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Private Labels – Long Way To Go !!!

Private Labels arrived in India long back…I still remember when I purchased few shirts of Shoppers Stop’s Private Label STOP in year 2005 but honestly speaking Pvt Labels have actually not picked up in India, the way they have picked up in western countries…Though my take is Pvt labels are future of Retail but they have long way to go in India…The problem with Indian Retailers/Marketers is whenever they go outside India, they pick up few thoughts/ideas & try to implement same in India only on the basis of benefits these ideas will bring for organization but without understanding the consumer behavior/usage pattern..Understanding consumer behavior is very important for success or failure of Product? The concept of Pvt labels is also western concept & its like changing consumer behavior from the perspective how Indian Customer treat brand i.e. preferring Pvt label over known Brand…..Either brand should be patient enough to wait for consumer behavior to change, which is long process or end up closing their shop. Many people quote success of Private Labels in Hyper city or Big bazaar etc but personally i don’t consider them as success of Private Labels becoz we are used to buying non-packed/open Grocery, Spices etc  from Local kirana store since our childhood. These items are as good as Private Labels of Local Kirana Store…The real test come when Private Labels compete in organized retail i.e. Consumer Electronics, Apparels etc. In organized retail, a paradigm shift is required in usage behavior of customers towards Private Labels…

Before proceeding further lets take classic e.g. of attempt to change Usage Behavior…The example is of  Hand Wash Solution launched in 2003, the USP or benefit showcased was that u need not to wash hands with water…I remember ad in Cineplex wherein a lady comes out of washroom & use few drops of this solution (No Water) for Hand Wash…It was a big marketing blunder rather I would say, disaster from marketing perspective…The brand tried to change consumer behavior & that too related to hygiene….Indian mind is fine tuned from ages that till u wash hands with Water, they are not cleaned…The product was copy from Europe but Indian Company failed to understand why it is successful in europe…Two primary reasons (a) Water is very costly in Europe, A glass of water cost 1 Euro today (b) Western countries are very cold regions where temperature for most of the year is sub zero so water gets freezed in pipes…..But in india neither water is costly nor its a cold region…Becoz of this reason people use fork & spoon in western countries & we try to copy them..The company which successfully changed consumer behavior to some extent is Kellogg’s, if i am correct they launched corn flakes in 1997 & i remember i got 2 packets free as sample….At that time, for Indians the breakfast means (a) Idly, Sambar etc in southern part (b) Parontha, Aloo Puri etc in North India & (c) Vada Pav, Poha etc in Western part… To some extent the success of corn flakes is linked to fact that in many families both parents are working and lady of house don’t have time to cook breakfast in morning..

With this background, Pvt Labels also try to change consumer behavior which is catch 22 situation..Why i will explain, 1st place marketers say buy a brand and try to make it a mass brand (it can be premium brand also) but when it comes to Pvt Label, they insist customer not to buy mass brand in that segment e.g. apparels & buy their own labels (Still Pull factor is retailers/retail stores brand as mass brand)…Bit confusing, let me take e.g.  of Store A and its Pvt Label B in Apparel segment…Label B is competing with mass brand Label C in that segment….Now store A is insisting customers to buy Label B over Label C riding on the equity they created as Store A whereas Label C has created equity for self in Apparel segment so effectively u r riding on principal of Brand when it comes to Brand “Store A” but at the same time defying the same logic in Apparel Segment…Basically state of confusion, what to communicate…

In this dilemma, over the years these brands have killed Pvt Labels to an extent that now rather than harping on Quality they started playing on pricing and for customer, Pvt labels means cheaper alternative of Branded product.

Recently i purchased DVD player from Croma, It was branded as Croma  only (Pvt label)…The way store executive projected Pvt Label was quote interesting..I was interested in purchasing Sony DVD player which was costing approx 6k, My basic requirement was HD support, USB port ,  5.1 Ch speaker support & few other features…Based on my requirement i finalized Sony.. Just before closing the sale this smart guy told me all the features required by me are also available in Croma branded DVD player which will cost me just 3.2k…From customer’s perspective, I told ok let me have a look…I checked and found all features and quality were almost same so purchased Croma DVD player…Out of curiosity I asked him why he has not told me this when I entered store, I shud not have wasted my time…The answer he gave me was quite astonishing..He told me that if he would have told me in advance then definitely i would not have bought Croma DVD becoz when i entered the store, i came with preconceived notion to buy Sony (Good Quality)..But once i finalized i had clear idea on what i am going to buy and then i can compare the product finalized by me with Croma DVD player more objectively and rationally…I was shocked that this guy’s understanding of consumer behavior is much better than many so called Marketing Gurus….I am using this DVD player from quite sometime & quality is awesome but as a marketer its very sad to know that Good Quality product is being sold on Pricing USP rather on quality..

Just to substantiate this another e.g. is of Apple ipods..Do u know Apple ipods are manufactured in China and same company also sell ipods to some Pvt Labels through some other manufacturing facility which are available at lower rate than Apple ipods.. So its not that company is willingly projecting pvt label as cheaper alternative but reason is customer will not buy at higher rate…If same product with same quality i get as Apple ipod and another as Pvt label & if pricing is almost same then my preference will be Apple ipod but if I get some discount than I might consider Pvt label..

Even u can notice in FMCG products where product is manufactured by some SME but it is mentioned that Marketed by some big FMCG company & product is being based on Brand Pull rather quality…The similar product of SME might be available at lower rates under some local brand but we will not buy. Conclusion is Brand is God.

Next que which is coming into ur mind is, if quality is same then why Popular Brand product is priced higher than Pvt label..Reasons are very simple..

  1. Popular Brands invest heavily on branding whereas in Pvt Labels not much investment in terms of branding(except branding of umbrella brand which anyways retailer has to invest)
  2. Huge Margins in Pvt label becoz not many intermediates like distributor, retailer etc..The retailers directly source them from manufacturer and logistics is maintained by all these big retailers.
  3. Customer loyalty is high in case of Pvt Labels..Now as i am happy with Croma DVD player, my next purchase of TV in all probability will be Croma TV only as i know quality will match with big brands and I can save upto 1ok on purchase of 50k..Probability of repeat sale is high in Pvt labels

So even after offering huge discounts, retailers make good money from Pvt labels. Though adaptability levels are very low..As per estimate currently only 15% sale is coming from Pvt labels but definitely the scenario will change in future & Pvt labels will rock. Customer will benefit from this transition.

Conclusion is Private Labels are here to stay. Customer will buy Pvt labels only if quality matches with popular mass brand, Pvt label is not trying to change customer behavior  & it should be available at discount in comparison to popular brand…

I am a big fan of Pvt labels as till date, I could not find any issue on quality but at the same time i also got some cool discount between 25% to 30% without compromising on quality…Its Win Win for me & i don’t care who is losing :)

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

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