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Private label products—a major growth driver for retailers

Indian consumers are value conscious, more so in the current economic environment. Consequently, Retail&Consumer companies are launching a range of private labels products in order to meet the demands of value conscious consumers, to develop product portfolios and to improve margins in a retail environment where efficiency and competitiveness is imperative. While private labels may have a “no frills” approach in their packaging and marketing, they aim to satisfy consumers’ value preferences.

Categories that have little emotional connect and are mainly functional are likely to have successful private label offerings. India’s retailers view private labels as a robust value proposition and are also witnessing double-digit growth rates in the sales of these products. The margins of private labels are typically double than that of nationally branded products.

Private label brands are an important revenue driver in developing markets and filling a demand gap in terms of range, quality and price. Since consumers may not be too familiar with private label offerings, retailers need to embark upon intensive promotional and marketing campaigns to advertise products and drive sales. Using mainstream advertising, placing free point-of-sale samples, using in-store advertising, audio-visual advertising, and participating in media articles all help to drive consumer awareness and demand. For certain product categories, such as FMCG and food, consumers are fickle in choosing between products and are not too brand loyal. This represents an opportunity for retailers to build brands that will “stand tall” against national brands. In this context, it is essential to have robust positioning of the private label offerings and induce the trial of the products (through freebies, buy one get one free offers, etc.)

While low-price private labels exist, retailers are changing their focus from “a price game” to one that involves developing a portfolio of brands with distinct positioning for each brand. Retail chains are trying to understand unfulfilled demands existing in Indian market through need-gap analysis and are incorporating demographic and psychographic indicators.

India’s major retailers expect to embark upon the following strategies for their private label products—

  • Increase the range of offerings

  • Derive an increased share of revenue from the sales of products

  • Embark upon promotional offers and sales

  • Increase the visibility of products in store outlets

  • Offer selected products through other retailers’ outlets

Strategic Issues for Retail CEOs* : Perspectives on Operating in India’s Retail Sector

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