in a Spencer's large format store. Private labels contribute up to 18 per cent of Spencer’s sales and the company expects this to go up to 25 per cent in the next two years.

Future brands, a subsidiary of Future Group, contributes around 30 per cent to Pantaloon retail’s revenue. This amounts to Rs 1,950 crore of the company’s reported revenue of over Rs 6,500 crore for eleven months ended May 2009. “We expect Future Brands to contribute up to Rs 10,000 crore to Pantaloon Retail’s revenue by 2011,” said a company spokesperson.