March 2009
Global brands in Oman's hypermarkets are facing stiff competition from private labels, the non-branded, store-labelled products that were previously dismissed as also-rans. In the ongoing global recession, private labels have emerged as the best product option for the price-conscious consumer who is still unwilling to compromise on quality.
Private labels, in turn, are becoming increasingly quality conscious in an attempt to enhance store image and provide good value for money to consumers in these tough financial times. The result is that private labels are fast gaining prominence on store shelves.
While offering consumers a wider shopping choice, these also help retailers ensure store loyalty and keep the cash registers ringing. There is ample evidence that though the private label market in the GCC is still in its infancy, it is set to grow considerably in the coming years.
Private labels are at a fast-growing stage in the Middle East, says Shamim Sainulabdeen of EMKE, who is responsible for implementing private labels in Lulu's chain of hypermarkets across the GCC. "The growth (of private labels) has been strong in Oman and last year it was at least 100 per cent more than the previous year," she adds.
"With the current credit crunch, people are always looking for lower-priced items, while desiring the same quality provided by a pricey international brand. Private labels ensure good value for money, while offering wider choice to the consumer. That is the reason why there has been substantial growth in the private label sector here in Oman in the last year or so," says Sarel Myburgh, deputy general manager, Al Fair, which currently sells over 200 private label products under the name Home Choice.
Private labels have a distinct advantage over brands when it comes to price. With pockets no longer as deep as they were, the sultanate's consumers have become discerning when selecting a product. This is where private labels come in. "The advantage private labels have over brands is that the stores can manipulate the prices of these products in relation to the branded ones and offer them at a considerably lower price," says Jerry B Paco, general manager of White House, wholesale distributors and importers for Al Jadeedah stores.
Any product that delivers is always sought after by the public. Private labels are being increasingly sought for their ability to address the price-quality question," he adds.
Not the end of brands
This is not to say that branded products are dying out. "Brands are always strong in the market and are absolutely necessary for any store to ensure footfalls," says Myburgh. Although competitive, private labels will never completely eliminate branded products due to customer loyalty obtained over the years by heavy spending on advertising and marketing, according to Sainulabdeen.
These days, however, private labels are winning the loyalty of more and more consumers every day. They have achieved unprecedented acceptance with shoppers who are more aware of private labels and plan to increase their purchases of these," says Sainulabdeen.
"Branded products are always manufactured under stringent conditions and come with the assurance of quality. The confidence that a particular brand creates in the minds of customers is very hard to break," says Dhananjay Jadhav, general manager, Fair Trade, leading importers and distributors of fast moving consumer goods (FMCG) in Oman.
Retailers and importers of brands say private labels often contribute to the image of a store. "We focus on private labels as much as we do on the brands, because private labels contribute considerably to our store image, and vice versa," says Agnelo Goveia, general manager, Safeer Group of Companies, which has between eight and ten products in the FMCG category and a fast-expanding private label product line in the non-food durables category as well.
Brands in their own right
"Sometimes, some of these private labels are so popular that they become mainstream brands in their own right and grow above the store that introduced them. This, of course, boosts the store's image considerably," says Jadhav.
He cites the example of Tesco in the UK, which has evolved its own private labels to such an extent that they are now brands in their own right and offer a price segmentation strategy to attract all customers: Tesco Value is the no-frills, low-cost proposition, Tesco is the mainstream range competing with the brand leaders and Tesco Finest offers quality products priced at a premium over the leading brands.
Another plus for private labels is that faster innovation is possible than for their branded competitors. "The moment a branded product hits the market, its features and characteristics become widely known," says Paco. "And manufacturers of private labels can improve on these features and package them more attractively to attract the public," he adds.
Private labels have mainly been introduced in the FMCG category to date, but retailers are trying to change this. Today, most of the prominent retail outlets have private labels in non-FMCG categories, like readymade garments, footwear and furniture, to name just a few examples.
"When it comes to products outside the FMCG category, consumers look more at style, design, comfort and of course, price. That is the reason why our private label products in this category are a huge success. We get them directly from the manufacturers who make them as per our design specifications and quality standards," Goveia says.
