As retail strategy consultants, we advise firms on how to enter the Indian market. Most of our clients have large manufacturing facilities catering to the wholesale industry or are geared for export.We help them with brand strategy, marketing collateral for launch and provide feedback on cost of placement / sale from potential retail partners.
Recently I noticed interesting phenomena – especially for commodities or other products that can be classified as fast moving durables. While meeting Modern Trade buyers, to evaluate the potential demand for a new brand and the cost of retail entry, the conversation would move to supplies for in-house private labels.
The lure of the Private Label :
Our clients are large players in their respective categories. Hence they can easily be a reliable supplier for modern trade with in-house private labels. This retail entry route is attractive as it would immediately provide the client with adequate business. This would in turn allow them to build a sales and logistics team and gradually gain an understanding of the B2C market. Plus the cost of entry would be negligible and sales are relatively assured. As retail consultants, working on an unbiased business plan, we always explore this opportunity to use existing facilities for higher returns and fund the growth of a fledgling brand.
Build a new Brand vs. Supply the Private Label :
There are reams of research published on the changing roles of brands in a modern trade scenario. As consumers shift from general trade to modern formats and e-business options, the role of the private label increases. Hence while determining demand for a new brand – we never under estimate the role of the in-house hero.
Plus there is always the cost of creating a new brand. As part of our engagements, we advise our clients on the cost of retail entry, the number of months / years they will take to break even and potential challenges they will meet on the journey to profitable growth. The picture is not always a rosy one.
Weighing the Pros and Cons :
In our discussions, we evaluate multiple options of building the client’s revenue from ‘stable sources’ and one of them is private label. At the same time, we also urge our client to remain committed to building a strong, consumer facing brand that will pay them huge dividends in the long run.
As a retail consultant, who has seen the rise of department stores and other forms of modern trade, I have witnessed the rapid growth of private labels, first hand. But while private-label becomes the preferred choice of a certain group consumers – well defined brands can still command a premium in the competitive context.
Hence it’s evident both brands and private labels will coexist and it is up to the entrepreneur to decide which path to walk.
The Entrepreneur’s Perspective:
Interestingly, in several of our retail strategy engagements, our client’s are emphatic about building a brand of their own. They agree that private label supplies (in undeveloped categories) are a potential, low cost, growth avenue with faster paybacks. However they are not a guarantee for future business. Eventually there will be a hungrier, more cost effective supplier. And most of our client’s don’t want to go down that path.
An increasing number of entrepreneurs are optimistic about the future. They believe a branded offering meets certain emotional and functional needs of the consumer. By creating a focussed, differentiated and relevant brand – they can create value for themselves and the consumer, over a longer period of time. They are ready to walk along the retail path – inspite of it being cost intensive with longer gestation periods.
Managing brand and private label dynamics in modern trade is a balancing act. A rising number of entrepreneurs are committed to building world class brands for the future.