Private Labels

India has emerged as the fourth attractive destination for the retailers with immense growth potential and market attractiveness (Global retail development index by A.T. Kearney, 2011). Organized retailing in India is projected to grow at a rate of 20-25% per annum and and the total retail sales to grow around 396 Billion USD on 2011(Business monitors, 2011). Due to these developments Indian retail sector is passing through a dynamic phase which is attracting global retail players. These developments are resulting into new store formats and innovative retail strategies. In present scenario Indian retail players are developing private labels or store brands for higher margins, to add diversity, store loyalty and negotiate with manufacturer brands for better deals. Indian retail sector has private label penetration of 10-12 % (India Retail Report, 2009). Private label market in India is estimated to be 23 million - 29 million USD (India retail report, 2009). Private labels have emerged as the key players in FMCG segment in food and personal care products with a share of 19-25 %. Store brands account for 12-15 % of sales and contribute to 20-25 % profit for the retailers (Economic times, 2011).

1. 1. About Private Labels

Private labels are developed by retailers which are sold exclusively through their retail outlets. Schutte (1969) defined private labels as products owned and branded by the organizations whose primary objective is distribution rather than production. Private labels were termed as "brands owned, controlled and sold exclusively by retailer" by Baltas (1997). The contemporary description given by Nirmalya kumar and Steen kamp (2007) describe private labels or store brands as any brand to be produced and owned by the retailer which is sold exclusively in retailer's outlet only. Private label manufacturer association (PLMA) has termed that private label products encompass all merchandize sold under a retailer's brand. That brand can be the retailer's own name or a name created exclusively by that retailer. The American marketing association (AMA) has defined private label in a product development and retailing context. In product development context private label is termed as brand that is owned by the product's reseller rather than by its manufacturer. In some instances, the reseller may be the manufacturer as well. In retailing context, private label is termed as any brand name or label name attached to or used in the marketing of a product other than by the product manufacturers usually by a retailer.

Retailer's intention to develop private labels can be attributed to the higher percent margins that private labels or store brands can provide (Hoch and Banerji, 1993). Retailers think that a private label product creates an opportunity for building store image and differentiating their stores from competitors. The presence of private labels can