STOP, DJ&C, RIG, haute Curry, Melange, Eliza Donatein, Vittorio Fratini, John Miller, DNMX, Gia, Shristi, Westsport, Teamspirit, Kashish ? do these names ring a bell? You may not be able to place them instantly, but these apparel brands are flying off the shelves literally. The most interesting fact ? these are private labels from retail chains such as Shoppers Stop, Lifestyle, Reliance Trends, Westside and the Future Group.
The apparel market in India may be largely unorganised, and multinational brands somewhat restricted to the premium segment, but it is these private labels, often referred to as in-house brands or store brands, that are gradually building up a loyal clientele. So much so that some of these private labels have now graduated into standalone stores. Earlier this year, Lifestyle, owned by Landmark Group, announced that it will launch one of its ethnic women wear private labels ?Melange? as a standalone store. Future Group had earlier launched ?John Miller? as a standalone brand in 2008 and is now evaluating more such standalone private brands stores. Another interesting development that happened this year was the announcement by jewellery brand Gitanjali Gems about its foray into private labels apparels for both men and women.
The private labels apparel market is clearly flourishing in India and the numbers speaks for themselves. According to Anand Dikshit, partner – corporate finance and investment banking, Pricewaterhouse Coopers (PwC), ?If we consider the retail market size of $600 billion and organised retail of close to 12% or $60 billion ? the private labels apparel market in India could safely come to $8 billion. This would be a back of the envelope estimate given the fact that we should obviously include the multitude of small retailers in India.?
According to a Nielsen report released in July this year, private brands (across categories of FMCG, consumer durables and apparels) account for close to 7% of modern trade sales in India, compared to 1% in China. And on a global level, about 8 to 10% of retail sales come from private labels, according to industry estimates.
The whole premise of the popularity of private labels apparels is quite simple actually. Lower costs of private labels vis-?-vis branded products is what the consumer gets and higher margins, lower cost of manufacturing and low advertising spends make private labels attractive for retailers. Govind Shrikhande, managing director, Shoppers Stop, sums it up quite well when he says, ? Private labels are working everywhere globally. Reasonable price, good quality and attractive range are key reasons for their success.? When Shoppers Stop launched the STOP brand of women’s ethnic wear in the early nineties, it was the one of the first retail chains to do so. Today it has numerous private brands for both men and women such as STOP, LIFE, haute Curry, Eliza Donatein, Vittorio Fratini, Kashish and Karrot.
In the Nielsen report mentioned earlier, Dipita Chakraborty, executive director for retail and shopper practice, India region, The Nielsen Company, said that the private labels phenomenon has leapfrogged in India compared to other Asian countries for many reasons: The value conscious Indian consumer, their familiarity and comfort with unbranded/generic products and the focus on quality of private labels products by the retailers.
Talking particularly about the cost benefit for the consumer, Dikshit of PwC feels that since the consumer has a cost benefit of approximately 10% for such a product, it is an attractive proposition for him. ?The price advantage is made possible by their non-existent or very limited spending on product development and brand promotion. Bulk of the products are reverse-engineered and are promoted within the store, not advertised outside,? he says.
Another reason behind the immense success of these labels is that retailers aggressively push their brands. According to Dikshit, the retailer prefers to push his own brands rather than manufactured brands because private labels in apparels and accessories offer more than a 40% margin. ?Retailers accept that 80% of purchase decisions are made at the store shelf, and the store is where they have maximum control. Thus, most retailers work on creating multiple touch points within the store, through extensive in-store advertising and placement strategy,? he says.
Private labels owners agree. Says Gaurav Mahajan, chief operating officer of Westside, a unit of the Tatas’ owned Trent Ltd, ?A retailer is favourably placed to manage and control cost, quality, production and distribution efficiencies for a private label as opposed to an ?external brand?. Private labels are communicated largely through concentrated efforts at store level. Further a strong private label allows for incorporation of customer feedback into product design, enables better control over merchandise design/ quality (also, facilitates realisation of better margins ? thereby strengthening competitive position).? Private labels of the retail store Westside include Ascot, Richmond, Gia, Wardrobe, Westside, Westsport, Nuon and Zuba.
According to Atulit Saxena, chief operating officer – brands, Future Brands, part of Future Group, apart from the obvious cost advantage, speed is a huge factor which works in favour of private label apparels. He says, “Private labels can accelerate changes in fashion much faster. You can offer much more variety through private labels. Also, consumers are now hunting for product comforts and expectations from modern trade are higher and it is easier to fulfill them through private labels. This sector is also opening up a lot of new interesting categories.”
Another advantage is that, private labels can actually provide guard against ?mockdowns? (copies) of various established brands. Says Saxena, “Consumers will evaluate private labels with national brands and if they can get the same value or even better value then it provides immunity against mockdowns.”
