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Monday, May 04, 2009
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Business Daily from THE HINDU group of publications Monday, May 04, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Retailing Marketing - Brands Web Extras - Outlook Retailers bet on private labels 
Varada Bhat Mumbai, May 3 With rising pressure on margins, retailers are now looking at private label sales to boost their bottomlines. Most retailers are eyeing 20 to 40 per cent growth in their private label segment in the next three years. “With the margins that the FMCG companies offer, no one can survive. Even global retailers such as Wal-Mart, Carrefour and others are successful because of their strong focus on private labels. No retailer can survive on rentals and low margins,” Mr Thomas Varghese, CEO, Aditya Birla Retail. He said margins on private labels are as much as 35-40 per cent. Aditya Birla Retail is aggressively pursuing the strategy of promoting sales of private labels. “Currently, the segment accounts for around three per cent of its total sales but now we are targeting 10-15 per cent in the next two to three years,” said Mr Varghese. Bharti retail, a wholly owned subsidiary of Bharti Enterprises, is eyeing 30 to 40 per cent growth in its private label segment in the next five years. At present, the private labels contribute to 8 to 9 per cent to the company revenues. “By selling private labels, it’s a win-win situation. We can beat better known FMCG products by offering good quality and lower price,” said Mr Vinod Sawney, President and COO, Bharti Retail. Private labels are brands owned, merchandised and sold by retailers themselves. They are also sold at least 5-20 per cent cheaper across various categories.
Most retail chains in the country are increasingly relying on private labels to bridge the gap in their product mix and are targeting specific needs of consumers. According to KPMG report on the Indian retail sector, private labels enable retailers to offer quality products and earn higher margins. “Private labels are likely to continue to grow in the current financial environment as cash-strapped consumer’s perception of the products as ‘cheaper option’ changes. Part of private label growth in a recession is permanently sustainable,” said the report. Retailers like Pantaloons, Shopper’s Stop, Reliance and Vishal Megamart are expanding their range of private label products from cosmetics, food apparel, healthcare products and furnishings to clothing to improve the profit margins of their stores. “There are no middlemen costs in this and the benefit is passed on to the consumer. Private labels enhance the bargaining power of the retailer while negotiating with manufacturer brands,” said the report. Mr Amit Kumar, Retail Head, Fashion@bigbazaar says they will increase their private label penetration by to 90 per cent from 60 per cent. “Since private labels require long term planning, it enables the retailers to understand all the nuances of its products as against an opportunity stock which would turn into an opportunity cost in the long run,” he said. Globally owned brands contribute 17 per cent of retail sales with a growth of 5 per cent per annum. International retailers like Wal-Mart and Tesco have 40 -55 per cent own label brands in their stores. Futurebrands to spread reach of private labels Reliance Mart bets on value, private labels to drive sales Reliance Trends opens 10th large format store More Stories on : Retailing | Brands | Outlook
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