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The Increase Of Private Labels Of Grocery Products

How customers make product selection is a vital concern in marketing theory. A vast briefing and a growing stream of models have been developed seeking to throw light on this issue. Implicit in mainly of this work is that consumers are choosing among rival company brands. In today’s FMCG markets private brand increasingly competes with manufacturer brands noticeable at very unusual price levels.

The increase of private labels of grocery products is a sign of a major change in the product mix offered by seller. Store brand offer consumers with a competitive substitute to national brands. Private brands offer low prices due to their low manufacturing costs, low-cost packaging, nominal advertising and lower overhead costs. For retailers, store brand offer a chance to increase store traffic and build store loyalty. Though private brands are generally priced lower than manufacturer brands, the higher margin earned on these products allow retailers to increase into lower volume categories for which success depends on greater per unit contribution margins. More prominently, the accessibility of proprietary brands not sold elsewhere may support store loyalty and boost store traffic. Once inside the store, the consumer also become a prospect to which to sell the whole grocery basket due to cost of time involved in multi store shopping.

Consumers frequently make judgments of product quality on the basis of substitute or indirect indicators. Surrogate measures are product connected sign that consumers think are linked with real objective measures of product quality. Surrogate sign are used in quality assessment because they can be interpreted, assess and review easily when considering a variety of brand alternatives. Therefore, it would seem helpful for store brand managers to understand which substitute variables are in use by households when inform store brand quality and how different groups of consumers diverge in their consumption of such indicators in brand choices.

Retailer who sell both private brand and manufacturing brands, which is often accurate for frequently acquire consumer products, is confront with describe his private brand market. It is vital for him to know whether the sales of his private brands are reason for the impulse buying of consumers who switch to his store at the time of purchase or whether his brands customer are loyal to his brand and comprise a particular market segment. In fast moving consumer goods normally get pleasure from very slim profit margins in their product categories. It is therefore very important that the retailer be aware of the impact of the introduction of a store brand on customer demand for both the store brand and manufacturing brands.

Retailer have turn out to be more powerful and global, they have gradually more focused on their own brands at the cost of manufacturer brands. Rather than just selling on price, retailers have changed private label into brands. Consequently, such a Johnson & Johnson, Nestle, Procter & Gamble and Unilever and all other locally and multinational manufacture now compete with their largest retail and wholeseller customers like Metro, Makro, Agha’s and Naheed. The development in private labels has huge inference for executive on both sides. So far, brand manufacturers still stick to their outdated assumptions about private labels. Most vital, the lay out actionable approach for opposing against or work together with private label supplier. Private labels enable managers to steer beneficially in this radically altered landscape. Private label market share usually goes up when the economy is distress and downward in stronger economic periods. Manufactures of brand name products can have major influence on the importance of the challenge create by private label goods. It is not easy for managers to look at a competitive risk objectively and in long term situation when day to day performance is suffering.

Lot of private label commodities are more complicated than their rivals similar products. Once chosen for less prosperous buyers, private labels have enjoyed growing attractiveness among all consumers. Private brands are, in reality, altering the branding, product development marketplace, and retailing which was already changing in reply to globalization, more rapidly development, and superior consumerism.

Private Brands are growing into full fledged alternative, capable of competing productively with these national brands on quality as well as on price (Harding & Quelch, 1996) and contributing significantly to profitability, Store discrimination and store loyalty (Lal & Corstjens 2000). Sales Volume and market shares of store brands, as well as their appeal to consumers have gradually increasing. A lot of retailers come into view themselves increasingly as active marketers of their own store brands, rather than as iactive distributors ofnational brands. Private brands can help retailers to attract consumer’s traffic and build loyalty to the store by offering exclusive product lines and quality products. In addition, store brands can help project a lower price reflection for retailers, increase their bargaining influence over manufacturers and producers of major national brands and point to increased control over shelf space. Carrying store brands comes with sevral advantages, one of which is the comparatively high gross margin, which can be more than a manufacturer’s brands. The high margin results from the more proficient marketing effort, lessening of middleman, and economies of scale get hold of distribution. Furthermore, they present worth to customers by offering a mishmash of good quality and superior products and strenghten the retailer’s name both on the shelves and in customer’s homes (et al Richardson, 1996 and Fitzell 1992;).

The idea of store brands is often used interchangeably with terms such as ‘private label brands’ or’ own brands’.

(cf. DelVecchio, 2001; Dick et al., 1996;Hoch and Banerji, 1993; Raju et al., 2001; Sethuraman and Cole, 1999).

The positioning of the brand is a gathering of many different variables, such as the image of the store, quality of the products, price of the products, variety of the products and drive of the retailer to invest in its promotion (Kapferer, 1994 and Davies, 1998;). In most of the cases the private brand is closely linked with the store itself, for example in the case of Makro, Metro, Naheed, Agha’s and D-Mart where own brands are sold exclusively. In other cases, the store brand is one of lots of brands available in the store. This situation is distinctive for most retail stores.

