"Each in-house brand is created for a specific need of the customer. The advantage is that it is priced right."
— Salil Nair, COO, Shopper’s Stop Limited
If you are a brand loyalist with an unswerving faith in the products you purchase, be it apparel, food or toiletries, this story is not for you. But if the recent financial upheaval has compromised your budget and you want to bypass the big brands for less expensive products, without foregoing the quality, read on.
Several renowned retail chains have created brands which are sold from their own outlets along with the other national brands—but are up to 40% cheaper. So while they may not be objects of social envy, they will certainly be easy on your wallet and the quality is almost always intact. “During financially tough times, people don’t mind picking up an inhouse brand, particularly in the FMCG category,” says Harish Bijoor, CEO, Harish Bijoor Consults Inc., a private label consulting firm.
While the FMCG section provides rich pickings, even apparel and electronic goods are being retailed at lesser prices. So you have Shopper’s Stop, Ebony, Reliance Fresh, Spencer’s, Subhiksha, Big Bazaar, Westside and Lifestyle furnishing a bevy of in-house brands or private labels across product categories ranging from apparel, accessories, food, skin care and oral hygiene to home care, kitchen appliances, consumer durables, even electronic items. All these are available at huge discounts to national brands (see table). “In food, private labels are 25-40% cheaper than national brands, whereas in apparel, they are 15-20% cheaper,” says Atul Takle, head, corporate communication, Pantaloon, Future Group.
This means you can save around Rs 500 by buying a STOP formal shirt, a Shopper’s Stop product, compared with a popular pan-Indian brand. In beverages like tea, you can save Rs 50 if you opt for Reliance Select rather than your favourite brand. Home brands in electronic items (Koryo and Sensai by Big Bazaar and Gerat by Spencer’s) are Rs 1,000-3,000 cheaper than the national brands.
Needless to say, the prices of the private labels are attractive, but what about the quality? “Our inhouse brands are technically and qualitatively as good as the other brands, or even better. If you are not finicky about flaunting a particular brand, you should pick up these labels,” says Salil Nair, chief of operations, Shopper’s Stop Ltd.
To compensate for the random incidences of qualitative inferiority, the companies claim that they offer guarantees, and have exchange and after-sales services for their inhouse brands. “Exchange options are open for almost all categories of products except inner wear or perishable products,” says Samar Singh Sheikhawat, vice-president, marketing, Spencer’s Retail. “As with normal brands, the exchange should be carried out within a certain time frame. We don’t have any specific exchange or return policy on our private labels,” he clarifies.
But what accounts for the price difference between an in-house brand and a national brand? This is easily explained by the absence of advertising and distribution costs in case of home brands. This cost is included in the selling price of a national brand. For instance, in apparels, a national brand spends up to 35% on manufacturing, about 7-20% on advertising, 6% on distribution and the remaining on sundry costs, besides retaining a margin of up to 15%. In case of the retail chain brand, only the production cost is incurred and no money is spent on advertising and distribution.
In the FMCG category, where the manufacturing cost goes up to 65%, the retailer only spends on production while retaining the same margin. This results in lower prices.
While price may be reason enough to try out these products, you might also end up forming new brand loyalties.
What’s in a name?
In-house brands are created and merchandised by the retail chains.
» Due to the absence of advertising and distribution costs, these products can be 10-40% cheaper than the big, national brands.
» The quality of such items is often equivalent to that of the national brands.
» These products are available across a range of categories, including apparel, accessories, home care items, food items, consumer durables, even electronic items and kitchen appliances.