A recent survey by a reputedmagazine states that when customers were asked to name their favorite apparelbrands, only 16% of them responded. This denotes a low level of brand loyalty, especiallyin apparel categories. Every apparel retailer would have experienced pricedeflation. With the backdrop of falling prices, retailers have come across variousways to tackle the situation, and counteract the effects of lower retail priceson profit margins. One such strategy adopted by retailers is to develop and marketapparels under private label brands. This option is being explored by theretailers who do not want to be under the mercy of big manufacturers.

 

Earlier, manufacturers made thebrands and built an image for them. Retailers created a distribution access,and focused on providing value for money. Now, the changing attitudes ofconsumers, and shortening of time spans, has created a need for more innovativeways of marketing. The person who is close to the consumer, and who understandstheir psychology is in a better position to create brands of long lastingvalue. Moreover, garments of international brands are created, keeping in mindthe lifestyle and preferences of the consumers of those countries and may notnecessarily match with the needs of the shoppers of another country. So, it isthe retailer who understands the consumers' choice, preferences, and theirbudgets.

 

ThePrivate Label Paradigm:

 

Private labels are generallylaunched to gain higher gross margins from branded products. They differentiatethe retailer's own product from the branded ones and aims to gain and sustainconsumer loyalty. They provide a competitive benefit to the retailer over brandedplayers. It also offers a platform for the retailers to negotiate with brandedplayers.

 

Some retailers combine privatelabel clothing with national brands. They create their own brands and sell themin their outlets along with other national brands at a 40% cheaper price. Storeslike Sears and JCPenney opt to combine 50% of their apparels with 50% ofnational brands like Adidas, Sag Harbor etc. This way, sourcing and costadvantages are passed on to the consumers. Retailers who sell their own privatelabel apparels have appropriate control over product development. The apparelsare created by an internal design team. Through adequate market research theyare able to customize their outfits to target specific groups of consumers.

 

GrowthDrivers:

 

  • Retailers need differentiation and better profit margins.
  • They imitate designer brands which will reduce their R&D expenses.
  • Better margin and better control in deliveries.
  • Independent pricing strategy.
  • Brand equity and loyalty.

 

Challengesfaced by Private Labels:

 

  • Higher risk of inventory.
  • Higher Research and Development expense.
  • Markdown or return allowances will not be available.
  • Failure of the product will create a negative image about the retailer.
  • More marketing expenses.

 

GrowingConsumer Acceptance of Private Labels:

 

The success of the private labelultimately depends on the consumers mind set whether he is ready to pay for theprivate label apparel or not. It depends on the kind of sales and margin levelthe retailer can drive in the business. There was a time when private labelclothing was considered to be a choice of buying only during recessions. In thepast private labels targeted the lower income people. But, today private labelsare fully accepted, and even wealthy shoppers go in for buying them. Buyingprivate label apparels is in trend currently, and is considered as Smart Shopping.Two out of every three shopper in the world believe that supermarket ownedprivate labels are as good as the other brands.

The price tags of private labels are quite alluring, but along with this the question of quality also arises. Does less price imply a compromise in the quality of the apparel? "Not at all!" says Mr. Santosh Desai, CEO of Future Brands, flagship of Pantaloon Retail. He further adds that, "Customers do not have to compromise on the quality at all, because there is a considerable saving in distribution and marketing costs.also you must remember that quality is different at different price points". While commenting about the Indian market scenario, and opportunities for private labels, Mr. Desai states that, "India is an extremely under branded country with brands having only an 8% penetration of the overall market. There is thus ample opportunity for everyone to co-exist including international brands".

 

 Power of Private Labels:

 

A survey taken in US apparel shops states that 45% of the total apparel sales are of private labels. In adult Apparel categories, 76% of the garments and in childrens clothing 65% of the clothing was of private label. Industry experts predict that by 2010, sale of private label apparels will grow from 22% to reach 55% of the total apparel sales. Expanded gross margins, adequate market research, and ability to control design are the most powerful drivers that manipulate the sales of private label apparels. The strength of private labels depends on the following factors:

 

  • The quality and price of the apparel.
  • The influence, the private label has in the minds of the shoppers.
  • A proper understanding of the consumer constituencies, and their cultural nuances.

 

At times, retailers may suffer losses when their private label apparel sales fall, but it can be recouped by shipping their garments to their outlet stores for a resale.

 

To acquire in-depth information about the market and future of private label apparels, Fibre2Fashion had an exclusive interview with Mr. J. Suresh, CEO, Megamart, Arvind Brands:

  • Do customers prefer private label over branded ones? What are your perceptions regarding the current trend?

    "Customers do not prefer private labels. However if the private label is available from a well known retailers outlet, the brand name of the retailer carries weight behind the private label. As far as we are concerned, we have developed a very strong 10 brand portfolio of private brands which we sell under the umbrella of Megamart".

  • Private labels ease the consumers wallet. Does this mean the consumer will have to compromise with the quality?

    "While private labels may be priced lower, it does not mean that they are of poor quality. Private labels save certain costs compared to a brand specifically advertising, which results in greater value delivery to the consumer. A poor quality private label at lower prices will never be able to survive in the market beyond a few months".

  • As more international brands are entering into the domestic market, what would you say is your USP?

    "We have the largest portfolio of international brands in the country. Hence other international brands entering the country will not affect us".

The fancy of buying private label garments are growing and retailers are aggressively involved in their marketing, as they do for branded apparels. The onward march of private labels continues to dominate the apparel sector. Shoppers of private label apparels proudly consider themselves are smart shoppers who evaluate the manufacturers brands with the store brands. They take pride in themselves that they are not being influenced by the brand status or the advertising stunts.

 

References:

 

  1. "Private Label Strategy", BY Nirmalya Kumar & Jan-Benedict E. M.
  2. GLGi: Increasing Utilization and Strength of Private Label Brands, PPT, July 31, 2007, New York, http://www.glgroup.com/
  3. "Rewrite Rules, Retail Values", PPT, Future Group.
  4. http://www.cottoninc.com
  5. http://sify.com
  6. http://www.allbusiness.com