2.1. Development of Intention

How do retailer attributes influence consumer valuation of store brands? Even though retail stores are facing difficulties in discriminating themselves due to the lack of a apparent core product/service and the need to address the broadest possible range of consumers and purchase situation, (al et Dick 1995). For Suppose that the store image acts as an important sign of store brand quality. Store image is reflected in the store’s physical environment (al et Richardson 1996b), Observation related to its commodities, and perceived service quality (Golden & Zimmer 1988, Baker et al., 1994).Custmer’s use these indication to form an overall assessment that will influence their attitude toward the store as a whole, and potentially towards its store brands. This can give explanation why store brands do better than manufacturer branded products in some cases. Consumers’ buying decisions will thus be subjective by their experiences with the retail environment, the merchandise and the level of service:

(al et Semeijn J. / Journal of Retailing and Consumer Services 11 (2004))

A well-recognized and established brand image is one of the most important assets a firm possesses. Brand managers and manufacturers are worried with managing brand equity and capitalizing on the value of a brand image (Aaker, 1991). A product or retail establishment has many relations which combine to form its total intuition. Only some would disagree that consumers form impressions of brands, and that these impressions afterward put forth a major influence on store choice decisions and shopping behaviors. Favorable images of brands surely influence patronage decisions and purchase behaviors, while unfavorable images unfavorably influence such decisions and behaviors. In other words, the images linked with the brands a store carries influence a store’s image, which in turn, influences consumers’ decision-making process and behaviors. As a result, brand image and Store image are inextricably connected to one another.

2.2 Store image

The concept of store image first came of interest when Martineau Pierre (1958) explain the “qualities of the retail store.” Since that declaration, it has usually been recognized that, over time, consumers form opinion and feelings associated with stores, and that these overall imitation strongly influence their shopping and patronage behaviors. Retail store image is an overall intuition of a store as perceived by consumers (Keaveney and Hunt, 1992). One of the normally conventional formal definitions of retail store image is an individual’s cognitions and feeling that are contingent from perceptions or memory inputs that are emotionally involved to a particular store and which represent what that store mean to an individual (Jacoby and Mazursky, 1986 Baker et al., 1994; ). In addition to developing explanation of retail store image, researchers have also recognized multiple extent of the concept. Retail image is normally explain as a combination of a store’s well-designed qualities and the psychological characteristic consumers link to these. Where as the exact dimensions have varied over the years, the well-known classification of image characteristic have consisted of some combination of functional and psychological characteristic. For example, some of the more common

proportions identified by researchers have been linked with: trend, choice, and excellence of merchandise; customer services and sales personnel; and the physical conditions and ambiance of the store

(Golden and Zimmer, 1988, Lindquist, 1974-1975; Martineau, 1958;).

A strong brand image offers an organization quite a few important strategic advantages. A brand differentiate the goods and services of one seller from those of rival. A powerful brand identity creates a major competitive advantage; a well known brand encourage repeat purchases. Thus, a brand acts as a indicator to consumers concerning the source of the product and defend customers and manufacturers from “me-too” products that may come out identical. Brand image consists of consumer knowledge and thinking, stored in memory as associations, about brand attributes and the consequences of brand use (Olson and Peter, 1994). These relations are usually organized in some meaningful manner (Aaker, 1991). Brand images are important because they form worth for manufacturers in at least five means (Aaker, 1991).

1st, brand images help consumer’s retrieve and process information.

2nd, brand images give a basis for discrimination and positioning of a product.

3rd, brand images involve product attributes and customer benefits that give consumers a basis to purchase and use the brand.

4th, brand images create relations that make positive attitudes and approach that are transferred to the brands.

5th, brand images provide the source for product extensions, by creating a sense of fit among the brand and the new product or by giving consumers a basis to buy the new product.

The value brand images create for manufacturers are also expected on to the image of retail stores that hold the brands. One way consumers explain retail stores is in terms of their assessments of the brands accepted.

(JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 6 1997)

Store brands are usually owned, controlled, and sold exclusively by particular retailers. The products sold under these brand names are generally developed and packed by retailers rather than manufacturers and are marketed solely through their own stores. The entry of a store brand can aid retailers in a number of ways: First, store-brand entry can strengthen the bargaining position of retailers v/s national brand manufacturers. The retailer’s channel power is supposed to increase as a result of store-brand entry, which changes the nature of the manufacturer-retailer dealings. Store brands may permit the retailer to negotiate lower wholesale prices on national brands. In addition, retailers can strategically position store brands in the product space to strengthen their bargaining position when negotiating supply terms conditions with manufacturers of national brands. Store-brand entry may increase the importance of the entire category and increase category sales. In fact, store-brand entry may shake up a ”dormant” category. The store brand itself may make profits because of its high unit margin and potentially high volume. Store brands make shopping easier for consumers, and they enhance the store’s image and store loyalty by improving store differentiation v/s other retailers.

