ITM Business School (Kharghar)

PGDM-RMM
BATCH 2013-15

Study of Private Label vs. National Brands

Submitted By:
Nikhil J Nanwani

Faculty Guide:
Prof. Rachna Nigam

ITM Business School, Kharghar

Table of Contents
Acknowledgement

Declaration by Student

Certificate from guide

Executive Summary

Introduction to topic

Objectives

10

Research Methodology

11

Findings

12

Recommendations

18

Learning
Conclusion

19
20

Appendix

22

Bibliography & References

26

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Acknowledgement
I would like to thank Prof. Rachna Nigam my project
mentor for her guidance and support throughout the
tenure of my project. Without her efforts and cooperation,
the project would have not encompassed many aspects of
my research and wouldnt have been such a wonderful
learning experience.
Finally we would like to express our sincere gratitude to
ITM Mumbai for giving us an opportunity to undertake this
project. It was a wonderful learning experience.

Nikhil Nanwani
GLC-RMM-369

ITM Business School, Kharghar

Students Declaration

I hereby declare that this report, submitted in partial fulfillment of

the requirement for the award for the Post Graduate Diploma in
Management, to Institute of technology and Management college is
my original work and not used anywhere for award of any degree or
diploma or fellowship or for similar titles or prizes.

I further certify that without any objection or condition subject to

the permission, I grant the rights to ITM College to publish any part
of the project

if they deem fit in journals/Magazines and

newspapers etc. without my permission.

Place

Date

: Mumbai

: ____ / ____ / _________

Signature: _______________
Name: ___________________________
Batch: _________
Roll No: _______

ITM Business School, Kharghar

Certificate from Guide

This is to certify that the Project Work titled Study of Private

Label vs. National Brand is a bonafide work carried out by

Nikhil J. Nanwani a student of PGDM program 2013 2015 of
the Institute for Technology & Management, Kharghar, Navi
Mumbai under my guidance and direction.

Signature of Guide: _______________

Name: _______________________________
Designation & Address: ______________________
Date: __/__/____
Place: __________________

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Executive Summary
INTRODUCTION TO INDIAN RETAIL INDUSTRY

The Indian retail industry is the fifth largest in the world. Comprising of
organized and unorganized sectors, India retail industry is one of the fastest
growing industries in India, especially over the last few years. Though
initially, the retail industry in India was mostly unorganized, however with
the change of tastes and preferences of the consumers, the industry is
getting more popular these days and getting organized as well. With growing
market demand, the industry is expected to grow at a pace of 25-30%
annually. The India retail industry is expected to grow from Rs. 35,000
crore in 2004-05 to Rs. 109,000 crore by the year 2010. According to the
8th Annual Global Retail Development Index (GRDI) of AT Kearney, Indian
retail industry is the most promising emerging market for investment. In
2007, the retail trade in India had a share of 8-10% in the GDP (Gross
Domestic Product) of the country. In 2009, it rose to 12%. It is also expected
to reach 22% by 2010.According to a report by North bride Capita; the India
retail industry is expected to grow to US$ 700 billion by 2010. By the same
time, the organized sector will be 20% of the total market share. A McKinsey
report 'The rise of Indian Consumer Market', estimates that the Indian
consumer market is likely to grow four times by 2025. Commercial real
estate services company, CB Richard Ellis' findings state that India's retail
market is currently valued at US$ 511 billion (Bang, 2009).According to the
Investment commission of India, India is expected to be among the top 5
retail markets in the world in 10 years. India's overall retail sector is
expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018,
at a compound annual growth rate (CAGR) of 10 per cent.

