KBSuccess-Internship Chronicle 2010

Recession has influenced the recent study conducted by to focus more on value retail
revenue of retail brands. The the author2 among the and influence the consumer
slowdown in the economy shoppers at BIGBAZAAR and wallet. Brands h-ave always
has badly hit consumer D’mart in Pune, India, it is positioned them-selves as
spending on passenger cars, found that 88% of the lifestyle goods in the various
two-wheelers, airlines and consumers are willing to supermarkets and
have brought down retail trade down3 in their purch- departmental stores. Also
sales1. Bharti Retail president asing behaviour. This way of there is more demand for
and COO Vinod Sawhny said, consumer behavior4 unfolds FMCG products and food
“Introducing Wal-Mart some interesting dynamics retailing. ‘Where is that
private labels in our stores for the marketers to study frequent shopper? Has he
helps cut down on the and improvise. stopped spending in retail
learning curve”. ‘Connecting outlets or is he influenced by
to the transforming The retail consumers are the neighbourhood kirana
consumer’ is the greatest unlikely to change their stores??? Are the questions
challenge the marketer is purchasing behavior even in the minds of organized
facing in this slowdown after recovery of the global retailers. Frequent discount
global economy. The Indian recession. They will continue offers were the tool to
consumer is reluctant to to remain value-conscious liquidate slow moving stocks
spend unless the value customers and will not be and thereby reduce the
proposition is satisfactory. driven for brand loyalty. The inventory practiced by the
Did the global meltdown economic slowdown has retailers like BIGBAZAAR.
influence the Indian adversely affected the footf-
consumer? According to the alls in Indian retail industry
by 70%5. Retailers will have
1 Business Line
2 Prof.G.M.Jayaseelan – A study on the market for private label products in retail stores (2009)
3 To forego purchase of a premium brand in favor of a cheaper one
4 Belch and Belch define consumer behavior as 'the process and activities people engage in when searching for selecting,
purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires'.
5 KPMG study (2009) “Indian Retail: Time to change lanes”

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Consumers are building a
critical approach to shop-
ping time they had before
for visiting the retail outlet.
They prefer to spend more
time at home with the
family, changing from the
previous habits of shopping
and impulse purchase6 beh-
avior. The retail brands sh-
ould go beyond advertising
as products offered at the
lowest price and instead
teach how savings can
contribute to customer’s
lives. This has become very
critical to build a trust
between the retailer and
the shopper, more so in this
period of economic slowd-
own. Direct Selling(DS) ind-
ustry in India is estimated at
Rs.3500 crores. Amway
India has a market share of
30% in the country. Amway
India grew by 40% in rece-
ssion hit 2008 reaching
Rs.1,128 crores from Rs.800
crores in 2007. Consumers
are looking for reassurance
during uncertain times.
Amway is capitalizing on
this by saying ‘We’ are liste-
ning’. The success of A-
mway products is predom-
inantly driven by the quality
of the products. Since the
company does not advert-
6 An impulse purchase is an unplanned or otherwise a spontaneous purchase.
7 As published by Commodity Online on Feb 22, 2010.
8 IndiaInfoline report published on Feb 01, 2010.
KBSuccess-Internship Chronicle 2010
ise its brands, the only
communication channel is
through Amway Business
Owners (ABOs) who visits
households and make
presentations.
According to World Gold
Council, India had retained
its No.1 position in the
consumption of gold in
20097. Therefore it is
evident that the trade down
is not happening across all
categories of retail consu-
mers and products. P&G
hygiene and health care
resulted in sales of
Rs.274.59 crores in Q2
December 2009, an incre-
ase of 21.71% over Q2
December 20088. Consum-
ers are trading down or
staying with the premium?
The top of line items
including gold is doing
better and the middle range
of products are hit by this
economic outcome. Rich
consumers or people who
are ready to spend more on
healthcare products have a
tendency to shell out
money for luxury and
quality assurance but mid-
range customers however
are a bigger part of the pie
for most of the brands and
price-value equation is
turning to be more
significant for the retailer.
The footwear sector is
considered to be a reces-
sion proof industry in India.
The Indian shoe market is
estimated to be worth a-
round $2.8 billion with fo-
otwear retail expected to
grow about 20 percent on a
compounded annual gro-
wth rate basis. Bata India
Limited, the largest retailer
and the leader in the
footwear market in India
declared its best ever
financial results for the
quarter ending December
st
31 2009, with a growth of
66.9% in Profit Before Tax
(PBT) at Rs.3,865.8 lacs
against Rs. 2,316.9 lacs in
the same period last year.
The Company’s net turn-
over grew by 12.9% at Rs.
28,809.0 lacs as against-
Rs.25,522.5 lacs in the sa-
me period last year.The
Company’s Net Turnover g-
rew by 12.9% at Rs.28,809.0
lacs as against Rs. 25,522.5
lacs in the same period last
year.
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 KBSuccess-Internship Chronicle 2010

