Academic journal article IUP Journal of Brand Management

Building Private Labels into Strong Brands

Academic journal article IUP Journal of Brand Management

Building Private Labels into Strong Brands

Article excerpt

Private labels are great assets far retail firms, as they help attract customers, build loyalty and generate large sales margins. Though private labels have evolved worldwide from being cheap substitutes for manufacturers' brands to strong contenders for them over the years, their role in the Indian market at present is limited. Many Indian retail firms have launched their private labels, but several of them have not been very successful. Based on the perception on private labels and intention to buy private labels, an empirical research conducted by the authors among consumers in Coimbatore, who purchased from modem retail outlets, revealed that the buyers of private labels could be classified into three and two clusters respectively. The respondents' age and income did not influence their perception and intention, but their gender did. Based on the findings, this paper aims at exploring the approaches possible for retail firms to develop their private labels into strong brands.

(ProQuest: ... denotes formulae omitted.)

Introduction

The organized retail business in India is of die size of about ?2.25 lakh crores at present, which is 8% of the total retail industry. It is expected to grow to 20% of the Indian retail industry by 2020 (India Retail Report, 2013). The recent market sluggishness that upset nearly every business in the country gave the organized retailing its own woes as well. Many major retail firms halted their expansion plans and consolidated their present status. These retailers began to increasingly use their own brands, which are called, in the marketing parlance, 'Private labels', as one of the main units of their armory for fighting tough market conditions.

The Presence of Private Labels

Private labels have grown from being mere substitutes to major threats for manufacturers' brands (Steve and Shiona, 1999). Private labels are at present major contributors of revenue to the large retailers worldwide. The fact that the private labels of Wal-Mart generate larger revenue than that of the world's largest FMCG manufacturer, Nestle is an indicator of the power and size of private labels (Nirmalaya and Jan-Benedict, 2007). Private labels contribute about 20-45% of the retail sales in the developed countries. Though it has not grown so well in India, the concept of private labels is accepted and has become an important part of the retail business strategy. There are many large Indian retail chains which make an increasing contribution from their private labels to their total sales over the years (Business Line, 2009). In fact, private labels form about 12% of the retail product mix in our country and the private label market is set to experience a phenomenal growth in our country in the near future (KPMG India Report, 2009). Private labels are becoming widely prevalent and successful in apparels, staple food, bakery, biscuits, chocolates and beverages categories. Of late, they have also crept into some unconventional categories like home appliances too.

Private labels like Food Bazaar's Fresh-n-Pure, Reliancefresh's Select and TATA-Trent's Westside are very popular among Indian consumers. Indian consumers have begun to acknowledge the modern form of retailing as a better option for purchasing their requirements due to the shopping convenience that it provides them on many counts. This has led to manufacturers queuing up for the prominent stocking of their brands on the retail-store-shelves so as to influence consumers' purchase decisions effectively. The competition to a manufacturers' brand, of late, comes not only in the form of popularity of other manufacturers' brands, but also in the form of predominant presence of private labels in these retail outlets. Retailers are more likely to gain an increase in their category profits by introducing private labels in product categories which have a lot of manufacturers' brands (Jagmohan et al., 1995). Manufacturers use various strategies for fighting the potential threat of private labels (Nirmalaya, 2007). …

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