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Presentation on
A Study of
Private Label Brands
Submitted by : Submitted to: Chirag Jain (M00110) Prof. Abhinava Singh
Flow of Presentation
• Retail Industry• Private label brands• Primary Research• Findings• Conclusion
Retail Industry – Meaning of Retailing
• All the activities involved in selling goods or services directly to final consumers for their personal, non business use.
• Retailers can be classified as: Store retailers Non store retailers
Retail Industry - Organized Retail
• Any retail outlet chain (and not a one shop outlet) which is professionally managed, (even if it is family run) has accounting transparency (with proper usage of MIS and accounting standards) and organized supply chain management with centralized quality control and sourcing can be termed as an organized retailer in India.
Source- (Dept. of Company Affairs)
Private Label Brands
• Private brands also known as store brands, own brands and merchandise brands.
• Private brands are products developed by a retailer and available for sale only from that retailer.
• Private brands products that carry the name of the seller, not the manufacturer
• They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.
Source – Crisil Research
Market Overview of Private label Brands
• Less than an estimated 7-8 per cent (US$ 1.4-1.6 billion) of organized retail sales
• 10 to 12% growth rate• 75% share of food items in total private label brands • Key Segments, their sizes in FY13Apparels & Accessories: USD 755 MnFood & Grocery: 510 MnHome Improvement: 280 MnFootwear: 155 Mn
Source – Tata
Why private label brands
• Grow of Middle-class
• Changing Lifestyle
• Consumer Choices
• Critical factors for high-end users
• Market Expansion
Source – Crisil Research
Types of Private Brand
• Generics• Copy cats• Value Innovators• Premium Store Brands
Source – Crisil Research
Cont…
Generic private brands• Generic – very low promotional , very low margin.• Same or better quality at better price , average
20-40% less than national brands.• Example- Big bazaar “LOOKS” = “LUX” (6) = (10) Both Lux & Looks are kept in same shelf for sale.
Source – Crisil Research
Cont…
Copy Cats Private brand• In this category only the brand name will be
copied (which almost sounds like original).• The copycats are mostly manufactured within
the company by the retailer him self
Source – Crisil Research
Cont…
Premium Store Brand• Premium store Private Labels are more expensive
than national brand & will have superior quality, good features & design.
• Example- In Globus F21 is very superior quality wise & offers better features & design especially for women segment.
• In west side 80% of the merchandise are own brand & they are far superior in quality as compared to national brand.
Source – Crisil Research
Marketing mix of Private label brands
Price• Lower than the national brands approx 5% -
20%Product
• Quality is improved as consumer rating• Increase focus on product presentation and
packaging
Source – Crisil Research
Cont..
Promotion• In house advertising• SMS channels• Loyalty programs
Place• Increase availability in terms of stores• Keep with national brands
Source – Crisil Research
Growth factors of Private Label Brands
• Consumer Value
• Retailer Profitability
• Consumer Confidence
Source – Crisil Research
Where Do Store Brands Come From
• Only buy their favorite store brand at their favorite store• Manufacturers of store brand products fall into four
general classifications:• They are large national brand manufacturers that utilize their expertise • They are small, quality manufacturers that specialize in particular product lines and also produce national brands.• They are major retailers and wholesalers that own their own manufacturing facilities.• And they are also regional brand manufacturers for specific markets.
Source – Crisil Research
Store Brands Meet All Standards and Requirements
• Meet the same exacting standards and requirements as all the major national brands
• Label the product to meet the store's specifications• Store brand products are tested and analyzed for
quality and safety by independent companies before they reach the shelves
• Good and attractive packaging design• Store's name or symbol is on the package – assure to
the customer the product is manufactured to the highest quality standards and specifications
Source – Crisil Research
Store Brands: The Smarter Choice
• American shoppers estimated $32 billion in annual savings
• Difference is the so-called marketing tax, which consists of advertising and promotional
Source – Crisil Research
Counter Strategy of National Brand
• Develop unique products and stay ahead as a trend leader
• Create own stores
• Never compromise on quality
• Increase brand loyalty
• Develop a compelling marketing strategy
• Evaluate production cost Maintain net price (minimal
promotions & discounts)
Source – Crisil Research
Costing of National Brand V/s Private Brand
ITEM OF COST National Brand Private Label
Fabric Cost (2.2 m/100 ) 220 220
Fabrication Cost 100 100
Direct Cost 320 320
27% Manufacturer Markup 86 0
Direct cost to Retailer 406 320
Indirect Costs 41 13
Cost price to retailer 447 333
EXERCISE 61 47
Sales Tax 27 21
Cost price to retailer 536 400
Trade Margins (%) 33 39
Trade Margins 293 268
MRP 825 675
Source – Crisil Research
Advantages
• More margin for retailers Example.- Shoppers stop have only five private brands and it
accounts to 20% of their annual turnover. • Private labels can offer huge discounts which the national
brands cannot offer. Example.-Big Bazzar offers noodles, pasta, soups under their
label “TASTY TREAT”. They introduced cornflakes for Rs 99 with free bowl worth Rs 60.
