IMPACT OF

ORGANIZED
RETAILING ON
BRANDS
 ORGANIZED RETAILING

Retailing according to Kotler (1973)

includes all the activities involved in selling
goods or services directly to the final
consumer for personal, non business use.

Retailing which presupposes a retailers’

ability to manage or more importantly
influence a set of supply chain variables in a
commercially viable and sustainable way is
called organized retailing
- Raghu Pillai
09/10/10 2
 BEFORE ORGANIZED
RETAILING
The unorganized retail channel served as an
entry barrier for brands that do not have
mass appeal.

Stuck in the vicious cycle of product

placement and product pull.

No touch-n-feel of the product before

purchase
09/10/10 3
 IMPACT ON BRANDS

Breaking the vicious cycle:

Interface with the customer directly

Focus on distribution strategy:

Modern Organized retail chains are brands in
themselves (Own target segments)
Eg: Nilgiris & FoodWorld

09/10/10 4
 Brands without mass appeal:
The segmentation has also ensured that
niche brands also survive in the market at
higher as well as at the lower end.
Eg: Shahnaz Hussain & Health and Glow

Direct contact with the customers:

Most of the organized retail chains allow
the customer to touch-n-feel the product
before it is purchased.
09/10/10 5
 Promotions and consumer schemes:
The direct access has also marked a considerable
increase in the promotion and consumer schemes

• Communication strategy:
This is an unprecedented opportunity for the
brands to communicate to the consumers and
influencers and not just customers

09/10/10 6
 PRIVATE LABELS AS
BRANDS
Private label is by definition, is the store
label, developed and designed by the store.
Marketers have long derided “store” brands
and “private label” offerings, viewing them
as clearly distinct from – and markedly
inferior to – traditional “name” brands
Product marketers and retail chains don’t
decide what a “real” brand is – consumers
do

09/10/10 7
 WHY PRIVATE BRANDS
Great margins:
The private label offers a terrific
opportunity to the retailers to increase their
margins and still offer great prices to the
customers along with good quality.

ETIG’s study on the private labels have

found that on average, the private label
margins are 30 to 50 percent more than the
margins provided by the national brands
09/10/10 8
 Better Brand Image:

Improved Flexibility:
The higher margins of retailers increases
their flexibility.
The other major benefit is that it helps
the retailers in clear positioning of the brand.
Eg: SHOPPERS STOP

09/10/10 9
 CASE STUDY: THE EBONY
EXPERIENCE
“Keep pace with the customer’s expectation
and meet their requirements; create
differentiation and yet earn better margins.”
Ebony ETC – Private label across streetwear,
outerwear & basic merchandise in apparel for
men, women and kids.
Key emphasis area to build private label

Supply chain & logistics Tracking customers

09/10/10 10
• Firm grip on “BUY” aspects include
Right infrastructure
Supply chain
Identification of product category
Customers
Market segments
Pricing structure
Promotion

09/10/10 11
 ACNIELSEN RETAIL AUDIT OF
PRIVATE BRANDS 2005
Through parallel online survey by ACNielsen of
21,262 consumers in 38 countries, including
India, we now know exactly what customers
feel about own store brands.

A good 56 per cent of them consider private

label to be a good alternative to manufacturer
brands. Yet, if that figure is lower than the
global average of 68 per cent, it is because it
points to the differences between the Indian
retail environment and the ones abroad
09/10/10 12
 Supermarket own brands are a good alternative to
other brands
Asians are still hesitant about private label brands

G L O B A L A V ER A G E 28 40 21 8 3 AG REE
S O U T H A F R IC A 28 44 15 9 4 S TRONGLY
L A T IN A M E R IC A 2 4 40 24 7 5 AG REE
S L IG H T L Y
N O R T H A M E R IC A 36 41 15 61
N EIT H ER A G R E E
EU R O P E 37 41 15 5 2 NO R DIS AG REE
P A C IF IC 36 42 13 6 2 D IS A G R E E
S L IG H T L Y
A S IA 1 2 39 32 13 4
D IS A G R E E
0% 20% 40% 60% 80% 100% S TRONGLY

09/10/10 13
 The quality of most supermarket brands is good
A lack of private label exposure shows up in Asian answers

G L O B A L A V ER A G E 2 1 41 23 12 3 A G R EE
S O U T H AF RICA 28 44 14 11 4 S TRO NG LY

L A T I N A M ER IC A 2 3 41 19 13 5 A G R EE
S L IG H T L Y
N O R T H A M E R IC A 32 40 18 7 3
N EIT H ER A G R E E
EU R O P E 26 42 20 10 3 N O R D IS A G R EE
P A C IF IC 25 45 15 11 4 DIS A G REE
S L IG H T L Y
A S IA 1 0 39 31 16 3
DIS A G REE
S TRO NG LY
0% 20% 40% 60% 80% 100%

09/10/10 14
 Can’t trust store brands where quality matters
The Asian consumer is more quality sensitive than average
global consumer

G L OBAL AV ERAG E12 28 29 20 11 AGREE

S O UTH AFRICA 20 27 19 21 12 S TRO NG LY

L ATIN AM ERICA 21 30 27 13 9 AGREE

S LIG HT LY
NO RTH AM ERICA7 20 25 28 20
NEITHER AGREE
EUROP E 10 25 28 23 14 NOR DIS AG REE
P ACIFIC 13 28 25 23 11 DIS AG REE
S LIG HT LY
AS IA 14 34 33 15 4
DIS AG REE
S TRO NG LY
0% 20% 40% 60% 80% 100%

09/10/10 15
 I just don’t know enough about these Retailer brands
A lack of awareness seems to be the problem in Asia.

