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How retail chains take on national leaders in electronics with their own labels

 Large retail chains  have subtle ( and not so subtle) ways to position their own  store brands  against  global and national biggies
May 22 2019: Last week on this page we reported on how  multi-brand electronics and appliance retailers were struggling to hold their market in the face of heavy discounting by online traders  We also suggested that the Indian government  was thumbing the scales in their direction by  encircling e-commerce business  with a number of regulations to ensure they don't swamp the traditional retailer avenues.
Our investigation into this  undeclared war  turned up an interesting sidebar into the  ways large retail chains specializing in electronics and consumer white goods  use whatever strength they have to  improve their profitability.  We can best summarise this by dusting an old saying: "If you can't fight 'em, join 'em!" This is how it works.
Multibrand stores display  dozens of brands of TVs,  washing machines, refrigerators, music systems and the  like, side by side and the customer is free to walk around and do comparison shopping.  Prices these days for a specific category  -- say 36 inch full HD smart TV --  are mostly within a small price band, so intense is the competition  between brands..   But  shoppers  are often surprised to  find that even as they face a dharam sankat:  how to make  a choice, they  see  one brand that seems to be cheaper than products  of identical specification. This varies from outlet to outlet.  In an e-Zone store of the Future Group,  products branded Koryo tend to be more attractively priced. If you are in a Reliance Digital store,  the Reconnect brand appears to offer a better deal whether you are shopping for a Bluetooth speaker or  an air conditioner. In a retail outlet of Vijay Sales, the Vise branded TV  appears more attractive and in any category where a Croma branded product  is available in a Croma store,  it  shouts 'paisa vasool'!
Welcome to the world of  private labels, other known as own brands or store brands
A matter of margins

All  electronics and  appliance multibrand stores work on dealer margins when it comes to the big name global and national  labels they stock.  But   showroom space, ambience, cooling, trained staff   all eat into this margin. What if the store chain  could compete with its own label  and  take a share  of profit as manufacturer, effectively  cutting out the middle man?   Big groups like Reliance Retail, Croma,   Future Group (e-Zone),  Next Retail (Videocon) etc  have the financial muscle to  take on the role of OEMs,  having fast moving goods like AC, TV, fridge,  bulk manufactured  for them by a contract manufacturer, in India or abroad and selling the same under their own label.  And what they save by  cutting out the reseller , they are able to  pass on to the end customer in some measure.  
Contract manufacturing
There are some categories of goods  ( like TV) where  regardless of whose brand the product displays, the actual  production happens in the same contract manufacturing plants, hence  shrewd customer sometimes decide to forget about brand name and go for the  most attractive price.   Stores who control their shop floor display can be quite unsubtle in 'pushing' their own brands  by strategic location vis a vis the big names.
Good times, bad times
Experts have seen a trend in the sale of store brand versus  big brand:  When times are good, and when customers have more money, they tend to go for established brands -- and the premium this involves. When times are bad and money is scarce, the same customers will save every rupee and   go for the cheaper store brand. At the end of the day, every one   wins: big brands at one time, store brands at another....  Win some, lose some....that's life in the consumer retail  business!
This story appears on ACE/EFY today
 




    


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