Private labels of retail stores in India are on the growth path. With the retail sector poised for growth, national brand manufacturers will have to contend with the competition within the distribution channel, which calls for a revised marketing strategy, locally, to thwart the threat of the private label in a store. The phenomenon also offers national brand manufacturers the opportunity to efficiently service the production needs of the private labels. This article offers an insight into the economics of private labels and the challenges and opportunities for the national brands arising out of the growth of private labels. A few lines of possible research are also suggested at the end.
Textbooks define marketing as the societal process of identifying and meeting consumers' needs to generate profit and growth (Kotler, 2000, p. 8; Perrault & McCarthy, p. 30). Most discussions in business magazines and dailies concern the quality of products and product development, with added focus on advertising. Marketing theory has oscillated between standardization for a mass market and customization for a specific niche. Given the technological developments in recent times, standardized products no more enjoy unique selling propositions as imitations cannot be prevented from entry.
Though private labels attracted the attention of channel researchers about 40 years ago (Stern, 1966; Boyd and Frank, 1966), in India, private brands have attracted attention primarily only in the last decade. However, research work in this area appears to leave a void. For Indian conditions, the current era symbolizes the wake up call that national brand manufacturers should take note of, to effectively combat the threat of private labels.
Store brands are the only set of brands for which the store is entirely responsible. Thus, the store has to bear all the costs (development, sourcing, marketing effort, time, risk and promotion) and it reaps all the rewards of the brand's success. It is intuitively evident that a store will enter that product category that has a (a) high profit margin (b) low entry barrier to labeling and (c) low switching cost to the consumers, which may affect monetarily. Commodities offer the best scope to stores for private labeling, since competition against the store label will be minimal from the unorganized market.
|
