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Private Label Brands Purchase Intent in the Indian Retail Food & Grocery Segment: A Study in the Gurgaon Region

Essay by   •  September 21, 2011  •  Research Paper  •  5,670 Words (23 Pages)  •  1,756 Views

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Abstract

Private labels or store brands are on escalating journey for growth in last few years in Indian market. The growth of private label brands (PLBs) is quite impressive in food and grocery segment, in spite of presence of leading national manufacturers brands in most of the categories. Though, initially PLBs were considered as cheap alternatives and therefore visible in copycat and generic categories, today they are a part of well defined retail mix strategy, and are developed in value innovators and premium categories for profit maximization and customer loyalty. Private labels bring lower prices that consumers want and higher margins which retailers need. The aim of this research is to investigate factors affecting consumer's purchase intent of PLBs with respect to National brands in the Indian retail Food & grocery segment and to propose a conceptual model of the determinants of PLB purchase intention in this market. The study has been conducted in the Gurgaon region of NCR. We used exploratory and confirmatory factor analysis to test the relationships between the variables of interest. Results show that five mains variables have a significant influence on the purchase intent of PLB in a partial mediation model: PLB perceived quality, PLB perceived price-image, PLB packaging, and perceived brand quality. (*Perceived brand quality and value consciousness have only a direct effect on PLB choice, while the effect of store image is totally mediated by purchase intention *). Important theoretical and managerial implications of these findings are presented and discussed.

Keywords- Private Label Brands, Consumer purchase intent, PLB purchase intention, Structural Equation Modelling, Retailers

Introduction

Introduction to Indian Retail Industry:

The Indian retail industry is the 5th largest in the world. It consists of organized and unorganized sectors. The Indian retail industry is one of the fastest growing sectors 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 Northbride 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. As an emerging market with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organised retail, which accounts for almost 5 per cent of the market, is expected to grow at a CAGR of 40 per cent from US$ 20 billion in 2007 to US$ 107 billion by 2013.

According to a new study by global management consulting firm AT Kearney says that in India, apparel, along with food and grocery, will lead organised retailing in India. India has one of the largest numbers of retail outlets in the world. A report by Images Retail estimates the number of operational malls to grow more than twofold, to cross 412, with 205 million square feet by 2010, and a further 715 malls to be added by 2015, with major retail developments even in tier-II and tier-III cities in India. Also, according to new market research report by RNCOS titled, "Booming Retail Sector in India", specifies that the number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015. It further specifies that rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent. Thus, according to industry experts, the next phase of growth is expected to come from rural markets, with rural India accounting for almost half of the domestic retail market, valued over US$ 300 billion In order to be truly successful, retailers must advance from the generic or store brand mindset of the past to a new private label paradigm. Many retailers have begun to describe their private label brands as "own" brands because there is recognition that these proprietary, exclusive offerings are tools that represent momentous power and potential for the retail store.

Meaning of Private Label Brands:

A private-label product is a manufactured good that a retailer purchases from a supplier, with the intention of renaming, repackaging and selling it under the distributor's own brand name. Depending on the agreement between a manufacturer and a retailer, the manufacturer sometimes handles the packaging and labelling for the retailer for an additional charge. Otherwise, the retailer is responsible for the process of dressing up the product as its own. Thus, it can be said that Brands owned not by a manufacturer or producer but by a retailer or supplier who gets its goods made by a contract manufacturer under its own label are called private label brands. Manufacturers use either their own name, that of a middleman, or a combination of both when they are marketing their products. Private labelling occurs when middlemen, usually large retailers or wholesalers, develop their own brand. Building a following from scratch through private-label products, especially in rough economic times, is challenging because smaller retailers do not have the marketing budget compared to their larger sized competition.

Private label brands

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