Customer Perception Retail

7/28/2019 Customer Perception Retail

1/97

STUDY OF CONSUMER PERCEPTION

TOWARDS PRIVATE BRAND IN

ORGANISED RETAIL SECTOR

A PROJECT REPORT

Under the guidance of

Miss Mamta Dua

(Faculty of MBA Marketing)

SUBMITTED BY:

Rakesh Kumar Sachdeva

(520915462)

(Webuniv Infoetch LTD)

(01504)

in partial fulfillment o f the requirement

for the award of the degree

Of

MBA

IN

Marketing

JANUARY, 2011

1


2/97

Acknowledgement:

Survey is an excellent tool for learning and exploration. No classroom routine

can substitute which is possible while working in real situations. Application of

theoretical knowledge to practical situations is the bonanzas of this survey.

Without a proper combination of inspection and perspiration, its not easy to

achieve anything. There is always a sense of gratitude, which we express to

others for the help and the needy services they render during the different

phases of our lives. I too would like to do it as I really wish to express my

gratitude toward all those who have been helpful to me directly or indirectly

during the development of this project.

I would like to thank my professorMiss. Mamta Duawho was always there to

help and guide me when I needed help. Her perceptive criticism kept me

working to make this project more full proof. I am thankful to him for her

encouraging and valuable support. Working under her was an extremely

knowledgeable and enriching experience for me. I am very thankful to her for

all the value addition and enhancement done to me.

No words can adequately express my overriding debt of gratitude to my parents

whose support helps me in all the way. Above all I shall thank my friends who

constantly encouraged and blessed me so as to enable me to do this work

successfully.

2


3/97

Bonafide Certificate:

BONAFIDE CERTIFICATE

Certified that this project report STUDY OF CONSUMER PERCEPTION

TOWARDS PRIVATE BRAND IN ORGANISED RETAIL SECTOR is

the bonafide work ofRakesh Sachdeva who carried out the project work

under my supervision

Signature Signature

Head of Department Faculty Incharge

3


4/97

TABLE OF CONTENTS

CHAPTER

NUMBER

CHAPTER NAME PAGE NUMBER

1 Objective 5

2 Scope of the study 6

3 Limitations of the study 7

4 Introduction to retail industry 8

5 Private labels 27

6 Research methodology 57

7 Data analysis and findings 60

8 Suggestions and recommendations 90

9 Conclusion 9110 Bibliography 94

11 Webliography 94

12 Annexure 95

4


5/97

OBJECTIVES

1. To see the consumer perception towards private Brands.

2. To see the factors that consumer consider while making the choice of the

brand.

3. To know how consumer see Private Brand in comparison to National

Brand.

4. To know the satisfaction level of the customers.

.

5


6/97

SCOPE OF THE STUDY:

The survey for the study has been conducted at retail outlets of:

Vishal Mega Mart

Subhiksha

Spenser

City in which the survey has been conducted is Delhi. The whole of primary

data was collected through the survey of customers that has been shopping in

the above stated retail stores at Delhi.

The small interviews of the store managers of the retail outlets have been

conducted at Delhi at Visual Mega mart, Subhiksha and Spenser. The

information was collected through the conversation with store managers.

6


7/97

LIMITATIONS OF THE STUDY

In attempt to make this project authentic and reliable, every possible aspect of

the topic was kept in mind. Nevertheless, despite of fact constraints were at

play during the formulation of this project. The main limitations are as follows:

The sample size is small as compared to universe.

Survey is conducted only in areas prescribed.

People were hesitant to disclose the true facts.

The chance of biased response cant be eliminated though all necessary

steps were taken to avoid the same.

Lack of published or unpublished literature on the study is also an

limitation.

Due to cost, time and human element involved project area was limited.

7


8/97

INTRODUCTION TO RETAIL INDUSTRY

Retailing is still in its infancy in India. In the name of retailing, the unorganized

retailing has dominated the Indian landscape so far. According to an estimate

the unorganized retail sector has 97% presence whereas the organized accounts

for merely 3%. Industry has already predicted a trillion dollar market in retail

sector in India by 2010. However, the retail industry in India is undergoing a

major shake-up as the country is witnessing a retail revolution. The old

traditional formats are slowly changing into more complex and bigger formats.

Malls and mega malls are coming up in almost all the places be it metros or

the smaller cities, across the length and breadth of the country.

A McKinsey report on India says organized retailing would increase the

efficiency and productivity of entire gamut of economic activities, and would

help in achieving higher GDP growth. At 6%, the share of employment of retail

in India is low, even when compared to Brazil (14%), and Poland (12%).Govt

of India's plan of changing the FDI guidelines in this sector speaks of the

importance attached to retailing. Recently moves by big corporate houses like

Reliance Industries has further fuelled the major investments in retail sector. A

strategic alliance, land acquisitions in prime areas give the essence of the mood

in this sector.

Both MNCs and Indian firms want to get their share of this burgeoning pie.

Notable in Indian firms are Pantaloons Retail & Big Bazaar, Trent's

Westside, Shopper's stop, Reliance and Subhiskha, Wills Lifestyle stores,

Caf Coffee Day, which are present in India in different retail formats. Wal-

Mart stores have just started operations in India. Some leading retail coffee

chains of the world like Starbucks, Barnies are planning to expand in a major

way in India.

8


9/97

THE INDIAN RETAIL SECTOR

India is the country having the most unorganized retail market. Traditionally it

was a family's livelihood, with their shop in the front and house at the back,

while they run the retail business. More than 99% retailer's function in less than

500 square feet of shopping space.. The Indian retail sector is estimated at

around Rs 900,000 crore, of which the organized sector accounts for a mere 2

per cent indicating a huge potential market opportunity that is lying in the

waiting for the consumer-savvy organized retailer.

There is no doubt that the Indian retail scene is booming. A number of large

corporate houses Tata's, Raheja's, Piramals's, Goenka's have already made

their foray into this arena, with beauty and health stores, supermarkets, self-

service music stores, new age book stores, every-day-low-price stores,

computers and peripherals stores, office equipment stores and home/building

construction stores

There seems to be a considerable potential for the entry or expansion of

specialized retail chains in the country. The Indian durable goods sector has

seen the entry of a large number of foreign companies during the post

liberalization period. A greater variety of consumer electronic items and

household appliances became available to the Indian customer. Intensecompetition among companies to sell their brands provided a strong impetus to

the growth for retailers doing business in this sector. Increasing household

incomes due to better economic opportunities have encouraged consumer

expenditure on leisure and personal goods in the country. There are specialized

retailers for each category of products (books, music products, etc.) in this

sector. Another prominent feature of this sector is popularity of franchising

9


10/97

agreements between established manufacturers and retailers. A strong impetus

to the growth of retail industry is witnessed by economic boom and driver of

key trends in urban as well as rural India.

The 4 major organized retail sectors are Food & Grocery, Clothing, Consumer

Durables and Books & Music. In 20037-08, private consumption expenditure in

India amounted to Rs 1,690,000 crores (USD 375 billion) of which, retail sales

constitute about 61% (USD 230 billion).

KEY TRENDS IN URBAN INDIA:

1. Retailing in India is witnessing a huge revamping exercise.

2. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern

trade) makes up percent or US$ 6.4 billion.

3. Ranked second in a Global Retail Development Index of 30 developing

countries drawn up by AT Kearney.

10


11/97

4. India is rated the fifth most attractive emerging retail market: a potential

goldmine

5. Organized retailing in India has been largely an urban phenomenon with

affluent classes and growing number of double-income households.

6. Food and apparel key drivers of growth in retail.

KEY TRENDS IN RURAL INDIA:

1. Rural markets emerging as a huge opportunity for retailers reflected in the

share of the rural market across most categories of consumption.