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INTRODUCTION TO TOPIC
Private-label brands are defined as those which have high
quality, with some offering manifestly superior quality to national
brands, and establish loyalties to both the label and the store
(unlike generics). Private-label brands are generally not advertised,
not heavily promoted, and do not display the store's name on the
label. They are allocated premium shelf space, and typically
generate higher retail margins (from 5 to 50 percent), despite
being sold at lower prices (from 10 to 40 percent) than national
brands.
National brands and low-quality generics have difficulty building
entry barriers to private-label brands as these are launched by the
distribution channels themselves who have direct control over
entry (shelf allocation) and end-user prices; whereas sellers of
"me-too" brands must convince retailers to stock or promote their
products with substantial market pull or trade promotions.
Some chain stores create a limited number of private-label brands,
while others, including smaller regional chains, have strategies of
offering over 1000 private-label items.' This trend has been
traditionally more advanced for grocery products in Europe and
Canada than in the United States due to the former having higher
levels of nationwide concentration in retailing: Loblaws (Canada),
Sainsbury and Tesco (United Kingdom), and Carrefour (France).
Retailers with private labels span various industries including
both mass and up-scale clothing stores, general discounters,
regional drug store chains, regional and national grocery stores
and specialty retailers.
National and private brand marketers must direct their efforts to
retailer/manufacturer partners that best fit their strategic goals
and objectives. This type of strategic collaborative marketing
partnership will increase sales and strengthen customer loyalty by
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getting the right products to the right place at the right time, with
a targeted value proposition.

Consumer Attitude towards Private label and National Brand

Customers go through a six-stage decision-making process in any
purchase. Where the first stage is need recognition where need
motivates a person to go for a purchase. Here the consumer is
aroused with a need of the product. Followed by information
search where internal and external search is done which is based
on the previous experience and opinion of other external sources
like family and friends. This captures the strong place in the
minds of the customers for preferring any brand. Then evaluation
of alternative is done where the customer utilizes his view about
the brand with that of the products available before him. This
evaluation is based on various factors that a purchaser may take
care before a purchase decision. Then actual purchase of the
product occurs based on the factors that captured space in the
minds of the customer. And at last post-purchase evaluation
occurs where the customer frames a picture in the mind, about
the product based on the reality of the product and the customers
expectation about the product.

National Brand/Private Label Price Differences

Any prospective measurement of a PL welfare effect for consumers
must consider the price differences between NBs and PLs as a
measure of potential savings. The difference between NBs and PLs
in price, with and without promotions, varies from 17 percent for
salad dressing to 33 percent for packaged bread
The shelf price is the price printed on the supermarket shelves
and does not include promotional discounts. The promotional
price represents the price paid by consumers who take advantage
of promotions, either by using a loyalty card or by any other
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method used by the supermarket for promotions. For products not

on sale, the promotional price equals the shelf price.
The NB/PL price difference is fairly similar with or without
promotions, as the average difference among NB and PL shelf
prices is 23 percent and rises to only 25 percent during PL
promotions. However, Volpe (2010) shows that the average
difference between.

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Objective of Study
Customer awareness about PRIVATE LABEL
Which category PRIVATE LABEL or NATIONAL BRAND is
purchased the most?

In To find out how much percentage of customer differentiate

between PRIVATE LABEL and NATIONAL BRAND.
Why do customer prefer PRIVATE LABEL over NATIONAL
BRAND in different categories like Food, Non-Food,
Electronics, Apparels

Importance of Price, Quality, value and brand in purchase

decision.

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Research Methodology
Sample Frame:
The sample includes respondents from different age group,
education and occupations so that a clear picture of how a private
label is considered in the minds of the customers. The data has
been collected from the selected sample through structured
questionnaire consisting 11 questions.
Sample Size:
Based on judgement sampling and considering time constraint the
sample size was 100
Research design used to study Market Potential
1. Secondary research:
Secondary research such as data available on website, magazines
and newspapers is used to get information of the available market
in India.
2. Primary research:
We used primary research such as Survey via questionnaire

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Findings

1) Customer awareness about PRIVATE LABEL

Awareness
94
84.5

5.3

FREQUENCY

PERCENTAGE
Yes

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No

12

2) In which category PRIVATE LABEL or NATIONAL BRAND is

purchased the most?

