The Indian retail industry has undergone tremendous changes over the past two decades, with technology and awareness the two key driving forces behind this change. And, an essential component of modern retail is ‘Private Label’.Private labels initially started largely on the me-too concept, with no leading chain wanting to be left behind. However, this product concept is now being viewed as strategic by retailers and they have focused an increased amount of resources, in terms of development and innovation, to ensure products are of high quality.Various retail chains have launched a bouquet of private label products in diverse product categories, and the products are launched either in association with the main retail brand or a separate brand name, with or without an association of retail brand. Buyers too, have become aware of the concept of private labels, in terms of attractive prices for products, as well as about product quality and allied areas.
Boon or bane
In the Indian food and grocery product categories, these are currently dominated by well established national brands. However, in several other product categories, there are not too many well recognised brands present, and retailers have recognised the opportunity. Retailers have introduced a range of high quality private labels in these products at rather attractive prices and are gradually expanding the presence of such products, across segments.These developments come at a time when the domestic retail industry is set to grow rapidly. For instance, retail trade was valued at nearly $ 470 billion at the end of ’11 and expected to reach $ 675 billion by ’16.Meanwhile, organised retail is expected to reach $ 84 billion by ’16, with food and grocery segment alone accounting for about one-third.
Rising middle class
The middle class in the country is expected to grow rapidly over the next few years, as per various estimates of management consultancies. Apart from that, we are also going to see the emergence of an inspirational middle class, termed ‘Urban Aspirers’ by Boston Consultancy Group, who has a far greater understanding of his/her needs and the products that will fit him.In this context, retailers would need to shift from the current strategy of a ‘good product at a lower price’, to one that focuses on a strong consumer proposition, and that also reflects the values of the retail brand. And this would have to be accompanied with products that have appropriate quality and attractive packaging, amongst other attributes. In terms of the branding strategy, two routes appear feasible; one could either stay with the retail brand itself or create independent brands in various categories.Retailers, who are in the process of building up scale, will probably pursue the former strategy, as it is more cost effective and quicker to implement, successfully.
Private labels are an integral component of modern retail here and have worked well for urban consumers, who are looking at high quality product without paying the premium prices of leading brands.Apart from that, it also allows retailers to connect directly with consumers, grab a share in the basket of products bought for daily consumption, and earn higher margins for the chain.The key to success for retailers is to select the right categories to offer private labels, and a comprehensive strategy in terms of product, branding and allied areas.