<div>The Indian retail sector has undergone tremendous changes in the past two decades. Technology and awareness are the two driving forces behind this change.<br /><br />‘Private label’ is an essential component of this modern retail offering worldwide and the same has been the case in India. <br /><br />Having a private label now is not just a matter of being ‘me-too’. The ‘copycat’ has really gone the whole hog in terms of development and innovation, with utmost thought given to the quality of the produce.<br /><br />Various retail chains have launched a bouquet of private label products in various categories. There has been a two-pronged approach when it comes to branding. <br />Products are either associated with the main retail brand or are launched under a separate brand name with or without an association with the main retail brand. <br /><br />Buyers have become aware, not just of the pricing dynamics, but also about product quality and sourcing. They want to know where particular merchandise came from, how it has been treated and processed, how it will affect his health.<br /><br />The seller, on the other hand, understands the demands of this buyer and is increasingly thinking of innovative ways to be in-sync with his consumer.<br /><br /><strong>Private Labels — Boon Or Bane?</strong><br />In the initial stages of evolution of modern retail, private label players tend to be opportunistic in nature.<br /><br />In the Indian context, the food and grocery landscape is dominated by strong primary and secondary brands. However, tertiary brands are not prevalent in most categories and most retailers see an opportunity to introduce good quality products, at prices that are significantly lower than that of the leading brand. <br /><br />Nevertheless, as modern retailers grow in size and importance, and urban consumers become more aware, there is a pressing need to take a strategic, as opposed to an opportunistic, view of the private label space. <br /><br />Let us take a look at some figures that give an indication of the size of the game: Research suggests that the Indian retail industry was estimated at $470 billion in 2011, accounting for approximately 35 per cent of our GDP and is expected to grow to $675 billion by 2016 at a Compounded Annual Growth Rate of 7.5 per cent.<br /><br />This industry is mainly divided into the organised and unorganised markets, the former estimated at $26 billion and accounting for roughly 6 per cent of the overall retail market (2011).<br /><br />The organised market is projected to grow to $84 billion by 2016 at a CAGR of 26 per cent. Within this, the Food & Grocery segment is the single largest retail category and accounts for about 70 per cent of the market ($325 billion in 2011), while the organised retail segment for Food & Grocery is estimated at about $9 billion and accounts for 35 per cent of all organised retail. <br /><br />Food, according to the Boston Consulting Group BCG, is what Indians spend on the most – at 31 per cent, compared to 25 per cent in China, with US$ 991 billion being the absolute number that our population spends on consumption in a year.<br /><br />By 2020, this number is set to hit $3,584 billion, out of which about $900 billion will be on food only!<br /><br />Given these numbers, it is imperative that the retail industry pay attention to what is being produced and sold its stores. <br /><br /><strong>A Middle Class Solution</strong><br />Given the scale and stakes involved, the battle for shelf space is only going to intensify in the future. <br /><br />Other than the main FMCG players, there will be many others who are entering the market with a product and distribution strategy meant exclusively for modern trade. <br /><br />Coupled with this, is the emergence of the aspirational middle class, aptly called the ‘Urban Aspirers’by BCG, that is going to drive the India consumption story in the coming decade with their spends.<br /><br />The Urban Aspirer is increasingly gaining a deeper and wider understanding of his/her needs and has a high level of clarity of what the product offering needs to deliver. <br /><br />This class of consumers is not necessarily enamored by big brands nor is it drawn to a product merely on account of the price. <br /><br />Retailers will need to completely revamp their private label offering to address this new emerging consumer segment.<br /><br />The “good product at a lower price”, will make way for a comprehensive 360-degree approach, leading to a strong customer proposition that reflects the values of the retail brand. <br /><br />Appropriate quality, attractive packaging, the right pack sizes that reflect consumption and buying patterns, attractive displays, designated shelf space and assisted selling will all be needed to supplement the price proposition. <br /><br />In terms of actual branding, there are essentially two routes that will continue to be adopted.<br /><br />The first would be to stay with the retail brand itself and the other would be to create independent brands in various categories. <br /><br />Players who are in the process of building up scale, will in all probability pursue the former strategy that is essentially more cost effective and quicker to implement successfully. <br /><br /><strong>Why Private Label?</strong><br />Private label offering is an integral component of the evolution of modern trade in India.<br /><br />It works well for the emerging Urban Aspirer who gets products that are sharply focused on meeting specific requirements without being burdened with the price premium of the leading brands. <br /><br />It provides an opportunity for the retailer to connect directly with the customer, gain a place in the customer’s home and kitchen, earn more in terms of margin and provide a counter-balance to large players in the market.<br /><br />The key to success is of course to choose the right categories to play in, put together a comprehensive offering in terms of width and depth andprovide the right support in the stores both in terms of space and people. <br /><br />The middle aspirer class is driven by the value-for-money motto in its consumption and private labels offer the twin comfort or quality and value for money.<br /><br />Consulting firm PriceWaterhouseCoopers says Indians are not always looking for a bargain.<br /><br />Hence, retailers need to offer value in quality, style and price and offering a comprehensive range of food labels will address this demand-supply gap in the market. <br /><br />Private labels will become more sophisticated in their look-and-feel with retailers using their private label portfolios as a means of differentiating and standing out in the market. <br /><br />Value is no longer only about price – it is very clearly Price plus, which could mean one or more of quality, convenience, service, experience, innovation.<br /><br /><br />(The author is CEO, Star Bazaar)<br /><br /> </div>