Categories
64

63
60
54
49
42

32

40

42

34

33
26

24

FOOD

BEVERAGE
DRINKS

23

BODY CARE
PRODUCTS

HOME CARE

Private Label

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CLOTHING

ELECTONICS

SPORTS &
LEISURE

National Brand

13

3) To find out how much percentage of customer differentiate

between PRIVATE LABEL and NATIONAL BRAND.

Percentage of Customer
16%

Yes
No

84%

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4) Why do customer prefer PRIVATE LABEL over NATIONAL

BRAND in different categories like Food, Non-Food,
Electronics, and Apparels?

Why Private Label in Electronics Category?

Electronics
36

40
35
26

30

25

25
20

13

15
10
5
0
Quality
Assurance

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Low Price

Brand Loyalty

Service

15

 Why Private Label in Non-Food Category?

Non-Food
35
30
25
20
15
10
5
0
Quality Assurance

Low Price

Brand

Risk Averse

Why Private Label in Food Category?

Food
45
40
35
30
25
20
15
10
5
0
Safety

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Low Price

Taste

Brand

16

 Why Private Label in Apparel Category?

Appparels
50
45
40
35
30
25
20
15
10
5
0
Quality Assurance

Service

Risk Averse

Low Price

Importance of Price, Quality, value and brand in purchase

decision.

IMPORTANCE
60

56

53

50
41
40

35

36 35

29

30

21

19

20
10

38

13
8

2 3

0 2

0 2

0
Price

Quality

Least Important

Slightly Important

Fairly Important

Highly Important

ITM Business School, Kharghar

Value

Brand

Moderately Important

17

Recommendation
Price is the most important factor for any product so it is
really important to price your product with carefulness.
After price quality is the factor rated high so quality
improvisation should be the goal for business.
These days many customer differentiate between private
label and national brand so the product place in the market
should be differentiated from each other.
In the food category customer do not differentiate a lot taste is
the prime factor in food category so taste should be taken
care of.

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Learning
1. First, we find that retailers indeed use their power to price
strategically by keeping prices of imitated national brands higher
than the category profit maximizing price. This higher price helps
the retailer to build market share for the store brand.

2. The pricing and promotional margins between NBs and

PLs vary widely across supermarket departments.
3. It is clear that acquiring a store label is commonly
considered a bad purchase, it can be noted that regardless
the

economical

differences

between

countries,

the

perceptions of Private labels vs. National Labels have the

same tendency, and this has been demonstrated by
comparing the background research against the results of
the study.
4. There is significant difference between preference for
national brands and private label product.
5. Majority customers prefer private label products because
of better offers. Majority customers, who are not happy
with private label products, have got the reason of low
quality.

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Conclusion
The study has proved that the customers see private label as a
local product which is not been considered same as the national
brand. This also helps to identify the reasons behind getting
attracted towards private label.
The study has revealed that, majority respondents prefer both
national and private label as compared to individual specific
brand, but has changed along with change in demographic profile.
Product wise preferences shows that, majority customers prefer
national brands for purchasing Electronic, Luxury, Sanitary and
Clothing items whereas they prefer private label for Food and
other miscellaneous items. The study also discloses that, out of
the sample respondents majority prefer private label products due
to suggestions by close ones or better offer, whereas those who do
not prefer private label products, are not happy with the quality of
these brands.
The view of customers towards any purchase is dependent on the
price of the product, after which the quality and brand of the
product takes in to account. Many customers view private label as
a low quality product which is perceived to be bought by low
income group who want a better life style but dont want to spend
on the same. These imitative products prove a better means for
these customers to satisfy their preference towards branded
products.

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Multiproduct retailers have to decide their product line mix in

order to better internalize in-store competition while also easing
retail competition, in addition to the direct eect that results from
replacement of a national brand by a store brand. We contribute
to the received literature by drawing attention to how consumers
dierently perceive brand types. Our simple approach suces to
explain dierent levels of private label penetration once accounting
for retailer strategic interaction.