Reliance Trends Chief
Executive Arun Deshmukh
said, “Reliance has 10 private
labels for various categories
such as sportswear, formal
wear, k-idswear, lingerie and
others with the ratio of
products available 50:50
between private and exter-
nal labels,". Samar Sheikha-
wat, VP marketing, Spenc-
er's, says, "We will also
expand our private labels in
terms of more variety and
options. This will ensure that
sale of our private labels
make up almost 35 per cent
of our revenues, from 25 per
cent presently marketers
should

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anticipate and respond to
consumer apprehensions a-
nd every brand should help
in simplifying consumer’s
lives. This is achieved when
the retail brand proves to be
reliable and consistent thr-
ough regular supplies and c-
ontinuous communications.
The consumers prefer that
the retailer should help them
plan their purchase and
manage money. Private label
products are very attractive
to consumers both in terms
of price and quantity. Brands
should plan different pack-
aging or an assortment of
products to facilitate retail
customers in times of
recession. They should give
the consumer a shopping
experience and he must be
contended with the best
bargain he managed at the
store. At BIGBAZAAR a good
assortment of discounted
and ‘best deal’ offer products
are displayed on the way to
the billing counter. The retail
brand is emphasizing quality
service by providing
maximum visibility to make
the customer realize that he
got all that he planned for
the day’s purchase.
9 Brand loyalty, in marketing, consists of a consumer's commitment to repurchase or otherwise continue using the
brand and can be demonstrated by repeated buying of a product or service or other positive behaviors.
KBSuccess-Internship Chronicle 2010
Retailer should plan ‘smart
card’ wherein the customer
can charge the card with
currency at various financing
establishment or at the
stores and then redeem
them. As the money is secure
and will not lose its value,
this seems to be a better
investment not influenced by
any uncontrollable environ-
mental factors in this econo-
mic slowdown. The customer
should also be rewarded
with points based on the
value stored in the card
along with points for
spending more on every
purchase using the card.
Emotions in Advertising and
retail communication are i-
mportant but there lies a
higher density of emotions in
consumption habits. Freebi-
es, offers, value pack have
come in the way to build
brand loyalty9 among shopp-
ers. Brands should drive in a
greater sense of ownership
and certainty by allowing
exchange and acceptance of
non-performing products
within a stipulated period.
This will neutralize the threat
of private labels. It is
observed from the study that
once a brand loses its
customers to a private label
and if such private label
keeps up the promise, it is
very difficult to get the
customers back. There must
be continuous innovation to
withstand the threat of
private labels. Brand’s value
proposition should be kept
unique and continuous mon-
itoring is required to derive a
better customer satisfaction.
The benefits offered by the
brand should never run in to
those provided by the pri-
vate labels. Moreover con-
sidering the competition in
the product life cycle as the
product travels through the
maturity stage and appears
to be old and less differenti-
ated, pricing has to be
competitive. It is recomme-
nded that the product is
priced lower to its entry level
status. Parker did this succes-
sfully by introducing pricey
Beta as generic versions of
Parker Vector were costly
and uncommon. Brands
should work with retailers
for more shelf space in its
category to keep off the
private label products.
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According to Ajit Sapre, the
manager at D’mart, ‘It is win-
win situation for both the
brands and D’mart private
labels’. Brands have to be
given a prominent position in
the shelves, for it is under
this price range set by brands
that private labels find its
competitiveness. By rational-
ly assorting the display and
space in the retail shelves,
the store gets its revenue
through private labels, con-
sumer has a choice to purch-
ase and brands get an
