Have you ever seen brands in specific retail stores which are not seen anywhere else? Ever wondered who owns these brands? Who manufacturers them? Why are these not available either with competition or with the local kirana store?
Welcome to the world of store brands or in house brands. The modern retail in the country has started a new trend of Private brands. These brands are manufactured by a third part manufacturer and marketed by the retailer. These third party manufacturers could be the manufacturers for the top MNC, the market leaders. These MNCs who do not wish to set up their own manufacturing units or are constrained by the manufacturing capacity to increase sales have third party manufacturers. These third party manufacturers may or may not have a brand of their own but they have enough expertise to manufacture the said product. In the excess capacity they manufacture the retailers’ private brand.
So what is the advantage of a private brand to a customer and a retailer?
A customer gets the best quality products at a lesser price as private brands are generally priced a tad lower than the market leader while the manufacturer might be the same for both the market leader and the private brand. Certain products are available only in private brands. For a big company introducing all the products from its portfolio in all geographies is very difficult. Hence they would introduce products which are commercially viable. Whereas for a retailer as they work on the mother warehouse concept (a warehouse which is nearest to the manufacturer) it is just a matter of shifting stocks from warehouse to warehouse. There are products exclusively available in a private brand. E.g. kasundi (a Bengali Mustard sauce) the presence of a private brand also leads to better offers on the market leaders. E.g. a retailer had launched a soup in a private brand with a mug free. This took the market by storm. Suddenly we had competition providing other freebies, price off on their customer so as to ensure their category share. Thus for a customer it’s a great deal.
For the retailer there are various advantages. Firstly Private brands provide higher margin than other brands. Presence of their own brands helps a retailer negotiate a better deal with the companies. E.g. in diapers. A retailer’s presence led to the competitors investing heavily with the specific retailer to safeguard their share with the retailer. In the case of soups, the competition hired additional man power to exclusively promote soups with the retailer. The private brands also provide the retailer an opportunity to explore and enter newer categories which a traditional brand might not have. They are already assured of the distribution and expect a definite set of customers. Hence they are willing to take risk in terms of products, packaging, and offers. A strong portfolio of a retailer’s private brands helps is having loyal customers to the store. The private brand needs to have a certain amount of pull to ensure a customer visit to the store to buy the specific brand as it is not available anywhere else. Infact in categories such as apparels most of the stores have only the private brand.
Any success story of a private brand across categories known? Any category which you think a retailer should enter or not enter?
Please share with me.