While, in these difficult times of economic slowdown, large retailers have resorted to cutting down on costs, they also begun to realise the importance increasing the share of products under private labels to improve viability of their operations.

The introduction of private labels in general and for products under value segment in particular has now become the main mantra of changing retail strategy. While, on the one hand, this reduces their dependence on national brands, on the other it helps to improve profit margins.

According to KPMG, the global research and consultancy firm, which released its ‘Indian Retail: Times to Change Lanes’ report on Tuesday, “Private labels are likely to continue to grow in the current financial environment as cash-strapped consumers’ perception of the products as a ‘cheaper option’ changes. Part of private label growth in a recession is permanently sustainable.”

According to Ramesh Srinivas, National Head (consumer markets) at KPMG Advisory Services, “Many retailers are increasingly focusing on their private label offerings now. They are realising the importance of the value segment. Even though profitability, footfalls and conversions have fallen, there is enough scope for retailers to develop newer product categories.”

Private labels now offer a respectable share of around 10-12 per cent in the overall product mix of organised retail.

While, private labels business is quite popular among fashion retailers like Shoppers Stop, Pantaloon, and Westside, among others, all major food and grocery retailers like Future’s Big Bazaar, Reliance’s Fresh, Birla’s More, RPG’s Spencer’s, and Bharti’s Easyday, among others, have in recent times unveiled strategies for increasing the share of ‘private label’ business.

Birlas are looking at increasing the share of their ‘private label’ business from 3 per cent at present to 15 per cent of their revenues in the next three years.

Kishore Biyani of Future Group has even decided to take his private labels, particularly under FMCG category, beyond the confines of his own chains by making them available at other retail chains. In fact, according to a strategy recently unveiled by him, he is planning to achieve a turnover of Rs 10,000 crore from private labels under different categories in the next four years.

Kishore Biyani’s private label ‘Tasty Treat’ for ready to eat snacks already contributes 20 per cent of the potato chip sales across the chains. “We are now going to launch our own toothpaste. Even if it gains a 15% market share among the top-selling toothpastes in the country, I will be happy,” says Biyani.

Even lifestyle retailers like Tata’s Croma and Ruia (Essar)’s The Mobile Store, according to a DNA report, are looking at introducing private labels for consumer durables. While Croma has already introduced products like laptops, air-conditioners and microwaves, The Mobile Store is preparing for launching low cost mobile phones. Croma is expecting its private label to contribute 20 per cent of its business, as it has already tasted success with sale of microwave ovens selling over 3,500 pieces of the same since its launch.