Retailers normally make an offer price on their private labels, which is usually 10-15 per cent less than the branded ones. This is followed up by service support, adoption of an aggressive promotion strategy on in-house labels and attractive freebies and product warranties as incentives to those who purchase these items
Customer preference
More and more customers are displaying a marked preference towards private labels and move away from expensive branded items. "These days I always buy the store-branded products that are on sale, from hypermarkets like Lulu and Safeer," says Naureen, a housewife. "I used to be brand conscious earlier, but now I think it is prudent to cut down on my spending, so I do opt for store labels. Several hypermarkets have a very good reputation. Again, the prices of these items are very much less than the brand equivalent," she adds.
"Why should I buy an expensive product when I can get the same thing for less?" asks Badriya al Hinai, who is a frequent shopper at the Darsait outlet of Lulu. "The quality of these store products is very much like an international product, and I can get good value for my money as well."
There are, however, shoppers like Maria Darcy, a resident of Al Khuwair, who prefer the assurance of quality and sophisticated packaging of a branded product over a private label. "I have certain brand preferences and would like to stick to them no matter what," Maria says, adding that price is not a consideration when it comes to quality.
To such shoppers, says a retailer, the credit crunch has hardly made a dent in their pockets as they belong to the upper strata of society. "Private labels will never make an impact on them and we don't target that segment with our in-house labels." Retailers know that for every Maria there are ten Badriyas or Naureens.
Private label problems
This is not to say that private labels don't face a fight for their existence. "Volatility of commodity prices, R&D, variant extension, distribution, marketing and advertising costs and restricted space for display are some of the problems faced by private labels," says Sainulabdeen.
Another challenge is the lack of proper focus and planning in the private label category. "The private label market in Oman is not very streamlined at the moment," says Jadhav. This is where the brands score. They have well laid out marketing strategies, targets and plans which are not there for private labels.
Paco says that a solution to this will be to earmark funds for promoting and marketing private labels. "Aggressive promotion would catapult a lot of these products into the mainstream," he adds.
"Smart retailers have to thoroughly evaluate, strategise and focus on their private labels," says Dhananjay. "There also has to be regular stock-taking and product analysis, to find out which products sell well and which ones don't," says Myburgh.
Whatever the struggles, private labels have managed to carve a niche in the fast-growing retail sector and are making their presence felt. Brands will now have to watch out and reorganise their strategies, if they are to adapt to the changing market in the sultanate. Consumers now have a much wider choice and are getting far better value for their money. The battle between the two is on but private labels are clearly here to stay.
Global brands in Oman's hypermarkets are facing stiff competition from private labels, the non-branded, store-labelled products that were previously dismissed as also-rans. In the ongoing global recession, private labels have emerged as the best product option for the price-conscious consumer who is still unwilling to compromise on quality.
Private labels, in turn, are becoming increasingly quality conscious in an attempt to enhance store image and provide good value for money to consumers in these tough financial times. The result is that private labels are fast gaining prominence on store shelves.
While offering consumers a wider shopping choice, these also help retailers ensure store loyalty and keep the cash registers ringing. There is ample evidence that though the private label market in the GCC is still in its infancy, it is set to grow considerably in the coming years.
Private labels are at a fast-growing stage in the Middle East, says Shamim Sainulabdeen of EMKE, who is responsible for implementing private labels in Lulu's chain of hypermarkets across the GCC. "The growth (of private labels) has been strong in Oman and last year it was at least 100 per cent more than the previous year," she adds.
"With the current credit crunch, people are always looking for lower-priced items, while desiring the same quality provided by a pricey international brand. Private labels ensure good value for money, while offering wider choice to the consumer. That is the reason why there has been substantial growth in the private label sector here in Oman in the last year or so," says Sarel Myburgh, deputy general manager, Al Fair, which currently sells over 200 private label products under the name Home Choice.
Private labels have a distinct advantage over brands when it comes to price. With pockets no longer as deep as they were, the sultanate's consumers have become discerning when selecting a product. This is where private labels come in. "The advantage private labels have over brands is that the stores can manipulate the prices of these products in relation to the branded ones and offer them at a considerably lower price," says Jerry B Paco, general manager of White House, wholesale distributors and importers for Al Jadeedah stores.
Any product that delivers is always sought after by the public. Private labels are being increasingly sought for their ability to address the price-quality question," he adds.
Not the end of brands
This is not to say that branded products are dying out. "Brands are always strong in the market and are absolutely necessary for any store to ensure footfalls," says Myburgh. Although competitive, private labels will never completely eliminate branded products due to customer loyalty obtained over the years by heavy spending on advertising and marketing, according to Sainulabdeen.
These days, however, private labels are winning the loyalty of more and more consumers every day. They have achieved unprecedented acceptance with shoppers who are more aware of private labels and plan to increase their purchases of these," says Sainulabdeen.