adequate amount of visibil-
ity. There has to be strategic
partnerships between the
retailer and the company
because no one has the
solution to a quality formal
wear than Peter England or
no one knows a readymade
shirts shopper better than
Van Huesen. By practicing
pull approach through ad-
vertisements and by sharing
the need for products and its
varieties, the brands should
KBSuccess-Internship Chronicle 2010
educate the retailer to better
understand about the prod-
ucts to stock and ways to
arrange them. Even though
the brands spend so much on
advertising and communica-
tion through various chann-
els including the internet and
the retailer complements w-
ith better shopping ambien-
ce, but still the consumers’
attitudes towards the brand
changes along with the
economy. Now it has bec-
ome important to emphasize
that companies are listening
to consumers, through in-
store promotions undertak-
en by some of the brands like
Nestle Sunrise coffee pow-
der. Such promotions may i-
nfluence the purchase beha-
vior and trade-off the price
difference and give the br-
ands a potential market
share. As per the study
conducted by the Indian
Council for Research on
International Economic Rel-
ations (ICRIER) the retail
sector is expected to contri-
bute to 22% of India’s GDP
by 2010. India’s retail market
has moved up to 39th most
preferred retail destination
in the world in 2009, accor-
ding to commercial real e-
state services company CB
Richard Ellis. As a democratic
country with high growth
rates, consumer spending h-
as increased consistently. T-
he disposable income of the
youth, which forms 33% of
the population below 15 yea-
rs, has shown a significant
increase. Brands have to co-
me out with innovative
strategies to take advantage
of the retail boom in India.
Indian retail market is
projected to grow with large
format malls and branded
retail stores across the
country. Koutons Retail India,
Timex India, Wills Lifestyle
are all set to expand and
market their brand of
products.
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According to Industry experts
the next phase of retail
growth is expected to come
from rural markets in India.
Rural market will be holding
50% of the Indian retail
industry by 2012. Therefore
the brands will have a
challenging phase to
compete with private labels
catering to the bottom of the
pyramid. In this period of
recession the malls and retail
stores are less frequented by
consumers. As the consume-
rs’ purchasing behavior has
changed, the retail sales are
not adequate and therefore
the prices have to be brought
down. This will have an
adverse effect on production
which in the long run would
result in Inflation. The brands
can strategically plan to work
on economies of scale and
be more competitive than
the private labels. This
leverage of cost competition
should result in effective
pricing strategies.

* The author was an Assistant Professor of Marketing and Strategic Management with Sprott School of Business, Carleton
University, which he joined in 2005 teaching at the off-campus program in India. He has served as Head of Department of
Marketing (2005-2007) at Kohinoor Business School Khandala, and is Chair of the Kohinoor Brand Committee (2007 onwards)
operating from Kohinoor Business School and Center for Management Research (KBSCMR). He had worked with Dr. Nicolas
Papadopoulos in the area of Consumer Behavior and Advertising. His research and professional interests focus on marketing
and business strategy, buyer behavior, and especially international marketing – with emphasis on advertising and sales
promotions. The Ph.D. scholar from Pune University, India has published a research paper ‘The Power of In-Store digital
advertising in India’ (2009) and with publications in Spectrum, e-journal of KBS. Prof.G.M.Jayaseelan worked with Eenadu
(Business Analyst and Marketing Consultant), Philips (Marketing Executive, Lighting Division), and Bayer India – Consumer Care
division (Sales Management) before beginning his academic career, and has kept close ties with the practice of marketing and
business.

References

• http://www.bata.in
• http://www.amway.in
• http://www.ibef.org

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