Private Labels - Are they good enough ?

Published by MBA Skool Team, Published on July 22, 2011

Whenever we go to retail chains like Food Bazaar, More, Shoppers Stop in India or even big retail stores across the world, we see few products which have a brand which seems to be of good quality and is very similar to the product we have been looking for. On close inspection these products turn out to be the private label of the store, we are currently standing in.


Private Labels
These are special products made by the retail stores or rather procured by the retailer from suppliers and branded with a brand of their own. These are called private brands or private labels. In India, you can easily find them in food bazaar by the brand name of Tasty Treat. You will get chips, noodles, ketchup, breakfast cereals under the label Tasty Treat.
Similarly More owned by Aditya Birla have their own similar products on the shelf for all the popular FMCG categories. If we move towards apparel, Shoppers Stop too has their own label called Stop. Globally Walmart, HEB, Carrefour all have their versions of private brands.

Why do retailers have these brands ?

1. Higher Margins
2. Better Control
3. Diversification, from just being a retailer, they become marketers too.
4. Better understanding of customer for planning inventory
5. Independence or autonomy
6. Better planning

Are they successful ?

These brands are of the similar quality as the major national brands available in the store but the consumers perceive them to be of low quality when compared to the popular brands.
These brands are not advertised as the major national brands so consumer is not fully aware of them. The brand is first seen by him in the store itself. On further inquiry, he/she comes to know about it.
The biggest disadvantage of such brands is that they start competing with the national brands. They compete not only on the shelf in front of the customer’s eyes but also behind the scenes i.e. the suppliers.
Many national brands do not appreciate this. Many of these stores work on close relationships with these so called national brands. They buy products on bulk on heavy discounts from the original manufacturers and sell it to customers like us on some discount thereby increasing the overall sales. But the private labels(or brands) interfere with this equilibrium. These are owned brands so are at higher margins so more discount can be offered on them as compared to the national brand. This eats into bigger brands’ sales.

Still Private Brands are rising in India as well as globally as the lure of higher margins and better control is too hard to resist.


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