2. ITC is experimenting with retailing through its e-Choupal and Choupal Sagar

rural hypermarkets

11


12/97

THE HIDDEN CHALLENGES :

Modern retailing is all about directly having "first hand experience" with

customers, giving them such a satiable experience that they would like to enjoy

again and again. Providing great experience to customers can easily be said

than done. In India, as we are moving to the next phase of retail development,

each endeavor to offer experiential shopping. The problem here is retail

differentiation. Another problem in setting up organized retail operations

is that of supply chain logistics. India lacks a strong supply chain whencompared to Europe or the USA. The existing supply chain has too many

intermediaries: Typical supply chain looks like:- Manufacturer - National

distributor - Regional distributor - Local wholesaler - Retailer - Consumer. This

implies that global retail chains will have to build a supply chain network from

scratch. This might run foul with the existing supply chain operators. The

concept of container trucks, automated warehousing is yet to take root in India.

This results in significant losses/damages during shipping.

Merchandising planning is one of the biggest challenges that any multi store

retailer faces. Getting the right mix of product, which is store specific across

organization, is a combination of customer insight, allocation and

assortment techniques.

The private label will continue to compete with brand leaders.

12


13/97

THE FOLLOWING FACTORS ARE THE PROS AND CONS

OF RETAILING

Employment Opportunities In Retail Sectors:

URBAN EMPLOYMENT:- Employment opportunities for youth, According

to PricewaterhouseCoopers (PwC) it is said that retailing will create additional

eight million jobs though retailing In India and will benefit population by

employing local (Urban) youth and others directly or indirectly. But it is feared

that our friendly neighborhood kirana shops where, one can make purchases in

small quantities and return the goods if not found good and many more friendly

services, will be on the verge of disappearance there by creating a vacuum

which cannot be filled by the big organized one.

RURAL EMPLOYMENT: - Contract Farming is the new mantra of organized

retailing in India. There is no doubt that the farmers are in some way benefited

by contract faming where in, the latest technology and equipment and scientific

farming is done by farmers with the help of retailers there by increasing the

productivity in agriculture, and uniform payment for their produce through out

the crop irrespective of fluctuations in market price. But one should also focus

on the freedom of farmers to sell their produce at will. It is evident in India that

rich farmers who possess vast lands are the beneficiary but farmers who have

little land and dependent on other trades are marginally benefited by this kind

of business.

13


14/97

WHAT SMALL RETAILERS AND CUSTOMERS SAY?

"I've lost half my business," says Rajiv Das, who has been selling fruit and

vegetables for 18 years and now has to contend with a new Reliance store a

three-minute walk away. "I'm not able to fight, but I would if I could."

Similarly, Selva Kumar, who runs a kirana 100 meters from a Reliance

outlet in Chennai, says, "We have lost 40 percent of our business, and

that's the future. We're not closing, but there'll be no growth."

COMPETITION:

The organized retailers are financially sound in investing in Big Business

promotion, aesthetic looks, technology and Supply chain management etc. Its

business principle "The bigger the better". The Bigger retailers the better it can

counter competition from small retailers and sustain business. But the

unorganized retailer cannot compete and are trying fight hard against organized

retailers however they cannot afford to invest heavy on technology and other

inputs.

Due to tough competition, Customer have lot many opportunities and choices

to go for, unless local retailers offer them best prices they wont be interested to

come back, unorganized retailers stores are finally waking up to become

competitive and try to attract more consumers.

14


15/97

FDI IN RETAIL SECTOR:

Government of India permitted up to 51% foreign direct investment in

single-brand retailing in the country. This rule, to some extent saved the

existence of unorganized retailers but in the long run there is a possibility thatIndian Government may allow 100% FDI there by permitting to setup

multinational retail operators which may wipe out the existence of unorganized

sector. The government is expected to examine FDI in multi-brand products

only after it receives reports from Indian Council for Research on International

Relations and the National Council for Applied Economic Research. Currently,

51% FDI is allowed in only single brand retailing.

Industry experts are sensitive to the point that local markets have an edge over

the retail investors in India as they have unique advantages such as an

understanding of local needs and extended service like home delivery. As the

FDI influence on the Indian retail sectorsets in, the total size of the retail trade

is expected to grow extensively in the coming years and the consumer segments

patronizing the big malls will create frenzy for organized retailing predicting a

growth of 25-30 per cent per annum over the next decade. Moreover, Indian

retail chains would get integrated with global supply chains since FDI will

bring in technology, quality standards and marketing thereby, leading to new

economic opportunities and creating more employment generation.

Industry trends for retail sector indicate that organized retailing has major

impact in controlling inflation because large organized retailers are able to buy

directly from producers at most competitive prices. World Bank attributes the

opening of the retail sector to FDI to be beneficial for India in terms of price

and availability of products as it would give a boost to food products, textiles

15
http://www.indianground.com/investments/major_investors_realestate.aspxhttp://www.indianground.com/retail/retail-sector-in-india.aspxhttp://www.indianground.com/retail/retail-sector-in-india.aspxhttp://www.indianground.com/investments/major_investors_realestate.aspx


16/97


17/97

STRATEGIES FOR THE GROWTH OF THE RETAIL

SECTOR

Right Positioning The effectiveness of the mall developer's communication of

the offering to the target customers determines how well the mall gets

positioned in their minds. At this stage, the communication has to be more of

relative nature. This implies that the message conveyed to the target customers

must be effective enough in differentiating the mall's offering from that of its

competitors without even naming them. The message should also clearly

convey to the target audience that the mall offers them exactly what they call

the complete shopping-cum-entertainment point that meets all their

expectations.

Effective Visual Communication Retailer has to give more emphasis on

display visual merchandising, lighting, signage and specialized props. The

visual communication strategy might be planned and also be brand positioned.

Theme or lifestyle displays using stylized mannequins and props, which are

based on a season or an event, are used to promote collections and have to

change to keep touch with the trend. The merchandise presentation ought to be

very creative and displays are often on non-standard fixtures and forms to

generate interest and add on attitude to the merchandise.

Strong Supply Chain

Critical components of supply chain planning applications can help

manufacturers meet retailers' service levels and maintain profit margins.

Retailer has to develop innovative solution for managing the supply chain

problems. Innovative solutions like performance management, frequent sales

operation management, demand planning, inventory planning, production

planning, lean systems and staff should help retailers to get advantage over

competitors.

17


18/97

Changing the Perception

Retailers benefit only if consumers perceive their store brands to have

consistent and comparable quality and availability in relation to branded

products. Retailer has to provide more assortments for private level brands to

compete with supplier's brand. New product development, aggressive retail mix

as well as everyday low pricing strategy can be the strategy to get edge over

supplier's brand.

18


19/97

THE GROWTH FACTORS OF ORGANIZED RETAIL IN

INDIA ARE:-

Increase in per capita income which in turn increases the household consumption

Demographical changes and improvements in the standard of living Change in

patterns of consumption and availability of low-cost consumer credit

Improvements in infrastructure and enhanced availability of retail space

Entry to various sources of financing

BENEFITS OF RETAIL SECTOR TO THE ECONOMIC

GROWTH:-

Better quality products and services would lead to better competition

More exports bring more foreign direct investments

Organized Indian retail sector would encourage tourism

Along with the employment boom there would be a vast development

in the expertise of the human resource

There would remain future scope for improvements in agriculture,

small, and medium scaled with the help of the Indian retail sector

19


20/97

CONSUMER PERCEPTION

All marketing starts with the consumer. So consumer is a very important person

to a marketer. Consumer decides what to purchase, for whom to purchase, why

to purchase, from where to purchase, and how much to purchase. In order to

become a successful marketer, he must know the liking or disliking of the

customers. He must also know the time and the quantity of goods and services,

a consumer may purchase, so that he may store the goods or provide the

services according to the likings of the consumers. Now the whole concept of

consumers sovereignty prevails. As consumers, we play a very vital role in the

health of the economy local, national or international. The decision we make

concerning our consumption behavior affect the demand for the basic raw

materials, for the transportation, for the banking, for the production; they effect

the employment of workers and deployment of resources and success of some

industries and failures of others. Thus marketer must understand this.Consumer

perception is defined as a process by which an consumer selects, organizes and

interprets stimuli into a meaningful and coherent picture of the product. It can

be describes as how a consumer see the products in the market.

