Re: cool retail -
May 11th, 2009
Organised retail is on the threshold of a boom in India. But as companies line up to grab a bigger and bigger slice of the retail pie, another battle is likely to change the face of the industry -- the one between the manufacturer brands and the retail chains’ private label brands, which are far from being just cheap generics. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands at the expense of manufacturer brands. Retailing in India is still very primitive. At the moment, private labels almost do not exist in the country. They are less than 5 per cent of the retail business and still have a long way to go. But Indian retail is extremely hot and it offers a proposition that can’t be seen anywhere else in the world. Only in China and India can retail chains have as many stores as they have in the US. In no other country can one imagine companies having 5,000-6,000 stores of their own.
Private labels will have a huge role to play in this. As much as 50 per cent of Indian retail will be occupied by private labels. Private labels are products that are manufactured by the retailer itself, rather than a manufacturer who generally markets them through separate retailers. As is evident, private labels are mostly prevalent in organised retail. Europe is the largest market for private label products globally. Within Europe, the United Kingdom is the largest private label market by size, followed by Germany. Private label penetration in the United Kingdom is close to 37 per cent currently, and is forecast to exceed 40 per cent by 2011.
Major factors affecting Private labels brands in India
• Structure of Indian retail is intrinsically not amenable to private labels
• Lack of retailer sophistication could hamper private label growth
• Rural areas unlikely to be tapped by private labels in the near future
• Psyche of the urban Indian consumer is both a hurdle and an opportunity
• Intense competition in Indian retail could provide impetus to private labels
• Private labels likely to exhibit maximum penetration in ‘food and groceries', ‘clothing' and ‘consumer durables' segments