bm private labels vs brands - grp 2

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Brands vs Private Labels

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Brands vs Private Labels

Examples of Private Labels

WALMART

TELCO

FUTURE GROUP

Advantages of Private Labels

Profit MarginCost of delivery

Supply Chain Efficiency

Eliminate Middle-man

Retailer Differentiation

Saviour during economic downturn

Independent Pricing Strategy

Threat to Brands!!!

Improved Product Quality by Private Labels

Quality

Development of Premium Private Labels

Emergence of New Channels

The European Success

Emergence of New Categories

BRAND STRENGT

H

• Quality Assurance• Comfort & security• More value

• Needs time or ability to invest• Doubtful about quality

PURCHASE PROCESS FAVORS BRANDS

FOUNDATION FOR COMPETITIVE ADVANTAGE

RUNNING START

STRONG BRAND EUITY

RESULT OF DECADES OF

ADVERTISING & CONSISTENT QUALITY

S

BRAND STRENGTH PARALLELS ECONOMIC STRENGTH

TRAFFIC BUILDING POWER

ENHANCE STORE LOYALTY

REPRESENTATIVE OF STORE CHARACTERISTICS

NATIONAL BRANDS HAVE VALUE FOR RETAILERS

EXCESS EMPHASIS ON PRIVATE LABELS DILUTES

STORE STRENGTH

UNAVAILABILITY OF BRANDS IN STORES LEAVES CONSUMERS WITH A BELIEF THAT STORE HAD INCOMPLETE ASSORTMENT AND HENCE REDUCES STORE TRAFFIC.

What Should Brand Manufacturers Do?

•Brand manufacturers that do not yet make products for private labels, should not start to do so!

Risks of making private label

•Taking orders in categories where its own market share is weak.•These categories: lifeblood of the manufacturers sales

When Choosing to Private Label

•Evaluate private label manufacturing on full cost basis rather than incremental cost

•Additional manufacturing and distribution complexities--> add to cost

•Efficiencies of selling private label contracts may be exaggerated – not accounting for competing bidders

•Companies may overstate the relative contribution of Private Label goods and thus understate the cost of cannibalization.

•Private Label contracts can increase dependence on a few large trade accounts

Indian Markets – Rise of Private Labels

Reasons for Growth in India

Still in Nascent Stage

Market Share 10% vis-à-vis 40% in

Europe

Increasing acceptance due to Organized Retail Sector Growth

Other Factors of Growth

Influence of

Retailers

Favorable Channels

like E -

commerce

Improved Quality

Low pricing attracts

customers

Growing Importance in Retailing

Prominent PLs in Indian Organised Retail

Tasty Treat Fresh & Pure

Clean Mate

Sach

Indigo Nation

Scullers

John Miller RIG

Private Labels offering 47 Product Lines

Prominent PLs in Indian Organised Retail

Prominent PLs in Indian Organised Retail

Feasters (Food

Products)More(Grocers)

110 Per Cent

(Soaps, Detergents)

AU79(Deodorants)

Know private level business done by you

Conduct a Private-label AUDIT

Calculate private-label PROFITABILITYFull-cost and Marginal-cost

Examine the IMPACT on your MARKET SHARE

The excess capacity

INVEST in BRAND EQUITIES

INNOVATE wisely

Use FIGHTING BRANDS

Build Trade RELATIONSHIPS

Educate your retailers

Examine their purchaseScanner data

Subsidize in-store Experiments

Ration support

MONITOR the

PRICE GAP

Secure Retail Space

Distribute Coupons

Sales rebate to Retailers

MANAGE each CATEGORY

Summary

• Examples of Private Label

• Advantages of Private Label

• Brand Strengths

• Choosing Private Label manufacturing

• Scenario in Indian Market

• Evaluating Private-Label Business

Take Private Labels SERIOUSLY