20


21/97

CONSUMER BEHAVIOUR IN INDIA

The term consumer behavior is defined as the behavior that consumers

display in searching for purchasing, using, evaluating and disposing of products

and services that they expect will satisfy their needs. Consumer behavior

focuses on how individuals make decisions to spend their available resources

(time, money, effort) on consumption related items. That includes what they

buy, why they buy, when they buy it, where they buy it, how often they buy it,

how often they use it, how they evaluate it after the purchase , the impact of

such evaluations on future purchases an how they dispose of it.

The three drivers of successful relationship between the marketers and

customers are customer value, high levels of customer satisfaction, and

building a structure that ensures customer retention.

India is a big country with 28 states, over one billion people and 120

dialects/languages. From the market perspective, people of India comprise

different segments of consumers, based on class, status, and income.

21


22/97

DIFFERENT SEGMENTS OF INDIAN CONSUMERS:

The Socialites: Socialites belong to the upper class. They prefer to shop in

specialty stores, go to clubs on weekends, and spend a good amount on luxury

goods. They are always looking for something different. They are the darlings

of exclusive establishments. They go for high value, exclusive products.

Socialites are also very branding conscious and would go only for the best

known in the market.

The Conservatives: The Conservatives belong to the middle class. The

conservative segment is the reflection of the true Indian culture. They are

traditional in their outlook, cautious in their approach towards purchases; spend

more time with family than in partying and focus more on savings than

spending. Slow in decision making, they seek a lot of information before

making any purchase.

The Working Woman: The working woman segment is the one, which has

seen a tremendous growth in the late nineties. This segment has opened the

floodgates for the Indian retailers. Today, she is rubbing shoulders with men,

proving herself to be equally good, if not better. Working women have their

own mind in decision to purchase the products that appeal to them.

Indias Rich: Indias rich can be categorized into five major categories as

follows:

The Rich: The rich have income greater than US$11,000/- per annum. Total

household having such incomes are 1,058,961. These people are upwardly

mobile. Some of them in this category are Double Income No Kids (DINK)

households. They spend more on leisure and entertainment-activities than on

future looking investments.

22


23/97

The Super Rich: The Super Rich have income greater than US$22,000/- per

annum. Total number of households is 320,900. There are less DINK families

here than in the rich category. The Super Rich are mainly professionals and

devoted to consumerism. They buy many durables and are status conscious.

The Ultra Rich: The Ultra Rich have income greater than US$44,000/- perannum. The number of households in this category is 98,289. There are some

DINK households of middle-level executives. Some single earning households

are of first generation entrepreneurs. Some rich farmers, who have been rich

for a long time, belong to this category.

The Sheer Rich: The Sheer Rich is made up by households having income

exceeding US$110,000/- per annum. Such households are 20,863. They do not

have a homogenous profile. There are joint families as well as nuclear families

in this category.

The Obscenely Rich: The Obscenely Rich is made up of households having

income exceeding US$222,000/- per annum. There are hardly 6,515 such

households in India. They are first-generation entrepreneurs who have made it

big. Some of them are techies. A variety of people belong to this category.

They are just equivalent to the rich in the developed countries. They crave for

exclusivity in what they buy. Most premium brands are relevant to them.

Rural Consumer:

About three quarters of the Indian population are in the rural areas and with the

growing middle class, specially in the Indian cities, the spill over effect of the

growing urban middle class is also felt in the rural areas. The Indian rural

market has been growing at 3-4% per annum, adding more than 1 million new

consumers every year and now accounts for close to 50% of the volume

consumption of fast-moving consumer goods (FMCG) in India.

Increasing awareness of indian consumer:

Over the years, as a result of the increasing literacy in the country, exposure to

the west, satellite television, foreign magazines and newspapers, there is a

23


24/97

significant increase of consumer awareness among the Indians. Today more and

more consumers are selective on the quality of the products/services.

This awareness has made the Indian consumers seek more and more reliable

sources for purchases such as organized retail chains that have a corporate

background and where the accountability is more pronounced. The consumeralso seeks to purchase from a place where his/her feedback is more valued.

24


25/97

MARKETING STRATEGIES:

ONLINE MARKETING: A study by the Confederation of Indian Industry

(CII) and the International Trade Centre predicts that e-commerce activity in

India will rise from US$ 0.10 million in 2000-01 to US$ 5.8 billion in 2005-06,of which the business to business segment will account for US$ 5.41 billion.

Currently, the products Indian consumers are buying through online are

greeting cards, clothes, CDs/VCDs/DVDs, cassettes, books, magazines,

medicine and educational material.

The popular online shops in India include: www.ebay.in,www.shopping.rediff.com, www.reliablegreetings.com ,

www.shopping.expomarkets.com

CELEBRITY INFLUENCE: This is an important tool which is able to

influence Indian consumer buying behavior. In India, celebrities are being

increasingly used in marketing communication by marketers to lend personality

to their products. With the visual media becoming more popular the use of

celebrities in the TV media has increased. Celebrities create headlines. Their

activities and movements are being closely watched and imitated. What they

endorse sell like hot cakes.

QUALITY ORIENTED OUTLETS: Indian consumers looking for quality

choose expensive brands as they feel that price is an indicator of quality.

However, in the absence of well known brands in selected product range,

consumers are likely to take cues from well established retail outlets hoping

that these outlets carry quality products.

25
http://www.ebay.in/http://www.shopping.rediff.com/http://www.reliablegreetings.com/http://www.shopping.expomarkets.com/http://www.ebay.in/http://www.shopping.rediff.com/http://www.reliablegreetings.com/http://www.shopping.expomarkets.com/


26/97

FREEBIES: Indian consumer buying behavior is influenced by freebies.

Freebies are consumer products given free of charge as gifts to purchases of

selected products above a certain value. TVs, washing machines, refrigerators,

and ready made clothes are some of the product categories in which freebies are

given to Indian consumers. Freebies generally comprise tooth paste, soaps,detergent, cooking oil etc.

ECO FRIENDLY PRODUCTS: The environmental awareness in India has

started affecting marketing of products based upon their eco-friendliness. In

general, Indian consumers are likely to buy environmentally responsible

products and packs. The future key for marketing could be to select more

ethical and ecological responsible products and packaging, which is also

convenient for consumers, thus, balancing environmental concerns with

commercial considerations.

CHANGING TRENDS: Urbanization is taking place in India at a dramatic

pace and is influencing the life style and buying behavior of the consumers.

The working urbanites are depending more on fast and ready-to-serve food,

they take less pain in traditional method of cooking and cleaning.

TRENDY LIFESTYLES: The current urban middle and upper class Indian

consumer buying behavior to a large extent has western influence. There is an

increase in positive attitude towards western trends. The Indian consumer has

become much more open-minded and experimental in his/her perspective.

There is now an exponential growth of western trend reaching the Indianconsumer by way of the media and Indians working abroad.

26


27/97

PRIVATE BRAND

Private Brand describes products manufactured for sale under a specific

retailers brand. They are often designed to compete against branded products,

offering customers a cheaper alternative to national brands. The mostcommonly known private label goods are the store brands sold by food

retailers, though this is just one example of many. Department stores,

electronics stores, and office supply retailers all offer private label products or

services.

Store brands are products developed by a retailer and available for sale only

from that retailer; some retailers may attempt to utilize this measure of

exclusivity to differentiate them from the competition. Store brands help

retailers to increase sales which indirectly add to the bottom line (profit).

However store brands are priced 20-30%less than the branded goods. Store

brands can used as a powerful tool i.e. The general feeling is that in times of

recession, private labels increase their market share, but tend to maintain that

market share as economies recover. Thus store brands prove to be a useful tool,

depending upon how it is created.

