Private Labels vs National Brands

Introduction

• Shoppers' Stop Limited is a chain of Retail stores in India owned by K. Raheja Corp.

• Group - The Company houses a host of many international & domestic brands across various categories such as apparel, accessories, cosmetics, home & kitchenware as also its own private brands.

• SS started in 1991 with its first store in Andheri, Mumbai.

• SS has built robust management systems to capitalize on the growth potential in the organized retail space, particularly the department store segment.

• With a Gross Retail Turnover of Rs. 8996 million, Shopper's Stop has become the highest benchmark for the Indian Retail Industry.

Shoppers’ Stop Represented Across Most Retail Segments

RAHEJA GROUP

What is a private label?

• A private label brand, often referred to as an in-house brand or store brand, is that which is owned by the retailers themselves.

• They have almost all the elements of a big label—a brand name and exclusivity.

• Private labels are a way for retailers to improve operating gross margin.

• Pricing: These products were priced substantially lower than the other brands.

• Differentiating factor: these brands are exclusively available at that retail outlet only. So a customer, for example, may want to revisit the store if they find the quality comparable to others at a more affordable price point.

• The retailers also believe that private labels give them more control over their shelves.

• As they compete head-on with brand manufacturers, private labels offer retailers better negotiation power with suppliers.

• Store Loyalty: In other words, with private labels not available anywhere else, if it clicks, then consumers return to the store.

• For the customer: Store brands most often mean products of reasonable quality at lower prices.

• For the retailer: Private labels translate into better margins, greater clout with the manufacturers and the ability to fill value gaps in the consumers requirements.

Shoppers’ Stop Private Labels

Source: Company Data

Private Labels

• Of the 204 brands stocked by the Rs 400-crore (Rs billion) Shoppers' Stop, only five are private tags.

• These include : Stop: the oldest and the strongest of the in-house brands, caters to

the youth segment Mario Zegnoti: Men’s Casual Wear. Austin Reed: International brand, exclusively sold in SS Life: for youth and the mid segment Kashish: the premium ethnic ladies wear Vittorio Fratini: a premium men's wear Elliza Donatein: an exclusive brand for ladies formal and casual

wear

• Interestingly, the private labels account for 18 to 20 per cent of turnover.

• Price tag: These products are priced substantially lower than the other brands.

• Depth of assortment: The private labels are not limited to a

particular category, it is extended from apparel for men, women to children.

• Store Space: These products are not differentiated from the other brands in terms of store space. They operate in 18-20% space only.

Merchandise Assortment & Pricing

STOP Lowest Price Highest Price

Men’s Formal Shirts Rs. 599 Rs. 1199

Men’s Tee Shirts Rs. 399 Rs. 599

Men’s Formal Trousers Rs. 999 Rs. 1299

Men’s Briefs Rs. 99 Rs. 199

Men’s Handkerchief Rs. 199 Rs. 199

Women’s Formal Shirt Rs. 649 Rs. 699

Women’s Office Wear Rs. 699 Rs. 799

Women’s Trousers Rs. 499 Rs. 899

Women’s Casual Wear Rs. 299 Rs. 599

Classics Ladies Kurti Rs. 599 Rs. 899

Classics Ladies Suit set Rs. 1199 Rs. 2199

Ladies Churidar Rs.499 Rs. 499

KASHISH Lowest Price Highest Price

Casual Wear Men’s Kurta

Rs. 299 Rs. 599

Occasional wear Ladies Kurta

Rs. 899 Rs. 1499

Churidar Rs. 1999 Rs. 3299

Occasional Wear Sarees Rs. 1799 Rs. 6999

VETTORIO FRATINI Lowest Price Highest Price

Men’s Formal Shirt Rs. 1199 Rs. 1599

Men’s Casual Shirt Rs. 799 Rs. 1199

Men’s Sport Collection Rs. 599 Rs.659

LIFE Lowest Price Highest Price

Men’s Casual Shirt Rs. 599 Rs. 999

Men’s Casual T-Shirt Rs. 199 Rs. 999

Denims Rs. 1299 Rs. 1599

Shorts Rs. 699 Rs. 999

Cargos Rs. 899 Rs. 899

¾ th’s Rs. 999 Rs. 999

Ladies Casual Top Rs. 299 Rs. 999

Ladies Jeans Rs. 699 Rs. 1099

ELLIZA DONATEIN Lowest Price Highest Price

Women’s Formal Shirt Rs. 799 Rs. 799

Ladies Casual Tops Rs. 299 Rs. 999

Ladies Trousers Rs. 999 Rs. 999

Marketing Strategy

• As these brands create an identity for the retailer, there is a lot of work that goes into the pre-launch phase.

• Salil Nair, customer care associate and chief operating officer, Shoppers Stop, explains,

“We have a very large base of loyal members, called First Citizens. Before we launch, we give a preview to First Citizens. We collect their feedback, so that we can study their likes, their sensitivity to price, their sensitivity to colors, silhouettes etc. We even put it for re-sampling if required, and then we launch it.”

