Retail chains to cash in on private labels

Written by Mona Mehta | Mumbai | Updated: May 10 2009, 04:16am hrs
Top-branded retail companies are betting big on private labels this year to overcome rising pressure on margins. Private labels are brands owned, merchandised and sold by retailers themselves, at least 5-20% cheaper rates, across various categories. Margins on private labels are as much as 30% to 40%.

Kolkata-based Spencer's Retail Ltd, a retail arm of the Rs 13,500-crore RPG Enterprises, has started witnessing 25% contribution from its 10 private labels which the company launched a year ago, a company official told FE. Spencer's Retail had launched private-label brands such as Island Monks, Mark Nicolas, Scorez, Detailz, Asankhya, Puddles, Little Devils and UNI. According to company officials, Spencer's intends to spur the high-margin apparel retailing business growth. This will be done by enhancing visual merchandising of most of the Spencer's stores in India. We do intend to launch new private labels in apparels, footwear and accessories in near future," the official added.

Meanwhile, Future Brands, the brand development & marketing arm of Kishore Biyani's Future Group, is in the process of rolling out two new private-label brands. It includes Spunk, in sportswear, and Mohena, in lingerie, segment.

Santosh Desai, chief executive officer of Future Brands, told FE, Private labels contribute 30% to Future Group's total sales. We are in the process of launching two new private-label brands Spunk and Mohena apart from launching three to four new beverage and food private labels in this financial year."

Apart from this, Future Brands is also planning to launch five new John Miller exclusive private label-branded stores from existing two stores. We are evaluating similar kinds of branded store formats for various other brands such as Rig, which is a casual-wear brand in Pantaloon stores. Very soon there will be announcements of new communication package for Rig brand whereby it will be eventually advertised in mass media for in-store private label, Desai added.

Globally, private labels contribute 17% of retail sales with a growth of 5% per annum, said the KPMG study, Indian Retail: Time to change lanes. International retailers like WalMart of USA and Tesco of UK have 40% and 55% own label brands representation in their stores, respectively.

According to a recent KPMG report on retail, the Indian private-label market is expected to touch a value size of Rs 6,500 crore by 2010-11.

Bharti retail, a wholly-owned subsidiary of Bharti Enterprises, is eyeing 30 to 40% growth in its private-label segment in the next five years. At present, the private labels contribute to 8 to 9% of the company revenues.

Shoppers Stop, too, is charting out plans to launch two to three new private labels in apparels and personal care in this fiscal as the company has achieved 20% contribution from them. Aditya Birla Retail is betting on its 350 private labels to nudge the firm to profitability by the end of 2010 fiscal.