According to Nirmalya Kumar, Professor of Marketing and Director of the

Aditya Birla India Centre, London Business School, and co-author of

Private Label Strategy, At the moment, private labels almost do not exist in

the country. They are less than 5 per cent of the retail business and still have a

long way to go. But Indian retail is extremely hot and it offers a proposition

that cant be seen anywhere else in the world. Only in China and India can

retail chains have as many stores as they have in the US. In no other country

can one imagine companies having 5,000-6,000 stores of their own. Heres a

little

27


28/97

calculation: in a few years, most retail chains will have close to 5,000 stores in

India. A profit of, say, Rs 5 lakh a store a month would mean a profit of Rs 250

crore. Ten such companies would mean profits of Rs 2,500 crore with their

combined turnover being more than Rs 25,000 crore In the next 20 years, the

richest Indian or one of the top three richest people in India will surely bea retailer. Private labels will have a huge role to play in this. As much as 50

per cent of Indian retail will be occupied by private labels.

HOW HAVE PRIVATE LABELS EVOLVED IN DEVELOPED

COUNTRIES: : Private labels have come a long way over the last three

decades. They started with retailers wanting to offer cheaper substitutes. This

was for two reasons. One, having a private label meant that retailers could

negotiate a better margin from the manufacturer. And the other, when they had

private labels they had a differentiator. While every shop sold a Coca-Cola and

Pepsi, a private label meant that the store now had something that other stores

did not.

The biggest change in the last decade or so has been the entry of premium

private labels. They are no longer saying buy us because we are cheap,

instead today, they are saying buy us because we are the best.

THE SAME CAN HAPPEN IN INDIA ALSO.The share of private labels in

any country depends on how consolidated the retail chains are. Developing a

good quality brand has a high development and innovation cost attached to it.

To be able to absorb such costs, Indian retail chains will need to scale up.

In India, the largest retail chain today has around 300-400 stores. Retail chainsin developed nations on the other hand have around 3,000-5,000 stores each. So

it will start with retailers reverse engineering manufacturers brands, and as

organised retailers grow larger, their

28


29/97

labels, too, will move up the value chain. However, the transition will be faster

in India.

STORE BRANDS IN INDIA:

Store brands in India in a growing stage. It will be difficult to get the details of

sales in India because of the highly unorganized structure of Indian retailing.

But still it contributes a turnover of Rs.700 Cr in the organized structure.

Though the margin of Rs.700 Cr is considered as low when compared to other

countries, India is expected to achieve a sizeable volume in the coming 3-5

years. Moreover in India the products come under store brands include mainly

food and apparel industry.

Some of the retail players having store brands in India are as follows:

DECISION FACTORS FOR BUYING:29

FOOD AND GROCERY FASHION OTHERS

Spencer's Daily Shoppers' Stop Vivek's

Adani- Rajiv's Westside Planet MSubhiksha Lifestyle Music World

Nilgris Piramyd Crossword

Nirma-Radhey Ebony Gautier

Vishal Mega Mart Globus Lifespring


30/97

Though the buying process goes like the above chart, there are some factors

that would influence the decisions of the buyer.

They are shown in the following chart:

CREATING RETAIL STORE BRANDS:

30

Values

Importance weights

Reference

group

Belief

About the

performance of the

retailers and

Culture

Values

Importance weights

Reference

group

Belief

About the

performance of the

retailers and

Culture


31/97

Creation of retail store brands involves both long term and short strategies. In

order to a create retail store brand, are

o Things to be considered before introduction of the store brand

o Things to be considered during the introduction of the brand

THINGS TO BE CONSIDERED BEFORE INTRODUCTION:

For the introduction of the brand, the following are very important in order to

make the brand a successful one, if the following is not right then the brand

cannot have a long term success.

Target customers:

Though there is a good response for the store brands introduced by the retailers,

it should be directed towards target customers i.e. to whom the products must

reach. More over for a retail store, the target customers would be the people

above middle income group and people above high income group (very rich).

Identify the needs of target customers:

Having the target customers, the store has to find the needs of the people which

remain unsatisfied. The needs of the customers have to be given due

importance because the consumers buying behaviour starts with it. If the needs

are found, a product can made in such a way that it satisfies their need. If the

consumer finds that the product is satisfying him then the retail store brand can

be successful one.

Quality of the product:

First and foremost thing which makes the consumer to buy the product is the

QUALITY of the brand. If the quality of the product is good then customers

will be attracted towards it. When the quality is good, during alternatives

31

Values

Importance weights

Attitudes

Evaluation of

retailers and

products

Customer buying

decision

Family

Reference group

Attitudes

Evaluation of retailers

and products

Values

Importance weights

Attitudes

Evaluation of

retailers and

products

Customer buying

decision

Family

Reference group

Attitudes

Evaluation of retailers

and products


32/97

(consumer behaviour) are evaluated, the consumer attaches more importance to

the retail brand.

Price of the brand:

Price plays an important role in the creation of store brand. Most of the storebrands are purchased because they are priced 10% to 40% below the national

brand. Because of this most of the consumers are attracted towards the brand

and this also used to differentiate the store brand and the national brand. the

store brands are normally priced below the national brands price. In some it can

also be premium store brands. There are two strategies for this. The first

strategy is to identify the gap in the market in accordance launch a premium

store brand. Supermarket Sainsbury did this while launching its brand 'Taste the

difference'.

Positioning:

Positioning attracts the customers a lot easily towards the brand. When

positioning of the store brand is perfect, then pricing the brand above premium

is possible. Moreover, when introducing store brands, retailers may use either a

differentiation strategy or an imitation strategy in positioning the store brands.

Examples of a high quality differentiation strategy where retailers introduce

high quality differentiated brands that differentiate them from the national

brands include "Sam's Choice" from Wal-Mart. Alternatively, the retailer may

differentiate by offering a white-label generic or a low quality store brand

targeted to low quality oriented customers. "Food Bazaar" positioned its private

salt brand as premium health salt which is available in the price of the ordinary

salt. It enjoys 40 - 45% market share in its category among all the "Food

Bazaar" outlets.

Packaging:

32


33/97

Packaging plays a very important role because even if the customers are not

aware about the store brand, the packaging will make the consumer to see the

product and it make the customer to inquire about the product. The store have a

special unit for packing their store brands and the design, look etc., of the

package is vested with the packing unit.

Training to the employees:

Training is said to be important because the customers of the store will not be

aware about the store brands, its uses, its merits, etc. In order to fill this gap the

employees of the store must be given adequate training regarding their brand.

Every time when the store introduces its new store brand, they are providing

one month training to their employees

THINGS TO BE CONSIDERED DURING THE INTRODUCTION:

33


34/97

Now the brand is available in the retail outlet. The following things are very

essential for the complete creation of the retail store brand.

Promotion of the store brand:

Promotion is that aspect of marketing communications that keeps the product inthe minds of customers and helps stimulate trial and repeat purchase. Most

retail owners and marketing managers are familiar with promotional strategies

such as:

Advertising

Personal selling

Sales promotions (buy one get one, coupons, introductory offers, etc.)

Public relations & publicity

For a retail store, media advertising is not needed, because it is already

provided by the national brand.

Feedback from the customers:

Feedback can be got from the customers regarding the store brand's

performance and its improvement. Feedback gives the satisfaction level of the

customers. The store receives feedback from the customers regarding their

brand's performance. Feedback can also be used for improving the qualities of

the brand.These are the things which should be considered during the

introduction of the retail store brand.

34


35/97

WHAT IS THE FUTURE FOR PRIVATE BRANDS?

Private brands will continue to grow and in Europe especially, will become

international. Discount stores will develop their own private brands at the

expense of brand labeled products.

