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Private labels to save retailers’ skin

Private labels to save retailers’ skin

Author | Source: The Economic Times | Friday, Feb 16,2007 8:23 AM

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Private labels to save retailers’ skin

In a bid to improve bottomline, Indian retail chains are moving beyond mere price-positioning for their range of private labels. Eager to cash in on missing gaps in the market, the chains are building a basket of private label brands targeting specific consumers' needs.

Retail biggies, including Pantaloons, Westside, Ebony and Shoppers' Stop, believe beefing up the merchandise mix for private labels will improve margins and increase the average billing size. It is also expected to help retailers retain their gross margin levels, especially at a time when overhead costs are skyrocketing. "Today, the offering of private labels is not about price. The private label brands are filling the missing gap in terms of both range and quality. Private labels are more about targeting specific merchandise for youth and mature customers," Shoppers' Stop CEO Govind Shrikhande told ET.

Retailers are finding specialised categories like women's luggage, accessories, gym wear, lounge wear, yoga wear and clothing for top corporate executives as segments where there's a dearth of options. "Which is why, there appears to be an effort at the retailers' end to address this gap by launching a host of aggressively-priced private labels," said Trent marketing head Neeti Chopra.

Till recently, Indian retail chains had been positioning their private labels nearly 20-40% cheaper than the established brands. While such low-price private labels may still exist, the focus is shifting towards developing a portfolio of brands with distinct positioning for each brand. Shoppers' Stop, for instance, has added two new private label brands this season targeting the youth.

Retail chains are trying to understand unfulfilled demand existing in Indian market through extensive need-gap analysis. "Consumer sentiments are changing, and they now prefer premium private labels. As a result, the merchandise mix for private labels is also undergoing a sea change," said Ebony Retail Holdings CEO Lalit Kumar.

Ebony, in turn, has recently brought out a new private label for casual wear - Offtrack - at a price-point (Rs 700-1,200) matching other premium brands in the segment. "This brand is already accounting for 12% of our sales within months of its launch," Mr Kumar added.

Elaborating on the trend, Ms Chopra added: "Expanding private labels which meet consumer's demand help us address different consumer segments, build brand equity, increase footfalls and ensure repeat purchases." "At a time when cost of retail space and manpower is on the rise, private labels will provide retailers with a cushion to keep their margins intact and be competitive," said retail consultancy, Technopak Advisors, chairman Arvind Singhal.

Pantaloons is also building each of its private brands based on demographic and psychographic classifications. "Private brands allow us to create new fashion and present it to customers more frequently driving our positioning of 'Fresh Fashion'," added Pantaloon Retail India spokesperson. Analysts feel this move by retailers will help create a distinct differentiation from the emerging competition. "In a market like India where the penetration of branded goods is quite limited, there is huge scope for retailers to increase the basket of their own brands," Mr Singhal said.

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