The retailer’s marketing tactic for store brands should think about manufacturers’ interest in developing store brands and consumer interest in store brands. Regardless of the potential power of a store-branding marketing strategy, and although its great attractiveness in a variety of sectors, applying a store-brand strategy does not necessarily promise instantaneous success. To a certain extent than viewing development of a store brand as a dependable recipe for success, retailers need to study the brand’s positioning and financial characteristics in depth to choose how and whether to apply a store-brand strategy. Several characteristic should be measured: The strength of competitiveness in the division. Retailers that work in less competitive markets essentially hold large market shares. Because these retailers get pleasure from regular traffic by consumers, they can offer wide range in leading and non-leading national brands as well as store brands. As a result, it is more likely that consumers will believe the private brand to be a good buy. These brands thus help strengthen tie between consumers and the retail chain and increase loyalty to the chain. Economies of scale. Because large retailers can exploit their strength to reduce distribution costs, they can easily ask manufacturers to manufacture a store brand for them at lower cost. The savings achieved permit large retail chains to present quality brands at reasonable prices.

The depth of the retailer’s product mix. Customers at retail chains with low positioning look forward to find a more limited range of brands, ranging from store brands to leading manufacturer’s brands. Because the majority of consumers in these chains tend to buy non-leading national brands, it is more expected that the store brands will sell and become a regular attribute in the shopping baskets of the chain’s customers in time. The retailer’s experience in diverse product categories. Consumers in specialty stores develop only a weak reliance on national brands because they seek exclusive brands rather than the standard brands offrerd in most stores. Against this conditions, the prospects grow for the specialty shop to build up a line of store brands. Price difference. Research demonstrate that when there is a large difference between product prices (national and private) in certain categories, the rivate brand has better prospects for success. As the gap grows smaller, the prospects of store brands similarly reduce . Promotion. Promotion activities by national brand manufacturers, such as concession on their own brands, direct to a loss of status and influence for store brands, mainly among price-sensitive consumers. When distributors strive to fight national brands through alike promotion activities, they may end up deteriorating the private brand and enhancing sales of national brands, as promotions can make consumers recognize the store brand as lower in quality than the national brand.

(Ram Herstein and Eugene D. Jaffe are based at the Ruppin Academic Center, Emek Hefer, Israel.).

2.2.1 Price of Store Brand

Price and extraordinary promotions have been used to attract customers to a retail store and create an increased level of store traffic (Berden and Lichtenstein, 1989 Krishnan, Monroe and Grewal, 1998). According to the trade publications, retailer’s use of price promotions to draw attention of customers and the want to maintain margins have always been at odds with each other. The disagreement has become more acute as price promotions have failed to build sales (Grocer Progressive, 1992). In addition, although price discounting can generate traffic in a retail store, such discounting can have negative effects on the brand’s quality and internal reference prices. Price discounting may even spoil a store’s overall image.

2.2.2 Quality

There was a distinctive gap in the level of quality between private label and national brand products. Now that gap has narrowed; private-label quality levels are much higher than ever before, and they are more consistent. The distributors that bond for private label manufacture have improved their procurement processes and are more cautious about monitoring quality. For a long time, the critical assumption that a product will best satisfy the customer as long as it has desired benefits was, unexpectedly, completely foreign to store-brand marketers in emerging & developed markets. Consumers were hesitant to accept store brands because they did not offer functionality benefits that indicated quality, freshness, high performance, resilience and etc. Only recently have some managers in the best-performing store brand markets learned what the store brand actually means to the customer, and they have consequently improved its functionality and quality.

(Launching store brands in emerging markets: resistance crumbles by: Jaffe D. Eugene and Herstein Ram)

2.2.6 Ambiance

Is it not enough to offer a well familiar product range at a best price in the right place? A good layout is a matter of customer satisfaction. Of course, there are also viable factors that argue in favor of the significance of a good layout. A good layout provides you with the opportunity of influencing store turnover. The proper shelf layout, the display of the product range or a well-thought out spot for special offers all have a direct outcome on turnover. So a good layout may very well create a boom in a store’s turnover. Each store has its own best explanation for logistics problems. This applies mainly to stores with a quick turnover of goods, stores that sell products that are not easy to market or products that take up a large amount of space. One of the major purposes of the layout is certainly to create smooth customer flow all the way through the store. To accomplish this, it is important to create the right balance between fast and smooth (consumer) flow on the one hand and provision of space on the other. Creating smooth (consumer) flow is essential in stores that have a high frequency of customer visits. Of course, a good layout has other purposes as well. In accordance with the belief that first impressions count, the layout can either catch the attention of customers or put them off. A layout can provide solutions or it can cause difficulties.

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