Private label

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current situation of market in which private label encroaching the bigger brands market share.....

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Private Label Brands: Encroaching the big brands share : 

Private Label Brands: Encroaching the big brands share November 24, 2008 By: Dr.Hitesh Gaur MBA Student Institute of Management Nirma University

Topics Of Discussion : 

Topics Of Discussion I. The Apparel Private Label Paradigm II. National Apparel Brands Counter Strategy III. The Future of Apparel Private Labels IV. Indian Scenerio

Private Label Market Share : 

Private Label Market Share Source: adapted from Cotton Inc.

Overview : 

Overview Worldwide Private Label retail sales have passed US$1 trillion 2006 US apparel & shoes retail sales: $358.6 Billion 2006: 45% apparel sales were private label 2005: 39% apparel sales were private label 2002: 35% apparel sales were private label By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales Source: US Dept of Commerce, expand on May 2007 Apparel and Textile News

Why The Growth? : 

Why The Growth? Consolidation of retailers Brands sell to same retailers and become a commodity Retailers need differentiation and better margin Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06) Globalization of Production

Decline in Retail Prices : 

Decline in Retail Prices From 1996 to 2006, the average retail price declined a minimum of 9% Source: adapted and expanded from Cotton Inc. winter 2003

Global Sourcing : 

Global Sourcing Imitate designer brands to reduce R&D costs Source direct with factories to eliminate middlemen cost Buy in larger volume to receive lower cost Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa How do retailers achieve low PL prices?

Types of Private Label : 

Types of Private Label Generic –very promotional, very low margin, Conway, Walgreen Fast Value Fashion – knock-off brands, Zara and H &M Premium Store Brands – Retailer’s own brand offers same or better quality at better price. The most profitable strategy in private label.

Premium Store Brands : 

Premium Store Brands Highly competitive - same or better quality at better prices, average 37% less than national brands Higher Gross Margins (est. 58 – 68%) Higher selling price per square foot than other Private label strategies Biggest threat to national brands Brand Loyalty What is the preferred PL strategy? See Appendix 2

Key USA Retailers : 

Key USA Retailers *Sales in billions include all private label & exclusive products Macy’s percentage includes 18% private label and 15% exclusive merchandise

Premium Private Label Brands : 

Premium Private Label Brands JC Penney’s – a.n.a., Arizona, Ambrielle Macy’s - INC, Alfani, Style & Co Wal-Mart - Faded Glory, George Target - Mossimo, Circo Kohl’s - Urban Pipeline, Sonoma, Apt 9

Private Label Trends : 

Private Label Trends Combined effort, a win-win strategy: American Living, Simply Vera, Isaac Mizrahi One time exclusive deal – H & M, Target Blending in with Premium brands - INC, Arizona Marriage with a celebrity name – Sarah Jessica Parker, Hilary Duff

National Brand Counter Strategies : 

National Brand Counter Strategies Develop unique products and stay ahead as a trend leader Create own stores Develop a compelling marketing strategy Increase brand loyalty Combine effort by offering exclusive lines. I.e, Simply Vera, American Living, Liz & Co Create one shot exclusive deliveries and SKUS Evaluate sourcing strategy and production cost Maintain net price (minimal promotions & discounts) Improve forecasting and turn around time

Future of Private Labels : 

Future of Private Labels Becoming national premium lifestyle brands: INC, Alfani, Arizona Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc) Spin off PL brands (Aeropostale) Cannibalize weaker PL brands

Private Label Pros & Cons : 

Private Label Pros & Cons PROS Exclusivity & differentiation Bring customer loyalty Better margin Better control in deliveries Brand equity Freedom in pricing strategy Increase bargaining power with both national brands and PL factories CONS Inventory risk Higher R&D expense Higher marketing expense No markdown or return allowance from branded suppliers If product fails, will create negative image Quality control, complex production & import issues

Private Brands To Watch : 

Private Brands To Watch KOHL’S New Launches– Simply Vera by Vera Wang, Elle Apparel, Food Network Kitchen estimated growth rate 6-7% for 2nd half of 2007 Tony Hawk, board-sports inspired, a hot category JC PENNEY American Living by Ralph Lauren 2008 C7P – Chip & Pepper Denim 2007 Liz & Co Arizona - $1 billion lifestyle premium brand MACY’S INC, Alfani, Style & Co, Martha Stewart, Field Gear, Epic Threads WAL-MART * George - $3 billion men’s urban fashion Faded Glory - $3 billion lifestyle premium brand *Wal-Mart figures represent worldwide sales

What This Means : 

What This Means To differentiate To gain and maintain consumer loyalty To achieve higher gross margin To compete with national brands I. Retailers believe private brands are their strategy:

Slide 18: 

II. National brands should: What This Means Change mind set and realize that Private Labels are competing brands Innovate and stay as market leaders to beat PL Stay focused on target audience Increase and market brand imagery to gain and maintain customer loyalty Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines Price competitively and streamline expenses

Slide 19: 

III. Future of private labels: Private brands will continue to play an important part of the assortment to their growth strategy Become national lifestyle premium brands Deploy a multi-layer strategy in brand, price and quality Cannibalize weaker private and national brands What This Means

Appendix 1Retail Price Comparison : 

Appendix 1Retail Price Comparison Average price gap 37% based on quality equivalent categories Average price gap 21% based on national brand’s quality is perceived to be less than private label brands.

Some Indian PL : 

Some Indian PL 12/9/2008 21 Jade Blue Mochi Ka Juta Food Bazaar Pantaloon Westside Naturals Reliance fresh Patidar Shree ji Induben-Khakhrawala

Slide 22: 

Contract PL manufacturing company Balsara enterprises: Contract PL manufacturing company Colgate Palmolive Beecham Group Henkel Cosmetics Reckitt & Colman Vasa Cosmetics :

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