India is considered one among the top five emerging retail destinations in Asia and 11th promising retail destination globally. This is largely due to the expansion strategies adopted by business groups like the Future Group, the Tatas, the Goenkas and the Rahejas. The ever- increasing retail clutter has forced retailers to differentiate themselves—introducing private labels has been one such differentiation strategy. Private labels or store brands have been found to trigger customer loyalty. The basic objective behind introducing private labels is to offer quality products at lower prices compared to the national brands. Retailers basically go for imitating national brands in terms of quality and packaging. Although there are instances where store brands are successfully introduced, there are several challenges involved as far as introducing and sustaining store brands are concerned.

Although organized retailing in India is presently at a nascent stage, it is set to take off in a big way by 2010. Presently, it accounts for 3-4% of the retail market in India ($350 bn). India has been rated the fifth most attractive emerging retail destination and the number of organized retail outlets in India is around 12 million and this has largely been due to the corporatization of the Indian retail trade. Corporate houses like RPG, Future Group, Bharti Group, Raheja Group and Tata Group are executing ambitious plans to tap the growing potential of the organized retail market. They are not just expanding their retail operations but are also actively toying with various innovative private label strategies.

However, private labels have a long way to go before they enter the active consumption radar of Indian customers. As Nirmalya Kumar (Kumar), Director of the Aditya Birla India Center at the London Business School puts it, "…organized retailing in India is still at a nascent stage and private labels occupy less than 5% of the total Indian market." Echoing similar opinion, Jan-Benedict Steenkamp, Professor of marketing at University of North Carolina observes, "The highly fragmented nature of the Indian retail market has limited the growth of private labels in India." Private labels or store brands offer certain definite advantages to retailers but then there are certain critical prerequisites for the creation and sustainability of store brands. The organized retailers need to adhere to the prerequisites and must also be aware of the possible challenges for the private labels in India. If properly nurtured, store brands can prove to be an effective tool in generating significant revenues for any organized retailer.

Private labels or store brands are products that are developed by a retailer and are available for sale only through that retailer (Annexure). The brand names of such products are owned by the retailer. It has been generally observed that store brands are priced 20-30% lower than the national brands. Moreover, if properly created, private labels can contribute handsomely to the sales revenues of a store. In the US, private labels contribute to 15% of sales; while in Canada and Europe, private labels account for 25% to 50% of sales revenues. The figures clearly indicate the kind of potential that private labels have as far as enhancing the financial prospects of a store is concerned.

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