Knowledge Primer- Private Labels

Private Labels are those brands which are owned by the retailers themselves.

Normally in an MBO ( Multi Brand Outlet ) you can see many brands which are external to the store.

However the store also offer their own brands. For example 'STOP' is a private label by Shopper's Stop.

Private labels work better in categories where there is a poor brand recall. For example in cereals category only two brand names come to the mind.

Private labels are recent phenomenon in India. According to an estimate private labels account for nearly 40 per cent of Wal Mart sales globally.

Buy why retailers keep private labels. The answer lies in margins. The margins are much higher in keeping private labels. They range from 15-20 per cent in FMCG, around 20 % in electronic goods and 30-70 per cent in apparels. The other reasons are differentiation and increase in consumption.

But why customer buy private labels ? The answer could be that store labels spell trust and savings.

The key concerns for retailers are inducing the first trials. It is seen that once used, customers have a very good brand loyalty.

Private labels work best in low-involvement category. For high-involvement categories, such as apparel, it is the name of the store that matters the most.