Impact of Organized Retailing on Brands

8/8/2019 Impact of Organized Retailing on Brands

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IMPACT OFORGANIZED

RETAILING ONBRANDS


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ORGANIZED RETAILING

Retailing according to Kotler (1973)includes all the activities involved in sellinggoods or services directly to the finalconsumer for personal, non business use.

Retailing which presupposes a retailersability to manage or more importantly

influence a set of supply chain variables in acommercially viable and sustainable way iscalled organized retailing

- Raghu Pillai


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BEFORE ORGANIZEDRETAILING

The unorganized retail channel served as anentry barrier for brands that do not havemass appeal.

Stuck in the vicious cycle of productplacement and product pull.

No touch-n-feel of the product beforepurchase


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IMPACT ON BRANDS

Breaking the vicious cycle:

Interface with the customer directly

Focus on distribution strategy:

Modern Organized retail chains are brands inthemselves (Own target segments)

Eg: Nilgiris & FoodWorld


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Brands without mass appeal:

The segmentation has also ensured thatniche brands also survive in the market athigher as well as at the lower end.

Eg: Shahnaz Hussain & Health and Glow

Direct contact with the customers:

Most of the organized retail chains allowthe customer to touch-n-feel the productbefore it is purchased.


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Promotions and consumer schemes:

The direct access has also marked a considerableincrease in the promotion and consumer schemes

Communication strategy:

This is an unprecedented opportunity for thebrands to communicate to the consumers andinfluencers and not just customers


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PRIVATE LABELS ASBRANDS

Private label is by definition, is the storelabel, developed and designed by the store.

Marketers have long derided store brandsand private label offerings, viewing themas clearly distinct from and markedlyinferior to traditional name brands

Product marketers and retail chains dontdecide what a real brand is consumersdo


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WHY PRIVATE BRANDS

Great margins:

The private label offers a terrificopportunity to the retailers to increase their

margins and still offer great prices to thecustomers along with good quality.

ETIGs study on the private labels havefound that on average, the private labelmargins are 30 to 50 percent more than themargins provided by the national brands


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Better Brand Image:

Improved Flexibility:

The higher margins of retailers increasestheir flexibility.

The other major benefit is that it helpsthe retailers in clear positioning of the brand.

Eg: SHOPPERS STOP


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CASE STUDY: THE EBONYEXPERIENCE

Keep pace with the customers expectationand meet their requirements; createdifferentiation and yet earn better margins.

Ebony ETC Private label across streetwear,outerwear & basic merchandise in apparel formen, women and kids.

Key emphasis area to build private label

Supply chain & logistics Tracking customers


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Firm grip on BUY aspects includeRight infrastructure

Supply chain

Identification of product categoryCustomers

Market segments

Pricing structurePromotion


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ACNIELSEN RETAIL AUDIT OFPRIVATE BRANDS 2005

Through parallel online survey by ACNielsen of21,262 consumers in 38 countries, includingIndia, we now know exactly what customersfeel about own store brands.

A good 56 per cent of them consider privatelabel to be a good alternative to manufacturerbrands. Yet, if that figure is lower than theglobal average of 68 per cent, it is because itpoints to the differences between the Indianretail environment and the ones abroad


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1 2

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0 % 2 0% 40 % 6 0 % 80 % 10 0 %

A S I A

P A C I F I C

E U R O P E

N O R T H A M E R IC A

L A T I N A M E R IC A

S O U T H A F R IC A

G L O B A L A V E R A G EA G R E E

S T R O N G L Y

A G R E E

S L I G H T L Y

N E I T H E R A G

N O R D I S A G R

D I S A G R E E

S L I G H T L Y

D I S A G R E E

S T R O N G L Y

Supermarket own brands are a good alternative toother brands

Asians are still hesitant about private label brands


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25

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4 5

42

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A S I A

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G L O B A L A V E R A G EA G R E E

S T R O N G L Y

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S L I G H T L Y

N E I T H E R A GN O R D I S A G R

D I S A G R E E

S L I G H T L Y

D I S A G R E E

S T R O N G L Y

The quality of most supermarket brands is goodA lack of private label exposure shows up in Asian answers


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14

13

10

7

21

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12

34

28

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0% 20% 40% 60% 80% 100%

AS I A

PACIFIC

E UROP E

NORTH AM E RICA

LATIN AMERICA

S OUTH AFRI CA

GLOBAL AV E RAGEAGREE

S T R O N G L Y

AGREE

S LI GHTLY

NEITHER AG R

NOR DI S AGRE

DISAGREE

S LI GHTLY

DISAGREE

S T R O N G L Y

Cant trust store brands where quality mattersThe Asian consumer is more quality sensitive than average

global consumer


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9

2

4

310

6

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23

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919

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0% 20% 40% 60% 80% 100%

ASIA

PACIFIC

EUROPE

NORTH AM ERICALATIN AMERICA

SOUTH AFRICA

GLOBAL AVERAGEAGREE

STRONGLY

AGREE

SLIGHTLY

NEITHER AGR

NOR DISAGRE

DISAGREE

SLIGHTLY

DISAGREE

STRONGLY

I just dont know enough about these Retailer brands

A lack of awareness seems to be the problem in Asia.