"Branded products are always manufactured under stringent conditions and come with the assurance of quality. The confidence that a particular brand creates in the minds of customers is very hard to break," says Dhananjay Jadhav, general manager, Fair Trade, leading importers and distributors of fast moving consumer goods (FMCG) in Oman.
Retailers and importers of brands say private labels often contribute to the image of a store. "We focus on private labels as much as we do on the brands, because private labels contribute considerably to our store image, and vice versa," says Agnelo Goveia, general manager, Safeer Group of Companies, which has between eight and ten products in the FMCG category and a fast-expanding private label product line in the non-food durables category as well.
Brands in their own right
"Sometimes, some of these private labels are so popular that they become mainstream brands in their own right and grow above the store that introduced them. This, of course, boosts the store's image considerably," says Jadhav.
He cites the example of Tesco in the UK, which has evolved its own private labels to such an extent that they are now brands in their own right and offer a price segmentation strategy to attract all customers: Tesco Value is the no-frills, low-cost proposition, Tesco is the mainstream range competing with the brand leaders and Tesco Finest offers quality products priced at a premium over the leading brands.
Another plus for private labels is that faster innovation is possible than for their branded competitors. "The moment a branded product hits the market, its features and characteristics become widely known," says Paco. "And manufacturers of private labels can improve on these features and package them more attractively to attract the public," he adds.
Private labels have mainly been introduced in the FMCG category to date, but retailers are trying to change this. Today, most of the prominent retail outlets have private labels in non-FMCG categories, like readymade garments, footwear and furniture, to name just a few examples.
"When it comes to products outside the FMCG category, consumers look more at style, design, comfort and of course, price. That is the reason why our private label products in this category are a huge success. We get them directly from the manufacturers who make them as per our design specifications and quality standards," Goveia says.
Retailers normally make an offer price on their private labels, which is usually 10-15 per cent less than the branded ones. This is followed up by service support, adoption of an aggressive promotion strategy on in-house labels and attractive freebies and product warranties as incentives to those who purchase these items
Customer preference
More and more customers are displaying a marked preference towards private labels and move away from expensive branded items. "These days I always buy the store-branded products that are on sale, from hypermarkets like Lulu and Safeer," says Naureen, a housewife. "I used to be brand conscious earlier, but now I think it is prudent to cut down on my spending, so I do opt for store labels. Several hypermarkets have a very good reputation. Again, the prices of these items are very much less than the brand equivalent," she adds.
"Why should I buy an expensive product when I can get the same thing for less?" asks Badriya al Hinai, who is a frequent shopper at the Darsait outlet of Lulu. "The quality of these store products is very much like an international product, and I can get good value for my money as well."
There are, however, shoppers like Maria Darcy, a resident of Al Khuwair, who prefer the assurance of quality and sophisticated packaging of a branded product over a private label. "I have certain brand preferences and would like to stick to them no matter what," Maria says, adding that price is not a consideration when it comes to quality.
To such shoppers, says a retailer, the credit crunch has hardly made a dent in their pockets as they belong to the upper strata of society. "Private labels will never make an impact on them and we don't target that segment with our in-house labels." Retailers know that for every Maria there are ten Badriyas or Naureens.
Private label problems
This is not to say that private labels don't face a fight for their existence. "Volatility of commodity prices, R&D, variant extension, distribution, marketing and advertising costs and restricted space for display are some of the problems faced by private labels," says Sainulabdeen.
Another challenge is the lack of proper focus and planning in the private label category. "The private label market in Oman is not very streamlined at the moment," says Jadhav. This is where the brands score. They have well laid out marketing strategies, targets and plans which are not there for private labels.
Paco says that a solution to this will be to earmark funds for promoting and marketing private labels. "Aggressive promotion would catapult a lot of these products into the mainstream," he adds.
"Smart retailers have to thoroughly evaluate, strategise and focus on their private labels," says Dhananjay. "There also has to be regular stock-taking and product analysis, to find out which products sell well and which ones don't," says Myburgh.
Whatever the struggles, private labels have managed to carve a niche in the fast-growing retail sector and are making their presence felt. Brands will now have to watch out and reorganise their strategies, if they are to adapt to the changing market in the sultanate. Consumers now have a much wider choice and are getting far better value for their money. The battle between the two is on but private labels are clearly here to stay.
By Anita Joseph
© businesstoday 2009