Apart from price driven private labels, the up market label will develop. This

has already been achieved in the UK with Sainsburys wines and Marks &

Spencer sandwiches. The private label will continue to compete with brand

leaders. The warning is if you have a branded product that is not a market

leader then your product could be seriously under threat in the next few years.

Private retailers will occupy 50 per cent of the market the world over. At 50 per

cent, they begin to saturate. If they try to occupy more than this, then

consumers feel that there arent enough choices. In countries such as

Switzerland and the UK, private labels have reached this limit and these

markets have saturated. But they will continue grow in the other countries till

they reach the same level. And this will happen very soon in India, too.

The private label brands in world:

Aldi 95% private label

Lidl 80% private label

Sainsburys 60% private label

Tescos 40% private label

Wal-Mart 40% private label

Carrefour 33% private label

35


36/97

ADVANTAGES AND DISADVANTAGES OF PRIVATE

LABELS

Advantages to the retailer:

Reduce producer domination in the marketplace

Create more dependence on the retailer by the consumer

Customer sales increase

An opportunity to differentiate and provide variety

Customer loyalty in a situation where you can avoid comparisons

Positive image building

More freedom in your pricing strategy

Positive control over stock keeping inventory

Better bargaining position in a depressed economy

The potential disadvantages for the retailer could be:

A negative backlash on their image

Lack of standardization of private labels between categories upsets the

customer

Financial control concerns

Lower turnover, resulting in lost total sales per linear metre.

Excessive focus on the private label at the expense of other products

The retailer could be perceived as less powerful in the marketplace as

they dont promote recognized brands

Low price equates to low quality

36


37/97

Lack of financial support from suppliers

If the product fails, the consumer doesnt forgive you

Advantages to the producer

It keeps out a competitor from using this opportunity

They can get into the marketplace at a lower cost

They have a secondary product that gives the company a new profile

They can produce a competitor product to position against their own

market leader

It is an opportunity for smaller suppliers who dont have the promotional

capabilities to enter a bigger marketplace

The supplier can get more shelf space in the store

An opportunity to build strategic partnerships with selected retailers

The main consumer advantages are

A guarantee of the same quality for a serious price differentiation

More variety within the category

A trusted retail name equals trust in the product

37


38/97

Product provides a need based on a want, where products were missing

within the category. Eg ethnic foods, diet foods, sugar free foods and so

on.

The disadvantages to the producer could be

The relationship with the retailer could be threatened if the product

doesnt perform

They have created a competitor to their own brand

Other suppliers may introduce cheaper private labels and drive margins

downwards

High inventory costs and low profit margins

The disadvantage for a consumer could be

Low quality product. Consumers may have a prejudice to low price

equalling low quality

Previous customer failures could effect the whole private label range in a

store eg if their cereals arent good, then their jam will be the same.

38


39/97

OPPORTUNITIES OF PRIVATE BRAND

Brand Loyalty :

National brands are sold all over, so there's no real sense of brand loyalty in

terms of where consumers buy them. Because private labels are unique to one

retail chain, there is the possibility for retailers to cultivate a sense of brand

loyalty. Though they used to be seen as knock-offs of "name brands", private

labels have become increasingly more accepted by the public as quality has

increased and retailers have expanded their offerings of private label goods.

Lower Prices/Higher Margins

Private label goods are generally much cheaper to produce than branded goods,

due to the lack of advertising and marketing expenses. As such, retailers are

able to purchase private label goods for much less than they would have to pay

for comparable branded products. The cost difference is usually large enough

that retailers can offer customers lower prices while still making higher profit

margins themselves.39


40/97

Retailers as Marketers

In the past, retailers were merely the last stop on a product's way from the

manufacturer to the consumer. Retailers are now becoming increasingly

established as brands themselves, marketing their private label products as

alternatives to national brands. This has resulted in a growing shift in the

balance of power between retailers and manufacturers, with retailers not only

becoming less dependent on manufacturers for product offerings but actually

making manufacturers dependent on them for sales volume.

Store-brand in FMCG industry in India are on a complete upswing.

With more and more retailers offering products under their own private labels,

consumers have not had it so good as far as shopping for FMCG is concerned.

The Government of India is looking for foreign direct investment in retail

sector and therefore one can expect greater growth in large retail chains or

outlets in the first decade of the current century. Marketing managers struggle

between cost-saving standardization for a mass market and high-cost

customization for a specific niche to improve consumer-acceptance. Given the

technological developments in recent times, standardized products no more

enjoy unique selling propositions as imitations cannot be prevented from entry.

Organizations continuously strive to find a method of creating unique selling

40


41/97

proposition (USP) to retain their existing customers and acquire new

customers. Such an outlook, in recent times, has called for a better

understanding of distribution channels in meeting specific customer-needs.

Retailers growing control over distribution channels:

The turn of the twenty first century witnessed many changes in distribution

channels in India. Smaller sized convenience stores encounter challenge

from large chains of departmental stores that offer many product

categories under one roof. Though convenience stores such as general

merchants, grocers and mini self-service outlets will continue to exist in

our country, large cities will witness the growth in one-roof shopping

malls of different kinds.

Already, large specialty stores such as Subhiksha, Food World in FMCG sector

have set their firm foot in South India, surpassing local chain stores such

as Nilgiris and Vitan in size and reach. As of September 2004, there were

over 72 outlets of Food World. Subhiksha has 115 outlets and is still

growing in number and gaining popularity among consumers. The RPG

Group that owns Food World has plans afoot to expand into the hyper

41


42/97

store category even more vigorously. Home Store India Limited (HSIL)

is reported to be planning for expansion in the North. This will result in

expansion in two types of retail stores: one in the hyper malls and the

other in large chain of The Sabka Bazar. Mega malls such as Shoppers

Stop and Forum have gained currency among upper middle class

shoppers seeking one-roof shopping combined with class and

exclusivity, and discount stores such as Big Bazaar are frequented by

middle class families who seek one-roof shopping combined with value

for money. Shoppers Stop is said to have plans for expansion which

symbolizes more growth in private labels.

Economics of private branding

Store brands are the only set of brands for which the store is entirely

responsible. Thus, the store has to bear all the costs (development, sourcing,

marketing effort, time, risk and promotion) and it reaps all the rewards of the

brands success.

It is intuitively evident that a store will enter into that product category that has

(a) high profit margin (b) low entry barrier to branding and (c) low switching

cost to the consumers, which may be either monetary of affective.

Commodities offer the best scope to stores for private branding since

42


43/97

competition. Against the store label will be minimal from the unorganized

market. Further, commodities are products over which, through allocation of

shelf or floor space, retail control can be quickly established. This is because

the suppliers of commodities do not purchase shelf-space and therefore there

will be little restriction or objection to the stores stacking and shelf-display of

its own brands. These commodities are called Destination categories,

normally stacked at the far end of a store, inviting the consumers to take a long

walk through a maze of other products so that they may pick up some of them

on the way.

For retail chains such as Food World, these categories represent high tactical

usage to bring in more customers and the price-related promotion of these

categories falls under aggressive classification. In the case of manufactured

products being introduced under private labels, the characteristics that enable

store brand introduction are (a)inexpensive, easy, low risk purchase for

customer (b) easy to make from commodity ingredients (c) perishable,

therefore local supplies are favored (d) category sales are growing fast,

enabling the private brands garnering reasonably high volumes and (e) low

number of national players dominating the category so the retailer feels the

need to reduce dependency on them.

43


44/97

MANAGERIAL ASPECTS OF STORE BRANDS :

Motivation for store brand entry:

Store brand entry is motivated by the following:

(i)Store brand enables the store to discriminate consumers on price

dimension. In most of the product categories, there are two types of

consumers, namely, those who prefer quality-guarantee even at higher price

and those who expect reasonable quality at reasonably low prices. The former

display brand loyalty, purely due to their faith in the quality of nationally

advertised brand. The latter are not affected by national advertising. They are

either ready to risk the quality aspect for the gain in price or not ready to risk.