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14 6 1018 18 11 11

32

20 18

26 26

17 23

27

20 22

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19

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2621

929 28

15 1526 21

0%

20%

40%

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ASIA

PACIFIC

EUROPE

NORTH

A

MERICA

LATIN

A

MERICA

SOUTH

AFRICA

GLOBAL

A

VERAGE

DISAGREE

S T R O N G L Y

DISAGREE

SLIGHTLY

NEITHER AGR

NOR DISAGRE

AGREE

SLIGHTLY

AGREE

S T R O N G L Y

Store brands are meant for people on tight budgetsLow priced is equal to low end? Asians think so


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10 8 7 614 19 9

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0%10%20%30%40%50%60%70%80%90%

100%

ASIA

PACIFIC

EUR

OPE

NORTH

AMERICA

L

ATINAMERIC

SOUTH

AFRICA

GLO

BALAVE

RAG

DISAGREE

STRONGLY

DISAGREE

SLIGHTLY

NEITHER AGREE

NOR DISAGREE

AGREE

SLIGHTLY

AGREE

STRONGLY

Retailer brands are poorly packagedPackaging is not big issue in Europe and North America


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82

7674

66

6261

51 51

48

21

25

0

10

20

30

40

50

60

70

80

90

Malaysia

Phillipines

Singapore

Indonesia

India

Hongkong

Korea

China

Taiwan

Japan

Thailand

Private label is value for money

A majority of Indians but not to sameextent as Malaysians


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6260

55 55

49

4543

41

3838

27

0

10

20

30

40

50

60

70

Phillipines

India

Malaysia

Singapor

Indonesia

Japan

Korea

China

Hongkong

Thailand

Taiwan

Private label quality is as good as manufacturer brandsA significant 60% of Indians think so


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39 39

37

26

2424

23

21

16

13

6

0

5

10

15

20

25

30

35

40

Singapore

Japan

India

China

Thailand

Hongkong

Phillipines

Korea

Malaysia

Indonesia

Taiwan

Private label is for the poorYes, again say Indians.


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3837

3231

2827

2625

24

23

0

5

10

15

20

25

30

35

40

45

Indonesia

Japan

Korea

India

Singapore

Hongkong

china

Taiwan

Phillipines

Malaysia

Thailand

Private label packaging sucks

Yes, say 68% of Indians and that inhibitspurchase


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64

62

61

56

52

48 48

39 39

35 35

0

10

20

30

40

50

60

70

Phillipines

Indonesia

Singapore

India

China

Hongkong

Taiwan

Thailand

Korea

Malaysia

Japan

Private label is a good alternativeMore consumers in India say so compared to

China, but hey are still a wary lot


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THREE KEY LESSONS

Lesson#1: Not all private labels aremade equal

Lesson#2: Pay attention to packaging

Lesson#3: Invest in Building Brand andAwareness


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CONCLUSION

Organized retailing is a significant upcomingtrend for the brand strategist.

Organized retailing also poses somechallenges for manufacturing brands. This too

is a blessing in disguise for the customers asit forces the brands to innovate continuouslyand offer higher value to the customer.

With the proliferation of organized retail

chains one can be sure that maximum gainswould accrue to the owner of the brand the customer.


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THANK YOU


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CONTRIBUTION TO ORGANIZEDRETAILING

36%

17%14%

13%

10%

3%3%

4% Clothing and textiles

watch/jewelry

Food /grocery

Footwear

Durable

Home

Books, music

Health, pharma

Source: ETIG


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NATIONALBRAND

PRIVATELABEL

Fabric cost ( 2.2 metres of Rs 100 per Metre Fabric ) 220 220

Fabrication cost 100 100

Direct cost 320 320

27% Manufacturer Mark up 86 0

Direst cost to Retailer 406 320

Indirect costs 41 13

Cost price to Retailer without duties 447 333

Excise 61 47

Sales tax 27 21

Cost price to Retailer 536 400

Trade margins (%) 33 39Trade margins 293 288

MRP 825 675

Source: ETIG


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0

20

40

60

80

100

120

%

SHOPPERS STOP* PANTALOON GLOBUS

EBONY LIFESTYLE WESTSIDE

* 50 Percent of womens wear is private labelS i ETIG

SHARE OF PRIVATE LABELS IN TOTAL SALES

Impact of Organized Retailing on Brands

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