the range image. Private labels put downward price pressure on national brands. It upsets the pricing structure and ultimately creates pressure on the retail margins. It also affects promotional support provided to retailers by national brands.
Aligning and integrating a private label strategy with national brands might help to create a win-win situation for retailers and national brands. Invading each other’ s territorial rights might generate skirmish and inflict damages on both.
Alternatively, retailers can get into the business of branding. But that will violate the valuable principle of‘ stick to knitting’ suggested in the book,‘ In search of Excellence’. Aligning and partnering with brands and taking them to customers in the right form, at the right price, in the right quantity and at right time is the role of retailers in the business. Small deviations to balance the profitability and threaten the national brands so that they respond well is a good tactic but getting into manufacturing and branding is not a good idea. This backward integration might push retailers back in the long run. Private labels are low hanging fruits but one must reap the quantity barely enough for the lunch.
National brands must understand the role of retailers and pay for their fair share. Unfortunately, there is the tendency of the major national brands to pull the rope harder commanding a larger chunk. Private label is considered as an‘ all are common’ kind of socialistic approach. It is certainly a retaliation of retailers against the monopolistic approach of mega brands and national players. Private label is the struggle for the existence of retailers who are under the mounting pressure of escalating costs and reducing margins.
National brands and organized retailers both are like nuclear powers. If national brands deny bread and butter( fair retail margins) then retailers respond by denying dwelling( shelf space in stores). Such a fight between national brands and private labels might appear beneficial to the customers in the short term. But this cold war has the potential to become the World War of marketing. As long as it remains a sibling rivalry it is good
BRANDS
for everyone but if escalated into a full-flagged war then it will destroy both, retailers and brands leaving customers high and dry.
However, Discount retailing is the format that looks to reduce the cost of living of their customers. It will remain unharmed but only as an important market segment rather than spilling over and spoiling other segments.
Yes, brands are under threat. But they won’ t die as long as they don’ t deny retailers their right to survive and progress. ■
Prof. Dr. Ajit Patil was awarded ‹ Top Voice on LinkedIn- 2017’. He is a Management Writer; Marketing, Business Development & Retailing Consultant. He conducts Management Development Programmes; trains & coaches Sales & Marketing teams. Reach him at: Ajitpatilmumbai @ yahoo. co. in.