GLOBAL AV ERAGE6 16 32 21 25 AGREE

S OUTH AFRICA 6 14 36 20 24 S TRONGLY

LATIN AM ERICA 10 19 27 20 24 AGREE

S LIGHTLY
NORTH AM ERICA3 9 34 22 32
NEITHER AGREE
EUROP E 4 11 23 22 35 NOR DIS AGREE
P ACIFIC 2 13 35 25 25 DIS AGREE
S LIGHTLY
AS IA 9 23 39 20 9
DIS AGREE
S TRONGLY
0% 20% 40% 60% 80% 100%

09/10/10 16
 Store brands are meant for people on tight budgets
Low priced is equal to low end? Asians think so

DIS AGREE
100% 9 S TRONGLY
15 15 21
18 29 28 26 DIS AGREE
80% 18 18
21 S LIGHTLY
60% 27 25 22 26 NEITHER AGREE
23 23
40% 24 NOR DIS AGREE
20 22 19
32 26 26 AGREE
20% 18 17 23 S LIGHTLY
20
14 10 18 18 11 11 AGREE
0% 6
S TRONGLY
ASIA

AFRICA
PACIFIC

AMERICA

AMERICA

AVERAGE
SOUTH
EUROPE

GLOBAL
NORTH

LATIN

09/10/10 17
 Retailer brands are poorly packaged
Packaging is not big issue in Europe and North America

DISAGREE
100% 8 STRONGLY
90% 21 24 22 15 19 18
80% 24 DISAGREE
70% 20 18 24 SLIGHTLY
24 26 24
60% NEITHER AGREE
50% 30 26 18
40% 23 27 26 NOR DISAGREE
23
30% 26 25 AGREE
20% 28 24 23
20 21 SLIGHTLY
10% 10 14 19
0% 8 7 6 9 AGREE
STRONGLY

E
A
A

G
IC

IC

IC
IA

IC

A
P
IF

R
S

R
O
A

E
C

E
R

A
A

V
U

A
P

A
TH
E

IN
TH

L
U

A
T

O
R

B
A
O

O
L
N

L
G

09/10/10 18
 Private label is value for money
A majority of Indians but not to same
extent as Malaysians
90

82

80 76
74

70 66
62
61
Malaysia
60 Phillipines
51 51 Singapore
48 Indonesia
50
India
Hongkong
Korea
40
China
Taiwan
30 Japan
25 Thailand

21
20

10

09/10/10 19
 Private label quality is as good as manufacturer brands
A significant 60% of Indians think so

70

62
60
60
55 55

49
50
Phillipines
45
43 India
41
Malays
ia
40 38 Singapor
38
Indones
ia
Japan
Korea
30 China
27
Hongkong
Thailand
Taiwan
20

10

09/10/10 20
 Private label is for the poor
Yes, again say Indians.

40 39 39
37

35

30

26 Singapore
24 Japan
25 24
23 India
21 China
Thailand
20 Hongkong
Phillipines
16
Korea
15 Malays
ia
13 Indones
ia
Taiwan
10

6
5

09/10/10 21
 Private label packaging sucks
Yes, say 68% of Indians and that inhibits
purchase
45
42

40 38
37

35
32
31
Indones
ia
30 28 Japan
27
26 Korea
25
India
25 24 Singapore
23
Hongkong
china
20
Taiwan
Phillipines
15 Malays
ia
Thailand

10

09/10/10 22
 Private label is a good alternative
More consumers in India say so compared to
China, but hey are still a wary lot
70

64
62
61
60
56

52

48 48
50
Phillipines
Indonesia
Singapore
39 39
40 India
China
35 35
Hongkong
Taiwan
30 Thailand
Korea
Malaysia
Japan
20

10

09/10/10 23
 THREE KEY LESSONS

Lesson#1: Not all private labels are

made equal

Lesson#2: Pay attention to packaging

Lesson#3: Invest in Building Brand and

Awareness

09/10/10 24
 CONCLUSION
Organized retailing is a significant upcoming
trend for the brand strategist.
Organized retailing also poses some
challenges for manufacturing brands. This too
is a blessing in disguise for the customers as
it forces the brands to innovate continuously
and offer higher value to the customer.
With the proliferation of organized retail
chains one can be sure that maximum gains
would accrue to the owner of the brand
– the customer.

09/10/10 25
 THANK YOU

09/10/10 26
 CONTRIBUTION TO ORGANIZED
RETAILING
3% 4% Clothing and textiles
3%
watch/jewelry
10%
36% Food /grocery

Footwear

13% Durable

Home

Books, music
14%
17% Health, pharma
&entertainment

09/10/10 Source: ETIG 27

 NATIONAL PRIVATE
BRAND LABEL
Fabric cost ( 2.2 metres of Rs 100 per Metre Fabric ) 220 220
Fabrication cost 100 100
Direct cost 320 320
27% Manufacturer Mark up 86 0
Direst cost to Retailer 406 320
Indirect costs 41 13
Cost price to Retailer without duties 447 333
Excise 61 47
Sales tax 27 21
Cost price to Retailer 536 400
Trade margins (%) 33 39
Trade margins 293 288
MRP 825 675

Source: ETIG
09/10/10 28
 SHARE OF PRIVATE LABELS IN TOTAL SALES

120

100

80

60
%

40

20

SHOPPERS STOP* PANTALOON GLOBUS

EBONY LIFESTYLE WESTSIDE

09/10/10 * 50 Percent of womens wear is private label 29

Source: companies, ETIG