These brands are then re-invented every year through consumer and competitor surveys.

"The key investments for developing a private label are in design resources, hiring of buying and merchandising personnel, travel to industry fairs, sampling activities and brand development activities such as the cost of promotions."

- Govind Shrikhande, Customer Care Associate, President and CEO, Shoppers Stop. Also responsible for design and development of all private labels of the company.

August 26, 2010

• Since private labels are not advertised as much as the other brands the costs of the private labels are lower enabling the store higher margins as well as permitting them to offer their customers quality products at lower price points.

• Shirkhande explains, “Getting a product is easy, but the fundamental objective of a private label is to expand the category per se and not take market share from established players.”

• Shoppers' Salil Nair says, "The objective is not to outsmart competition. We have to give value to the consumer."

Sales Contribution

• Shoppers' Stop says its five store brands together account for approximately Rs 50 crore or 20 per cent of its turnover.

• Private labels accounted for 18% of the sales in the fiscal year 2010 (source: www.fashionunited.in)

• According to Salil, Private labels are highly profitable. The profits earned from them are almost double than those from the third -party brands.

• He says, “Five years back, our private label brands were around 13% in terms of sales and today they are almost 18%—a 5% increase. So now we have started dedicating a bigger space for this. All our brands have good representation in our stores so that they have a visual impact. The treatment that our in-house brands get is equal to what other brands would get at Shoppers Stop.”

SS’s Stance• According to Images Retail Report 2009, as quoted in "Indian Retail:

Time to Change Lanes" by KPMG; private label brands constitute 10-12% of organized retail in India.

• Of this, the highest penetration of private label brands is by Trent at 90%, followed by Reliance at 80% and Pantaloons at 75%. Big retailers such as Shoppers Stop and Spencer’s have a penetration of 20% and 10% respectively.

Survey• To asses the differences between the Private Labels and National

Brands in Shoppers Stop a survey was conducted.

• Objective: To find out the consumer preferences between Private Labels and National Brands in Shoppers Stop.

Research Methodology• The research is explorative and analytical in nature and involves the

study of relevant secondary and primary data which has been analyzed.

Sources of data collection:• Sample design: To study the consumer preferences the survey

administers a convenient sample size of 25 consumers and the sample unit is universal in nature. The data was collected through questionnaires.

• Questionnaire design: The questionnaire includes both open-ended and close-ended questions.

32%

40%

20%

8%

How often do you visit Shoppers Stop?

Twide a monthOnce in a monthOnce in 3 monthsNot sure

Most of the respondents visit Shoppers Stop at least once a month. It shows that Shoppers Stop is a famous shopping mall.

28%

60%

12%

How often do you shop for Casuals?

FrequentlyOccasionally Rarely

Most of the people shop for casuals occasionally which implies that they might prefer other exclusive brand outlets or malls.

EBO MBO0

2

4

6

8

10

12

14

16

Where do you like to shop from?

Most of the respondents prefer Multiple Brand Outlets compared to Exclusive Brand Outlets for the abundance of choice of brands in the MBO’s.

Stop Life iJeanswear Mario Zegnoti Austin Reed Mustang0

2

4

6

8

10

12

14

Which of the following private labels are you aware of?

Most of the respondents are aware of Austin Reed as it is an International Brand exclusively available in Shoppers. At the same time, the respondents are not as aware of Mustang even if it

is an International Brand. Stop and Life are the Private Labels that respondents are aware of the most. They haven’t

heard about iJeanswear and Mario Zegnoti.

Private Labels National Brands0

1

2

3

4

5

6

7

More Value for Money (1-Lowest and 5- Highest)

12345

It can be understood from the above graph that the value for money is found more in private labels than national brands as the rating private labels have received come in the range of 4 -

6

Private Labels National Brands

4

10

5

10

2

5

12

8

Major Attracting Factor

Brand Loyalty Latest DesignsVisual Merchandising Offers

The respondents feel that they get more Offers in Private Labels than in National Brands. They need to concentrate on increasing the brand loyalty of private labels, increase the

number of designs being offered and better their visual merchandising.

56%

12%

32%

Effect of Promotions

YesNoSometimes

In-store promotions do affect the respondent’s buying patterns dramatically.

The age group of 19-29 is the most prominent among the customers

12%

48%

36%

4%

Age Group

below 1919-2930-4040-50

Below 25000 25000-35000 35000-50000 above 500000

2

4

6

8

10

12

14

16

Monthly Income

Most of the respondents fall in the monthly income scale of Rs.25, 000 – Rs. 35,000 followed by Rs. 35, 000

The Road Ahead…

• Private labels are slowly becoming the protagonist in the big Indian retail growth story.

• Taking cue from the West, Indian retailers are also churning out newer ways to increase their profit margins—one such initiative is the introduction of in-house brands.

• With Indian customers increasingly accepting these private label brands, they would soon be major contributors to the profits of Indian retailers.

SH PPERS ST P

THANK Y U

Presented By:Biji BasheerP. Shivram

Priyanka KhandelwalPhirabhu Raghavan