Module 1 - MPLB

Conceptual Framework

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 A private label brand (also called
as reseller, store, house or
distributor brand) is a brand
that retailers and wholesalers
develop

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 Private Label Brands
 owned not by a manufacturer or producer
 but by a retailer or supplier who gets its goods
made by a contract manufacturer under its own
label.
 Also called private brand.
 Private brands are also known asCorporate
brand
 Store brands
 Own brand
 Retailer brands.
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 Private Label Brands
 Private-label products or services,
 also known as "phantom brands",
 are typically those manufactured or provided
by one company for offer under another
company's brand.
 Private-label goods and services are available
in a wide range of industries from food to
cosmetics to web hosting.

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 Major categories
 Personal care
 Beverages

 Cosmetics

 Paper products

 Household cleaners

 Condiments and salad dressings

 Dairy items

 Frozen foods
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 Some of the factors for
this growth include:
 •Consumer Value - Store brand programs offer
high quality products at retail prices that are often
10-30% less than national brand varieties.
 •Retailer Profitability - On the average, retailers
profit margins on private brand products are
10%higher than the profit margins on national
brands.
 •Consumer Confidence - Educated consumers
recognize the value of private brand products and
are unwilling to pay premium prices for national
brand
Reetiproducts.
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 Advantages
 Control over production - Third-party manufacturers work at
the retailer’s direction, offering complete control over product
ingredients and quality.
 Control over pricing - Thanks to control over the product,
retailers can also determine product cost and profitable pricing.
 Adaptability - Smaller retailers have the ability to move
quickly to get a private label product in production in response
to rising market demand for a new feature, while larger
companies might not be interested in a niche product.
 Control over branding - Private label products bear the brand
name and packaging design created by the retailer.
 Control over profitability - Thanks to control over production
costs and pricing, retailers therefore control the level of
profitability its products provide.
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 Increased Margins. Typically, since you are bypassing the "brand"
name, there is no added cost for the vendor. After all, a vendor must
add some cost to their products to help promote its brand name to
drive people to your stores to buy it. Funny thing is, you are actually
paying for the traffic.
 Reduced Competition. If you are a retailer who matches prices
(and who doesn't these days), then this one is a great benefit. We
would get the vendor to make us the same shoe but without their
label on it. Then we could still charge full price for our shoe when
the competition put the branded version on sale.
 Brand Builder. With your own products, you can build your brand.
In my shoe stores, we created our own labels for the findings (items
like polish, shoe trees and cleaner) for the shoes. We simply bought
the products without labels and then attached our own when they
came in the store. The vendor was well aware of what we were
doing and fully supported it. I have seen retailers try and put their
label on the top of another brand. That is not legal or ethical.

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 Compensation Booster. I used to run sales
contests and spiffs on the private label products.
Since I had more margin, I could give more money to
the sales team. I ran contests and spiffs on these
items versus the branded ones. Even after paying out
the incentives, I still made more margin than the
branded version. My stores were non-commission, so
having an added incentive was important, and this is
the best one we used.
 Customer Loyalty. If the customer loves the
product, they will want more with that label inside.
And the only place they can buy it is in your store. In
a retail world where loyalty seems to be dead, this is
one way to fight back.

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 Disadvantages

 Manufacturer dependency - Since production of your

product line is in the hands of a third-party manufacturer,
it’s important to partner with well-established companies.
Otherwise, you could miss out on opportunities if your
manufacturer runs into problems.
 Difficulty building loyalty - Established household
brands have the upper hand and can often be found in a
variety of retail outlets. Your product will only be sold in
your stores, limiting customer access to it. Of course,
limited availability could also be an advantage, giving
customers a reason to come back and buy from you.
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 Dead Inventory: Sometimes you make a bad choice
and then you are stuck with it. With branded
merchandise, you can get a return authorization, but with
private-label you're stuck.
 Co-op Funds. With national brands, you get access
to co-op funds to help you promote and advertise. With
private label, you do not. Plus you also have to deal with
the hurdle of putting a brand in the paper no one has
ever heard of. Don't try and educate the customer on the
private label. Just set it next to the brands and treat it as
anReeti
equal .
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 PRIVATE LABEL BRANDS
IN INDIAN MARKET
 » India’s largest retail company Future Group has 12 apparel, 4 FMCG
and 2 household product private labels in its formats Big Bazaar, Food
Bazaar and Pantaloons. Besides these it also has many other private
labels across categories and formats.

 » Aditya Birla’s private labels segment has 7 brands which Aditya Birla
Retail Limited provides customers products under its own labels. Private
label Food Brands include Feasters, Kitchen’s Promise, and Best of India.
Home & Personal care brands include Enriche, 110%, Pestex, Paradise
and Germex. It is also planning to launch its private labels in milk and
dairy products.

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 » Tata Croma has plans for 100+ private labels across categories like
personal care equipment, laptops, small appliances, etc.
 » Reliance Fresh sells staples and food items under Reliance Select and
Reliance Value brands. It has recently launched Dairy Pure, in the liquid
milk segment. Reliance also sells a number of private labels in other
categories like apparel, through its various other formats.
 » Shoppers Stop has around 10 private labels, the prominent ones
being Stop, Kashish, Life, etc.
 » Bharti retail recently launched 8 international private labels of Wal-
Mart in its supermarket chain, Easy day.
 » Myntra is looking to launch its own private label by Q3 2012, which
according to it, will contribute to a better bottom-line for the company,
since the margins in private labels are higher.

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 » Flipkart has entered the private label league through online store
brand ‘Digiflip’, a brand that sells digital accessories such as laptop bags,
sleeves and camera bags & pouches.
 » Ruchi Soya Corp has tied up recently with Future Group for
manufacturing its private label brand – ‘Fresh & Pure’.
 Internationally
 » Nestle works with Lidl, a discount retailer, to create products and
packaging in many categories across countries. In the Indian context,
Brand owners and manufactures like Indo Nissin (Brand: Top Ramen),
Dynamix Dairy (Brand: Dynamix) etc. also manufacture private label
brands for their retailers to occupy their excess production capacity.
 » Wal – Mart’s private label ‘George’ is one of the highest selling apparel
brands in the US.
 » Aldi, the German deep discounter has more than 90 per cent of its
sales coming from private labels. Some of its private labels sell more
than any national brand in Germany

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 Growing Consumer
Acceptance of Private Labels
 Private labels compete on quality
 Private labels are brands
 Private label purchase as smart shopping
 Private labels are not a recessionary
phenomenon
 From manufacturer brand loyalty to store
loyalty

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