• Rise of customized products.Example- Spencers daily’s private label “EKTAA” has food items based on cultural and geographical considerations.
Source – Crisil Research
Pros & Cons of Private Label Brands
PROS
• Exclusivity & differentiation
• Bring customer loyalty
• Better margin
• Better control in deliveries
• Brand equity
• Freedom in pricing strategy
• Increase bargaining power with both
national brands and PL factories
CONS
• Inventory risk
• Higher R&D expense
• Higher marketing expense
• No markdown or return allowance
from branded suppliers
• If product fails, will create negative
image
• Quality control, complex production
& import issues
Source – Crisil Research
Future of Private Label Brands
• Private label sale to kirana stores• Nielsen estimates the spend on private labels
in the country to grow five times to reach $500 million, or about Rs 3,000 crore, by 2015
Apparels & Accessories: 31% p.a Food & Grocery: 36% p.a Home Improvement: 22% p.a Footwear: 27% p.a
Cont…
IN COSMETICS
• Pantaloons: Star and Sitaara
IN GROCERIES• True Mart – Uttam (Cereals, Masala Powder, Dry Fruits ) Big Bazaar – Tasty Treat, R-select aloo bhujia, Haldi healthy life,
Dubar rice, Supergrade rice, Sharbati atta, Amara , Externa handwash, Mupz, Scrubz, Shinze. Freshomz , Exlelz
Primary Research
Did Qualitative Research in which we have interviewed:
1. Mr. Kisan Satta (H.R. Head, Reliance fresh)2. Mr. Akash P. Modale (Marketing manager,
Pantaloon Fashion & Retail Ltd.)3. Prof. Devang Patel ( Faculty head, Xcellon
Institute)4. Mr. Pratik Parikh ( Regional Marketing head,
Nestle)
Quantitative Research
Sample Size: 20 respondent.Research Objective: To measure the awareness
and perception of people toward private label brands
Research tools: QuestionnaireSampling method: Random Sampling Type of Research: Descriptive
Findings - Consumer Research analysis
Know about private brands
70%YES
30%NO
Awareness of PLB
Source – Crisil Research
Findings - Why purchase Private label brand
0
2
4
6
8
10
12
9
11
Quality Affordable
Source – Crisil Research
Findings - Point of Parity & Point of Differentiation
Points of parity• Quality of Product• Packaging
Points of differentiation • Price • Layouts(Pictorial
presentation)• Sales Promotion• Push strategy
Source – Crisil Research
Findings - Private Label Brand v/s National Brand
Expelz
60 Rs for 500ml
Harpic
• 26 Rs for 200ml
Source – Crisil Research
Findings - Counter Strategy of National Brand
• Never compromise on quality
• Increase brand loyalty
• Combine effort by offering customer service
• Visibility – Off store and In store
• Not big threat from private label brands
Source – Crisil Research
Findings - Consumer Perception toward retail brands
• Women are especially likely to check out store brands
• Retail Brand name is more important • Prefer to buy due to price difference and same
quality• FMCG and apparel categories are more
preferabale
Source – Crisil Research
Conclusion
• Store image affect private label brand perception• Not use Retail brand name in product brand• The brand awareness perceived quality, service
level, store layout, price discounts, shelf display etc; affect the consumer perception of private labels.
• Growth in specific private label segments like food and apparel segments are growing at a faster rate.
Source – Crisil Research