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Private labels feel the heat as brands intensifies price war with frequent sales

Wednesday, 7 May 2014 - 7:55am IST | Agency: dna

Private labels or in-house brands of department store chains are just unable to match intense competitive pricing of established fashion apparels brands who have increased the frequency of their discount offer to thwart newer players.January to March quarter has already witnessed drop in sales of private labels and there are strong possibilities of the trend continuing in the April-June quarter as well.For instance, Shoppers Stop that operates 67 department stores across India witnessed a decline in the sales of its private label merchandise during the fourth quarter of fiscal 2014.

"Basically lots of brands were available at a discounted price and consumers prefer them over private labels," Govind Shrikhande, managing director, Shoppers Stop, said at an earnings call last week.While Shoppers Stop management did not share details on the impact of its private label category, industry experts said it was significant enough for the company to take note of. "Share of private label in the company's overall revenues used to be at 30%. It is now well under 20%," said a retail consultant who did not wish to be quoted.In a recent interaction with dna, Shrikhande had said that share of private labels was 16.5% for the fiscal 2014, thereby substantiating the consultant's view.

"We are looking to take this number to 18% in fiscal 2015 and 20% in the two years thereafter," Shrikhande had then said that private label would need to be treated like a brand and varied initiatives would be taken to enhance brand appeal in the longer term. Among various private labels offered by Shoppers Stop include haute curry, Kashish, STOP, Life, Vettorio Fratini, iJEANSWEAR, insense', Elliza Donatein and Mario Zegnoti.Executives from Landmark Group's department store chain Lifestyle could not be reached for a comment. An email remains unanswered.As for Pantaloons – the Aditya Birla Group owned department store chain – is concerned, the company management said their stores largely stock own private brands and the share of external brands is very low. Among host of private brands by Pantaloons include Honey, Rangmanch, Akkriti, Trishaa, Ajile, Annabelle, F Factor, Byford, Alto Moda etc.

"Our model is very different hence we don't get impacted. We only have exclusive (private) brands as primary engine that enjoy retail identity, have place of pride in the store and are supported by best-in-class external brands," said Shital Mehta, CEO, Pantaloons Fashion & Retail Ltd, adding that private brands contribute two-thirds of the overall revenue.Industry experts, however, are unanimous on the fact that private labels are under immense pressure especially with department store operators where external brands form a large part of their inventory. And when brands are sold at 40% to 50% discount, there is hardly a price gap between a branded merchandise and a private label."

Customers have become very brand conscious and await for discounts or sale season to make their purchase. With brands available at discounts at every end-of-the-season in addition to extended sales period, operators of department stores are feeling the impact on the sales of their private label merchandise," said Harminder Sahni, founder and MD of Wazir Advisors.Faced with this challenge, Rachna Nath, retail and consumer leader-India at pwc, said a lot of private label based retail companies are increasing the percentage of branded products in their store. "As branded products are made available at more affordable price, this helps the retailers strike a balance in their portfolio and also give their customers more options," said Nath.

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