Big rush for private labels

MUMBAI: The surge in demand for value-for-money items has sent the sale of private label brands soaring. The trend, which is popular in the west, is gathering momentum in India as the slowdown shifts consumers to economic products.
A Vishal Megamart spokesperson said the sale of its private label goods rose from 5-6% of its total revenue to 17-18% in the last 3-4 months. ���We are expecting it to be 40-50% of our total revenue in two years. The value proposition of private label goods is very high,��� he added.

Spencer's Daily reiterated the same. The retail outfit of the RPG Group, which mainly caters to the affluent customers, has seen its sale of private label growing by 15-20% comparing to the previous quarter and set a target of generating 35-45% of its topline from the sale of private labels in two years from the existing 25%. The company���s marketing manager Samar Shekhawat said it has decided to quadruple its stock keeping units for private labels to 10,000 in two years to cater to the flourishing demand.

Sensing a better business opportunity, retailers are trying to push their own brands by offering more discounts and giving better visibility in their stores so that the brands are noticed by the consumers.

Rajan Malhotra, CEO, Big Bazaar, said the spurt in demand for private label brands is across all categories. ���We are selling private label goods for a long time. In the last quarter, the sale of fashion accessories grew to 72% of total revenue from 50% last year,��� he said.

He also added that the food segment also witnessed increased sale of private labels, without divulging details.

Future Group last week announced its foray into FMCG, consumer durable and apparel segment with its "Future Brands". It is expecting the private labels to contribute one-third of its total business by 2012.

Given the grim economic scenario, private labels might soon rein over the established brands, said Hemant Kalbag, principal-consumer and retail practice, AT Kearney. ���The retailers have a broader range of their own brands now.���

Himanshu Arora, vice-president of In-Store Consulting, a retail consulting firm, said private label brands have low entry barrier. ���As the costs of running the stores are going up, the retailers can bank on their own brands for a better margin,��� he added.

Mr Arora, however, is sceptical on whether all retailers will be able to cash in on the spurt in demand for private labels. He thought that stores like Big Bazaar and Apple may gain more as consumers with tight budget prefer shopping there. But he is not sure whether it will help Spencer's in a big way.