Private Brands In retail Chains.

The issue, which I want to discuss today, is the role of private brands in retailing. Private brands are brands owned by the retailer and are available only at the retail chain to which it belongs. This phenomenon is quite old and established in the developed markets, because of the fact that organized retailing itself has been present in these countries for a longer period. The private brand phenomenon is in its infancy in India but maybe because of that it would be the right time to discuss it. Before getting into the details of private branding lets look at some stats from the marketing research agency A C Nielsen.

According A C Nielsen’s worldwide figures private brand are already a big trend, they have 17 percent of share of he consumer market and in developing markets they have grown by 11 percent, with close to 6 percent share. These figures give us some idea of how if private brands are in the developed markets and they would be as big if not bigger in markets like India.
There are many benefits for the retailer from promoting his or her own private brands, the first is that they are able to target a captive group of consumers who have walked into the shop with an intention of making a purchase and most of the times, hey are priced lower than the nearest competing brand from a company. They are able to give it prime shelf-space and organize promotions for their own brands. The question is why should the company promote it's own brands at the cost of the much bigger recognized brands.
There are two basic reasons for his, first is margins that they are able to get out of private brands, as they don't spend on advertising them, and no intermediaries in place, usually a no-frills product they are able to both price it lower and gain more margins than the what they would be able to get if they sell the organized brands. Second, reason is that by having their own brands provides the retailers with a lot of bargaining power while dealing with the branded manufactures. They are able to negotiate better deals because they have an alternative. This is all from the manufacturer and the retailers perspective, where does he consumer figure in the whole equation, what does he gain out of all this. Firstly he able to get a good quality product at a lower price .I am using the word good quality because in many cases the retailer ties with organised manufactures to use their spare capacity to produce the private brands, so in effect the consumer is getting a product perhaps as good as a branded one. Secondly when he walks into to make his purchase also has more choice , which is what should happen when the consumer is the king, and he is also reasonably assured of the brand as it does belong to the retailer who has stakes in maintaining quality and see the consumer comes back into his shop.

Now coming to India, though retail industry is booming, close to 95 percent of it still in the unorganised sector. But this is bound to change in the coming years. The private brands are being promoted by established players like Food world, but currently are limited to cereals and food grains, which is more of grading and packing. They also have brands in laundry called Clean made. The latest is the news that reliance retail is planning to come with private brand cola, and also has plans to come up with private brands in categories like Tea, biscuit and cosmetics. So the growth of retailing will see the growth of private brands across categories and the dynamics of the industry will change.