Those who are ready to risk quality for price choose one of those brands from

the competitive fringe in the store shelf. Those who are not ready to risk quality

need a brand that is an acceptable balance between quality and price..

(ii)Gap between marginal and average costs is another motivating factor

for the store brand.

44


45/97

Normally, the average cost of the national brand is more likely to be higher

than the marginal cost, due to national level advertising. If not very high degree

of economies of scale is present in the product category, this difference

between average cost and marginal cost is an attraction to the store to launch its

private label. This cost-gap is availed by the store by getting its brandmanufactured or packed by a smaller producer, perhaps locally, or in its own

premises.

(iii) Store brands enable the retailer to differentiate the store from other

stores in the vicinity.

By standing guarantee to a variety of store brands, the retailer signals to the

consumers his USP of higher quality. When consumers face large number of

stores, their uncertainty about the outlets is high. Store labels cuts through such

uncertainty and enables their faster and frugal heuristic decision.

STRATEGIC POSITIONING OF STORE BRAND:

Store brand positioning is motivated by the aspects given below:

(i) In a situation when more than one national brand is sold in the store, it

makes profit-sense for the store to sell the store brand priced as high as the

leading brand to offer its customers the utility of perceived quality associated

with the price. Thus, though there may be a temptation to sell at lower price, on

par with fringe brands, the store will be better off reaping a higher profit

through a higher price.

45


46/97

(ii) On aspects such as product packaging, pack size, design etc, it is suggested

that by positioning the store brand to mimic the leading national brand the

retailer can strengthen its bargaining position.

SUCCESS OF STORE BRAND AND PROFITABILITY:

Success of store brands depends on the following factors:

Introduction of a store brand in a category that consists of large number of

national brands increases stores profitability. A caveat must be added here that

this is possible only in such a situation where the competition among the

national brands is low . These two aspects should be present in conjunction for

the introduction of store brand to lead to greater category-profits. The intuitive

explanation of this phenomenon is as follows: In a situation when large number

of national brands is present, the stores dependence in any one brand is small.

Therefore, if the leading national brand retaliates to the store brands

introduction by stoppage of supplies, the loss of opportunity profits to the store

is minimal. On the contrary, when the national brands compete withinthemselves fiercely, the utility to the consumer about the quality of the brands

is high.

Dhar and Hock (1997) find six factors affecting the success of the store

brand. They are :

Quality of store brand relative to national brands is high.

46


47/97

The quality of store brand is consistent over a period of time.

The product category is large in absolute value terms in stores sales

revenue.

The percentage of gross margins in the product category is high

The number of national players is fewer than in other categories.

MARKETING STRATEGIES TO COUNTER PRIVATE

BRANDING:

In this section, the competitive strategy from the national brands view-point is

studied. Marketing strategy will no more be restricted to boardrooms and

strategy tables. The real battle is taken to the war-field - the retail space - where

the thick of action is witnessed. Companies no more compete solely with other

companies for mind-space and shelf-space, but with their own distribution

partners. Distribution management will no more be confined to managing

distributors, ensuring supplies to retailers and sporadic managing of product

movement from retail shelves through promotions.

Managing large retail chains and mega malls will be a reality, which calls for

different types of business-deals, caliber, aptitude and attitude among the

boundary personnel. Pricing strategy will not be simply based on competitors

moves; it will consider how the retail outlets act as well as will react to the

companys strategy. This may have a bearing on the segment-targeting strategy

of national brands, due to the competition arising out of retailers private labels.

Introduction of private labels reduce advertising space at the points of sales,

since the retail outlets may prefer promoting their own brands to promoting

47


48/97

national brands. Alternatively, advertising through points of sales may become

more expensive, with the retail outlets charging premium on shelf space and

advertising space. These may cause a fundamental change in the approach of

the national brands in their overall strategy of segmentation, targeting and

positioning. Companies may revert to mass-media advertising by giving up thecostlier point-of-sale advertising.

Manufacturers here need to realise and respect the strength of the retailer.

Today, most companies see retailers as the owners of small mom-and-pop

stores and not as a social or intellectual equal. But they need to understand that

retailers have equal weight and will soon wield a lot more power than them.

Hence manufacturers must start partnering with retailers.

They must start working closely with them as soon they will have to work

around them. In most developed nations like the US, the UK, South Africa and

Australia, manufacturers work closely with retailers. Even in countries like

Brazil, Mexico and Thailand one has witnessed this change. Hence Indian

companies can begin to build a partnership from now.

PRODUCT:

Introduction of private labels at retail stores implies to the national brands that

the consumers have greater options among products they buy. This means that

a wider product-range will be available. When the store competes vis--vis

national brands on product range, the short term inability of the national brands

to respond to the challenge is a matter to be contended with, since (i) a large

enterprise requires longer time to respond with changes in product-strategy and

(ii) the minimum quantity of production that enables the national brands to

avail the economies of scale may not be available when it reacts to a single

48


49/97

store. Alternatively, if a chain store introduces a premium or economy brand in

a category, then the national brand gets the benefit of market testing from the

experience of the store brand and can thus decide whether or not it, too, should

enter that segment.

PRICE:

In case the store competes with the national brand on price range, it can

effectively do so by locally promoting the price-advantage to the price-sensitive

consumers and by highlighting the higher quality of the premium-range

products to quality-conscious consumers through its counter-salesmen. Under

such conditions, the national brand has two options: (i) it can fight the store

brands on price or (ii) it may increase its prices and highlight its higher quality

through national campaigns. Fighting is an option the national brand can

exercise when the customers loyalty to the national brand is greater than the

customers store-loyalty. The decision to fight price-reduction in kind has both

advantages and disadvantages. The advantage is that the store brand will find it

difficult to gain acceptance among consumers, if an established national brand

is available at a similar price. The national brand may succeed in nipping a

budding store brand. For a national brand, response to a reduction of price need

not be in kind.

49


50/97

PLACE:

Private branding symbolizes the shift of intra-channel power downstream.

Whereas the national brands have conditioned the perceptions and preferences

of consumers by the quality of their brands and the content of their

communication, retailers who own private brand are in a position to dictate

terms to their manufacturers about the standards to be adopted in quality that

may well change the consumer perceptions and preferences away from the

national brands. Where the specific quality of the product is not contractible by

a private label owner, the retailer may contract the method of production or

insist on obtaining certain certifications such as ISO. This may result in shift of

certain investment costs upstream, an eventuality that the manufacturers of

national brands and private brands should be aware of. In essence, the major

impact of private labels may well be the increase in transaction costs for the

manufacturers. Every channel arrangement is characterized by a common goal

on the one hand and a channel conflict on the other. The common goal is to

achieve transfer of utility from manufacturer to consumer whereas the conflict

is about the sharing of costs and benefits of this transfer. Private branding

50


51/97

heightens such conflicts by adding a dimension of contrary marketing interests;

that is, the national brand competes with the private label of the retail store for

shelf space and consumer-attention. Which way the needle will tilt in this

power struggle will depend on the relative degrees of brand loyalty and store

loyalty. When the national brand enjoys greater brand loyalty than store

loyalty, the retailer is compelled to store the brand. Besides, the national brand

manufacturer may be in a position to penalize an opposing retailer by supplying

less quantity of such high-loyal brands or withdrawal of supplies altogether, an

eventuality that may affect the image of the retailer among the public.

Promotion:

As is evident from the previous paragraphs, private labels take the brand-battle

to the point of sales. The national brands compete with the private labels for

stores shelf-space and consumers attention-space. With the store brands

understandably getting the best shelf space in terms of visibility at eye level,

strategic points such as entry point and shelf display, national brands need to

compete for the same facilities at higher cost than earlier.

