Impact of Organized Retailing on Brands
Transcript of 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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A S I A
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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
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Supermarket own brands are a good alternative toother brands
Asians are still hesitant about private label brands
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A S I A
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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 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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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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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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0%
20%
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60%
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100%
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
28 24 20 2126 25
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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
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25
0
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20
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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
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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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Singapore
Japan
India
China
Thailand
Hongkong
Phillipines
Korea
Malaysia
Indonesia
Taiwan
Private label is for the poorYes, again say Indians.
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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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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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SHOPPERS STOP* PANTALOON GLOBUS
EBONY LIFESTYLE WESTSIDE
* 50 Percent of womens wear is private labelS i ETIG
SHARE OF PRIVATE LABELS IN TOTAL SALES