Retail majors sold on private labels

With slowdown biting, retailers are now looking at private labels to boost their sagging bottomlines. Most retailers expect their private label offerings to contribute between 20% and 40% to revenues.

Ramesh Srinivas, head (consumer markets) at KPMG Advisory Services, said, “Many retailers are increasingly focusing on their private label offerings now. They are realising the importance of the value segment. Even though profitability, footfalls and conversions have fallen, there is enough scope for retailers to develop newer product categories.” Private labels constitute 10-12% of the organised retail product mix.

Lifestyle International Ltd, part of the Dubai-based retail firm Landmark Group, is betting big on its private labels. Kabir Lumba, executive director at Lifestyle International Ltd, said the company’s apparels labels — Forca, Club Hopper, Fame Forever, Ginger, Junior and Melange — and furniture label Home Centre will contribute 25-30% to total turnover in a year or two.

To stimulate sales, the retailer is looking at the lower price point strategy. “In our private labels, we are going one notch down with prices. We are focusing on offering quality buy, good experience and a good price point,” Lumba said. Lifestyle stores will sell women’s t-shirts, kurtis and men’s shirts starting Rs 99, Rs 299 and Rs 199, respectively.

Bharti Retail Ltd, a wholly-owned subsidiary of Bharti Enterprises that owns the Easyday chain of stores, is bullish on its private labels business, too. “Private labels currently contribute 9% to our overall business but we are hopeful they will bring 35-40% in another 5 years,” said Vinod Sawhny, president and chief operating officer, Bharti Retail. Easyday has Good Value label in food and grocery, and George in apparels.

One of the newest entrants to the space is The MobileStore, the Essar Group-owned mobile retail chain that will launch its own handsets in a month. The MobileStore is looking at Rs 10,000 crore revenues from this venture in another 3-4 years. Rajiv Agarwal, chief executive officer, The MobileStore, said, “We are looking at offering aspirational private label mobile phones that will appeal to the youth. These will guarantee quality and have IMEI (international mobile equipment identity) numbers.” The retailer expects 10-15% contribution initially from this business, Agarwal said.

In a Tuesday report, research firm KPMG said, “Private labels are likely to continue to grow in the current financial environment as cash-strapped consumers’ perception of the products as a ‘cheaper option’ changes. Part of private label growth in a recession is permanently sustainable.”

Future Group, one of the largest retailers in the country, has already launched a host of private products in most categories. At a recent industry event, founder Kishore Biyani said that Big Bazaar’s potato chips brand, Tasty Treat, accounts for 20% of the grocery retail’s total chips sales. “We are now going to launch our own toothpaste. Even if it gains a 15% market share among the top-selling toothpastes in the country, I will be happy,” Biyani had said.

Croma, Infiniti Retail Ltd’s consumer electronics chain, last year entered the business with products like foot massagers, air-conditioners and microwaves. It has launched laptops, too, and expects its private labels to contribute 20% to revenues next fiscal. “We have sold over 3,500 microwaves after launch,” said Ajit Joshi, CEO, Infiniti Retail.