51


52/97

Private Label Products in FMCG

Additives-Preservatives Aftermints Dairy Products

Drinks-Beverages Health Food Home Care

Personal Care Ready to cook Ready to eat

Basic Staple Cereals Cooking Medium

52
http://www.vishalmegamart.net/ready-to-eat-1.htmhttp://www.vishalmegamart.net/ready-to-cook-1.htmhttp://www.vishalmegamart.net/fmcg-personal-care-1.htmhttp://www.vishalmegamart.net/home-care1.htmhttp://www.vishalmegamart.net/health-food.htmhttp://www.vishalmegamart.net/drink-beverages.htmhttp://www.vishalmegamart.net/diary-products-1.htmhttp://www.vishalmegamart.net/aftermints.htmhttp://www.vishalmegamart.net/additives-1.htm


53/97

Flours Pulses Baby Food Spices

What does FMCG Manager,Vishal Megamart(Delhi) says for private

labels of their retail chain:

It is difficult to develop your brand across different categories whilst retaining

the core value of the master brand? Department Stores always know brands are

very protective of their product and image and have the power to make

demands as to how their products are sold, displayed and marked down.

Sometimes Department stores attract there customer by doing arrangements

with major designers to supply there products.

Private labels for Vishal are doing good business especially in FMCG. Theprivate labels products whose sale is high are

:chips,buiscuits,cornflakes,Jam,Macroni,Juice,Namkeen,Pickle,Sauce,Aga

rbatti,Air fresheners, Ear buds, Floor cleaner and Aluminum Foil.The

private label sale of cereals and spices of Vishal Megamart is extremely

good. It is above 40%.

While 85% of consumers continue to patronise small grocers (Kirana shops), asignificant 15% shoppers now prefer modern stores to meet their food &

grocery needs. Factors such as entry of new brands, availability of a wide

range of products, and the new-age shopping experience are slowly pulling

consumers towards the modern supermarkets

.

53
http://www.indiaretailbiz.com/blog/2008/02/24/15-shoppers-now-buy-their-food-grocery-from-modern-stores/http://www.indiaretailbiz.com/blog/2008/02/24/15-shoppers-now-buy-their-food-grocery-from-modern-stores/http://www.vishalmegamart.net/spices-powdered.htmhttp://www.vishalmegamart.net/fmcg-babyfood.htmhttp://www.vishalmegamart.net/pulses.htmhttp://www.vishalmegamart.net/flours.htmhttp://www.vishalmegamart.net/cooking-medium.htmhttp://www.vishalmegamart.net/cereals.htmhttp://www.vishalmegamart.net/basic-staples.htmhttp://www.indiaretailbiz.com/blog/2008/02/24/15-shoppers-now-buy-their-food-grocery-from-modern-stores/http://www.indiaretailbiz.com/blog/2008/02/24/15-shoppers-now-buy-their-food-grocery-from-modern-stores/


54/97

What does Manager of Spencer, Delhi says about the private

labels in Spencer?

Private Label is not merely a product with the store/retailers name on it. It

takes more to qualify as a Private Label. The consumer must see the Private

Label product as distinct from being just aproduct in a pack. There must be a

clear perception that it is produced by this store. Manager of the Spencer tells

that sale of private label products of Spencer is very low as compared to

national brands. Among all the products the sale of grocery products of Spencer

is maximum.. Low price is an easy one to transfer across. But if your brand is

54
http://www.vishalmegamart.net/spices-powdered.htmhttp://www.vishalmegamart.net/cereals.htm


55/97

perceived as a high quality skin care product, it would be much harder to

transfer the brand benefit.

55


56/97

What does manager of Subhiksha says?

Today, the consumer doesn't think twice about spending Rs. 200 on a movie

ticket in a multiplex, but will search for rice that is cheaper by Rs. 10/kg. To

the consumer, soap or toothpaste is not seen as providing much value or a

better quality of life, while a movie or a mobile phone is seen as doing that.

Subhiksha sold all its products all the time below MRP. It eliminated the

margins in the traditional supply chain consisting of the manufacturer-

wholesaler/dealer retailer network. Private labels and home grown brands in the

organized grocery and FMCG retailing segment were beginning to pose a

major threat to the brands of established players like HLL, Nestle and Tata Tea.

The margins of these private brands were believed to be higher because

manufacturing of these products was outsourced. Subhiksha had a very clear

strategy regarding private labels and competitors.

35% of the companys sales came from parent labels of rice, dhal, etc.

Price to be an important choice driver for Subhiksha

56


57/97

The company had its own brands, but only in staples and other agri-

commodities where there were no national brands

RESEARCH METHODOLOGY:

Research in common parlance refers to a search for knowledge. It is a scientific

and systematic search for pertinent information on a specific study. So we say

that research is an art of scientific investigation. Research methodology is a

way to systematically solve the research problem. It may be understood as a

science of studying how research is done scientifically.

Research Design:

In this project the research design is exploratory through which an attempt is

made to obtain the relevant results regarding the study conducted. The

established objectives were kept in mind during the study, however no

hypothesis was formed. Questionnaires were prepared and get filled from the

customers. Exploratory research studies are also termed as formulative

research studies. This main purpose of such studies is that of formulating a

problem for more precise investigation. The major emphasis in such studies is

on the discovery of ideas and insights. As such the research design appropriate

for such studies must be flexible enough to provide opportunity for considering

different aspects of a problem under this study.

57


58/97

Measurement Techniques:

A structured Questionnaire was administered for the purpose of obtaining

information from the respondents. Care was taken to put simple and few

questions in the questionnaire..The questions included were open ended,

dichotomous and offered multiple choice

Sampling Design:

Under this head we actually try to analyze the whole universe of items or

products available for the study. Universe represents the whole, the sampling

unit helps us with some percentage of all universe items to be analyzed and also

side by side managing reliable results.

Universe:

All those customers that were shopping from the retail outlets of Vishal

Megamart, Subhiksha and Spencer while conducting the survey

Sample Size:The sample size taken by me was of 100 customers but as out of

hundred only 67 customers were aware of the private labels than questionnaire

filled by them were taken in account and the rest was left.58


59/97

Sampling Procedure:

The samples were selected on the basis of convenience sampling. A sample of

100 people was taken on the basis of convenience. The actual consumers were

contacted on the basis of random sampling.

Contact Method:

The customers were contacted through the visiting the retail stores and

approaching them.

Data Collection:

Data is important tool for the success of any survey. Moreover it reduces the

uncertainty in decision-making process. In order to make meaningful research

suitable methodology has been adopted.

Primary Data: Primary data has been collected through:

1.Questionnaire

2. Interviews of managers of Vishal Megamart, Subhiksha and Spencer.

3. Persons concerned like salesmen

Secondary Source:

The secondary data was collected from internet, References from Library.

59


60/97

DATA ANALYSIS AND FINDINGS

1.Frequency of visit of the customers at retail store:

TABLE No.1

Diagram No.1

60

Sr.No No of times %age

1. Once a week 21

2. More than twice a week 5

3. Once in fortnight 19

4. Once in month 485. Once in two months 7


61/97

The survey shows that maximum that is 48% of the total customers visit retail

stores once a month. 21% of the customers visit once a week, 19% of the

customers visit once a fortnight, 7% of the customers visit once in six months

and 5% of the customers visit retail stores twice a week. It suggests that there

are fewer customers who visit twice a week and those who visit once in sixmonths.

2. Awareness of customers regarding private labels:

Sr.No Particulars %age

1 Yes 672 No 37

Table No.2

Diagram No.2

The survey tells that 67% of the people are aware of the private brands of retail

chains but 33% of the customers dont know about them.

61


62/97

3.Preference of customers between national brands and private

labels:


1. National brands 31

2. Private Labels 2

3. Both 34

Table No.3

Diagram No.3

It has been found that 31% of the respondents prefer national brands, 34% of

the customers say that they prefer both and only 2%of the respondents were

those that prefer private brands. It depicts that preference for private labels is

far less than the national brands.