The Future Group has various apparel brands such as Shristi, John Miller, which now has standalone stores, Lombard, Bare, DJ&C, Buffalo and RIG which are available at its Big Bazaar and Pantaloon stores across the country. It has led the foray of private labels in the apparels business with some 80% of the stocks in a Pantaloon store typically in-house brands.
However, here is a bit of a twist in the cost tale. Earlier this year, due to rising input costs, private labels had also become expensive. In this scenario, why should consumers choose private labels over branded labels since lower cost has always been the most important factor? Retail owners and experts argue that even with cost increase, private labels are still comparatively cheaper and moreover, the quality of private labels has considerably improved.
Says Dikshit, ?The reasons because of which private labels have become expensive include the fact that inputs costs have increased like any other fast moving consumer goods. However, it is ensured that although they have become expensive, they have not become more expensive than the other manufactured branded products ? this coupled with the in-store push would ensure high sales of these brands.?
Agrees Saxena of Future Brands, “The impact of the higher input cost is the same for every brand, private or established, and due to this, the relative gap between the costs remain the same. Also, the point is that with rising cost, you cannot drop quailty. Innovation is the key here to divert the whole cost conversation. If cost is high, then improve the innovation. One of our learnings in the private labels business has been the importance of technology. We have to work harder on that because we need more innovation and we need it fast. ”
Shrikhande of Shoppers Stop also adheres to the point that private labels will always be relatively cheaper than the big brands. He adds, ?So, the main proposition should be supported with ‘fashionability’ to add value to the customers. Private labels are competitively priced, and the degree of control afforded to the company helps maintain a tight rein on escalating costs, which helps attaining a competitive business advantage.?
Sharad Mehra, who earlier studied fashion and apparel operations at Technopak Advisors (a management consultancy company) and is now working with Pearl Academy of Fashion, feels that with the escalating costs, many retailers have invested in design and development so the overall look and feel of the product has also improved.
One form of cost which is more or less under control for private label manufacturers is the advertising cost as in-store marketing still remains the most important tool in promoting private labels. In-store marketing involves a lot of things. According to Mehra, retailers place private labels quite strategically in their stores ? accessible aisles, closer to the entrance, near the cash counter, etc. ?Since the retailer controls the space and visual merchandising, often you will find private labels with more visible and attractive structures and point of purchase displays,? he says.
Shrikhande agrees that private labels mainly use store branding and promotions as the main driver of sales. He, however, thinks that general advertising is also visible now for private labels, given the current competitive situation.
Mahajan of Westside says, ?Private labels are communicated largely through concentrated efforts at store level. Further, in-store labels are also communicated to our loyalty base as well as new consumers, to ensure sampling and subsequent repeat purchases.?
Private labels are not necessarily eating into the revenues of the big established brands as their target groups remain different. However, they have the potential of offering tough competition for smaller established brands. “Private label brands try and capture price-value gaps in the market by targeting adjacent markets, where brands play,? says Sooraj Bhat U, brand head, Allen Solly. ?Allen Solly is quite confident of its price value equation and manages the competition from these with continous product innovation.” Allen Solly is one of the apparel brands of Madura Garments owned by the Aditya Birla Group.
Explains Dikshit of PwC, “I don’t think the private label apparel market is becoming a threat to the branded apparel market, both these cater to different segments of the consumer ? the upwardly mobile young Indian is conscious of the brands which he would prefer to buy.? Having said that, private label apparels have immense pull in the tier II and tier III cities where being in tune to the latest fashion trends has become important and private labels provide a good and reasonable way of doing that. ?The fundamental reason for the success of private labels is their price advantage, made possible by their nonexistent or very limited spending on product development and brand promotion, they would definitely affect the brands which are, let?s say, at number three or four of the value chain but it would be very hard to displace the brands at number one and two which have a loyal following,? he adds.
Rahul Mehta, managing director of Creative Garments that owns 109*F, a premium women’s western wear brand, says established brands are on a stronger wicket. “While private labels tend to be cheaper and give higher margins to the retailer, they cannot match the customer pull and brand strength which established brands have. Brands will have to compete on credibility, reliability, quality assurance, consistency, and communication,” says Mehta.
However, Saxena of Future Brands says private labels can be a threat to national brands. ?However, for us, competing against a national brand is not the aim. We want to increase the categories in this business. Category growth is what we want,? he says.
The number of labels is increasing and the number of companies foraying into this segment is increasing too. Retail analysts expect the sales of private labels to grow at a rate of close to 30% to 40% per annum, this growth is also driven by the fact that stores now expect 50% of their revenues from own labels, points out Dikshit. The numbers surely look optimistic and are directly proportional to the expectations of the retailers. Says Mahajan of Westside, ?The growth chart for private labels continues to remain very positive. As a private label retailer, we continue to see merit in the business format and have definite growth objectives set for the future.?