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Appendix
Questionnaire

Preference of National brands against Private brands

A national brand is a prominent or established product, while a private label or store brand is an exclusive product made or
acquired for sale through a particular provider. Retailers commonly sell a mix of national brands and private label goods to
take advantage of the benefits of each.
Name

Age
18-30
30-45
45-60
Gender
Male
Female
Are you currently?
Employed
Student
Homemaker
Retired
Do you distinguish between private/store brands and national brands while making a purchase?
Yes
No
In which of the following categories you buy private labelled products in the Supermarkets/Hypermarkets?
Food
Beverage Drink
Body care products
Home care products
Clothing
Electronics
Sports and Leisure

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Do you know what private labels/store brands are?

Yes
No
How often do you buy these private label products?
Few times per year
Once a month
Few times per month
In which of the following categories you buy National labelled products in the Supermarkets/Hypermarkets?
Food
Beverage drinks
Body care products
Home care products
Clothing
Electronics
Sports and Leisure
How often do you buy these national label products?
Few times per year
Once a month
Few times per month
Rank importance of PRICE in your purchase decision

Least Important

Highly important

Rank importance of QUALITY in your purchase decision

Least Important

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5
Highly Important

23

Rank importance of VALUE in your purchase decision

Least Important

Highly Important

Rank importance of BRAND in your purchase decision

Least Important

5
Highly Important

In category of Electronics, if a Croma TV and an Samsung TV is placed before you, which one would you consider
purchasing, keeping in mind all features same except Croma priced lower?
Croma
Samsung
Why do you prefer a private label over a national brand and vice versa in the category of electronics?
Quality Assurance
Low Price
Brand Loyal
Service
In the category of non- food, if a toothpaste Sach of Big Bazzar and Colgate is placed before you, which one would
you consider purchasing, keeping in mind features like quantity same except Sach priced lower?
Sach
Colgate
Why do you prefer a private label over a national brand and vice versa in the category of non- food?
Quality assurance
Low Price
Brand
Risk averse

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In the category of food, if Tasty Treat Tomato Noodles of Big Bazzar and Maggi Tomato ketchup is placed before
you, which one would you consider purchasing, keeping in mind features like quantity same except Tasty Treat
priced lower?
Tasty Treat Tomato Noodles
Maggi

Why do you prefer a private label over a national brand and vice versa in the category of food?
Safety
Low Price
Taste
Brand
In the category of apparels, if John Millers of Pantaloons and Peter England are placed before you, which one
would you consider purchasing, keeping in mind all features same except John Millers priced lower?
John Millers
Peter England
Why do you prefer a private label over a national brand and vice versa in the category of apparels?
Quality assurance
Service
Risk Averse
Low Price
Thank You!

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Bibliography & References

Consumer Attitude towards Private Labels in Comparison To National
Brands - Faculty, Bharati Vidyapeeth Deemed University, Institute of
Management and Rural Development Administration, Sangli.
National Brand and Private Label Pricing and Promotional Strategy University of California, Davis
"NATIONAL BRANDS VERSUS PRIVATE-LABELS: AN EMPIRICAL
STUDY OF COMPETITION, ADVERTISING AND COLLUSION" by P.M.
PARKER* and N. KIMt 95/32/MKT
Private Label & National Brands: Paving the Path to Growth Together
by IRI
Private Label vs. National Brand Price Sensitivity: Evaluating Nonexperimental Identication Strategies- Nathan M. Fong, Duncan I.
Simester, and Eric T. Anderson May 17, 2011
Do Private Labels Increase Retailer Bargaining Power? Sergio Meza *
Rotman School of Management University of Toronto
STORE VS. NATIONAL BRANDS: A PRODUCT LINE MIX PUZZLERafael Moner, Jos J. Sempere and Amparo Urbano
A Study on Different Perspectives on Private Labels - Jos G. VargasHernndez, M.B.A, Ph.D.
The Relationship Between National Brand and Private Label Food
Products Prices, Promotions, Recessions, and Recoveries- Richard
Volpe

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