4.Categories of products that customers prefer to buy from the retail store

Table No.462


63/97

Diagram no. 4

Among the categories of products that customers prefer to buy from the retail

store, cereals, pulses and spices rank 1st .The second preference of the

customers is ready to eat products, the 3rd rank goes to additives-preservatives.

4th in the row is ready to cook products. The other rank goes for health food,

beverages, personal care products and cooking medium respectively.63

Sr.No Categories of products Grand Total Average Rank

1. Beverages 236 3.52 6

2. Health Food 336 5.01 5

3. Personal Care products 159 2.37 7

4. Ready to cook 345 5.15 4

5. Cereals, Pulses, Spices 405 6.04 1

6. Cooking Medium 97 1.45 8

7. Ready to Eat 398 5.94 2

8. Additives-Preservatives 370 5.52 3


64/97

5.Choice of Categories between private labels and national

brands:

1. ADDITIVES-PRESERVATIVES:


1. National Brands 79

2. Private Labels 21

Table No.5

Diagram No.5

Among the private labels and national brands in the additives and preservatives,

79%of the customers prefer national brands and 21% of the customers prefer

private labels. Though it is far less than national brands but still more than

many other categories of products that people prefer in private labels.

64


65/97

2. BEVERAGES:



2. Private labels 4

Table No.6

Diagram No.6

Only 4% of the customers prefer private labels in Beverages. 96% of the

customers prefer national brands in beverages. It shows that preference of

private labels in beverages is very less than national brands.

3.HEALTH FOOD:



2. Private Labels 2

65


66/97

Table No.7

Diagram No.7

Only 2% of the people prefer to buy health food of private labels. The

percentage is very less. People are still loyal to national brands when it comes

to be health food

4. PERSONAL CARE PRODUCTS:Sr.No Particulars %age


2. Private Labels 2Table No.8

66


67/97

Diagram No.7

In personal care products also, 98% of the customers prefer national brands

while only 2% of the customers go for private labels. The preference of private

labels in personal care products is also far from satisfactory.

5. READY TO COOK



2. Private Labels 8 Table No.9

67


68/97

Diagram No.9

The survey depicts that 92% of the people buy national brands in ready to cook

products and only 8% of the customers prefer private labels.

6. CEREALS, PULSES AND SPICES



2. Private Labels 33

Table No.10

68


69/97

Diagram No.10

The ratio of preference of private labels is much more the preference of

customers for private labels in any other category. Here 33% of the customers

prefer private labels while only 67% of the people prefer national brands.

7. COOKING MEDIUM:

Sr.No. Particulars %age


2 Private Labels 1Table No.11

69


70/97

Diagram No.11

Only 1% of the customers (which is the lowest ration in any category for the

favour of private labels) prefer private labels for cooking medium. 99% of the

customers prefer national brands.

8. READY TO EAT:



2 Private Labels 27Table No.12

70


71/97

Diagram No.12

It has been found that 27% of the customers prefer private labels while 73% of

the customers go for national brands. The favourable impression has been seen

of customers towards the private labels of ready to eat products.

6. Factors affecting the choice of customers between private labels and

national brands:

Sr.No Factors affecting choice %age1. Price 34

2. Quality 45

3. Advertisement/Sales Promotion 9

4. Novelty/New features 10

5. Loyalty 2

Table No.13

71


72/97

Diagram No.13

The most important factor that affects the choice of private labels is Quality.

Price is the second important factor and the least affecting factor is loyalty.

7. Private labels in comparison with national brands in terms of:

1. Quality:

Sr. No Particulars %age

1. Low 45

2. Medium 54

3. High 1

Table No.14

72


73/97

Diagram No.14

According to most of the customers the Quality of private labels is

medium. Only 1% of the people say that it is high than national brands

and that is the notable point. It depicts that people believe that the

products of the private brands dont match national brands when it comes

to quality and they still believe that private labels are low-quality brands.

2. Price:


1. Low 54

2. Medium 46

3. High 0Table No.15

73


74/97

Diagram No.15

Most of the customers believe that price of private labels is low as compared to

national brands that is major driver that people go for private labels. Nobody

says that price of private labels is high.

3. Good value:Sr.No. Particulars %age

1. Low 37

2. Medium 44


74


75/97

Diagram No.16

Good value of private labels whether it is for money or product is medium for

most of the customers when compared to national brands.44% of the customers

says it is medium. 37% believe it is low and is worth nothing but 19% believe it

is higher than national brands.

4. Reliability:


1. Low 37

2. Medium 45


75


76/97

Diagram No.17

Reliability is also affective when going for any brand. Most of the respondents

say it is medium as compared to other brands. But surprisingly 28% of the

people believe that it is high as compared to national brands.

5. Attractiveness:


1. Low 39

2. Medium 54


76


77/97

Diagram No.18

More than half of the customers respond that attractiveness of the private labels

is medium as compared to national brands.39% of the customers say it is low

and 7% of the customers say it is high.

6. Customer response for :

Does store staff motivates or facilitates you to buy private labels:

Sr.No Particulars %age1. Yes 15

2. No 85

Table No.19

77


78/97

Diagram No.19

85% of the customers disagree that store staff motivate or facilate them to buy

private labels. But 15 % of the customers agree that store staff facilitates or

motivates them to buy private labels.

(b)Can private labels ever generate the type of consumer loyaltysome of the iconic manufacturer brands such as McDonalds and

Coca Cola have?

Sr.No Response %age

1. Yes 53

2. No 47Table No.20

78


79/97

Diagram No.20

53% of the customers respond positively that private labels can generate the

same loyalty as iconic manufacturer brands have but 47% disagree with the

statement

7. Methods through which private labels can compete with

national brands:

Sr. No Methods %age1. Advertisement 8

2. New product development 21

3. Low pricing strategy(discounts) 29

4. Consistent good quality 31

5. Easy availability 11

Table No.21

79


80/97

Diagram No.21

31% of the respondents say that private labels should have consistent good

quality to compete with national brands.29% of the people say that private

labels can compete with national brands through low pricing strategy.21%

believe new product development is the strategy to compete with national

brands.11% that private label goods should be easily available and 8% say it is

through advertisement that private labels can compete with national brands

7. To what extent customers agree with these statements:

1. Low price means low Quality

Response %age

Strongly agree 12

Agree 37

Neutral 2

Disagree 36

Strongly Disagree 13Table No.22

80


81/97

Diagram No.22

There is a mixed response about the statement.37% of the respondents

agree with the statement and 36% of the customers disagree with the

statement. 12% strongly agree with the statement and 13% strongly

disagree with the statement whereas 2% of the resopondents are neutralabout the statement.

2.Trust on the store has positive affect on the private label purchases

Response %age

Strongly agree 26

Agree 44

Neutral 24

Disagree 6

Strongly Disagree 0

81


82/97

Table No.23

Diagram No.23

Majority of the respondents agree with the statement that is 44%. Even 26%

strongly agree with the statement.24% of the respondents are neutral and 6%

disagree with the statement. But nobody is strongly disagree towards it.

3 Store ambience has positive affect on customer satisfaction :

Response %age

Strongly agree 33

Agree 54

Neutral 12

Disagree 1

Strongly Disagree 0Table No.24

82


83/97

Diagram No.24

54% of the customers agree that store ambience is important for their

satisfaction .33% strongly agree with the statement.12% are neutral about it.

Only 1% of the respondents disagree with the statement. Nobody is strongly

disagree with it.

4. Premium Quality store brands can make customers store loyal.

Response %age

Strongly agree 4

Agree 38

Neutral 44

Disagree 12

Strongly Disagree 2Table No25

83


84/97

Diagram No.25

44% of the respondents are neutral about the statement.38% of the respondents

agree with the statement that premium quality store brands make customers

store loyal.12% of the customers disagree with the statement. 4% of the

respondents agree with the statement.2% strongly disagree to it.

5. Private labels are imitations of national brands.

Response %age

St

Documents

Customer Perception Retail