Private labels contribute 19%-20% Aditya Birla Retail’s total sales. It wants to reduce private labels to focus on volume sales
Aditya Birla Retail Ltd (ABRL) is betting differently on private labels, products that are sold by retailing companies under their own brand name. The company is now concentrating on increasing volume sales through special schemes in private labels rather than adding more products. It has reduced its private labels in fast moving consumer goods (FMCG) category to 290 from 350. In staples, private labels are more than 200.
Sales from private labels are 19%-20% of the Aditya Birla retail's total sales. "We want to focus on individual categories and increase volumes rather than adding more products. We will be adding products as and when required in different categories," said Thomas Varghese, chief executive officer, Aditya Birla Retail Ltd. It is focussing on strengthening the food portfolio.
ABRL currently sells a range of private labels covering FMCG, apparels and footwear. Among its major in-house brands are More (staples), Blue Earth (apparels), True (footwear), Feasters (food based items), Kitchen's Promise (ready-to-eat) and Enriche (soaps and conditioners). Private labels in the stores are priced at 10%-15% less than branded labels.
The retail chain is also concentrating on increasing the customer base for its two-year old loyalty programme - 'Clubmore'. "We currently have a subscribed customer base of 1.3 million across India," said Mr Varghese.
The company plans to enter own branded consumer durables and electronics products when it has 14-16 operational hypermarkets. "By the end of this fiscal we shall have enough resources to introduce private labels in electronics. To begin with we will first introduce small appliances like irons, mixer grinders, beaters, etc. and then move to bigger white goods," said Mr Varghese.
Usually, private labels tend to be 5% to 20% cheaper than established brands. Retailers are able to cut out the distribution cost which they pass on to consumers.
Not only do private labels help retailers make more profits but these labels even help them to differentiate themselves from their rivals. And in the long run, they can use the private labels to additional attract customers.
Retailers are expanding their private label portfolio and targeting multiple consumer segments through tiered pricing and claims. Having established a significant presence in the household care segment, Indian retailers are now launching private labels in ready-to-eat foods, beverages and personal care. Retailers are building private label brands with product attributes that mirror national brands.
Adoption of private label by Indian consumers is not only based on price but also perceived quality. Success of private labels in the household category increases their propensity to try such prodcuts in the food and beverages and personal care categories.
BSE and MCX have filed their preliminary applications with SEBI to launch SME exchanges but there is little chance of this segment coming up in the near future
Since previous attempts to launch an exclusive platform for small and medium enterprise (SME) have failed, market regulator Securities and Exchange Board of India (SEBI) is moving cautiously about green signalling the idea again. The regulator is currently seeking feedback from the market to ascertain the impediments, which surfaced in its past efforts, to launch an SME exchange.
Unfortunately, this means that there has been no headway in finalising what the framework of an SME exchange will be. India has made two attempts to set up SME exchanges but both these attempts failed. The country's oldest exchange for SMEs, Over-The-Counter Exchange of India (OTCEI), was set up in 1989. It failed because of technology issues as well as regulatory confusion over what needs to be done to make it grow. The extremely lax regulations for new issues in 1994-95 encouraged companies to easily list in National Stock Exchange and the Stock Exchange, Mumbai (BSE), ignoring OTCEI. OTCEI also relied on the market-making system and market makers simply vanished after 1995. Under the next experiment, the BSE was directed to launch IndoNext Platform for SME in 2005 because that's what the then finance minister P Chidambaram wanted. But all BSE did was push out some poor quality and illiquid scrips to that segment.
SEBI is has been making some tentative attempts to launch an SME market for a few years now. The regulator came out with the guidelines for the SME exchanges on May 17, 2010.
"Attempts in India to establish exchange of small company is not a new attempt. Unfortunately these attempts did not work. A new attempt is being made. We will take a very constructive approach. We are conscious of the fact that small companies cannot bear the same kind of compliance cost that the bigger companies find it easy to do and therefore we are trying to reduce the compliance cost. As a regulator we need to keep a balance. We also need to protect the interest of the investor who are coming in and investing in their markets.
Compliance cost cannot be at the cost of not providing enough information to the investors who are going to invest. We are trying to do it in a manner where our chances of success improve" said C B Bhave at an event organised by small and medium enterprise (SME) Chamber of India, Mumbai recently.
Asia's oldest bourse BSE and the Multi Commodity Exchange (MCX) have filed a preliminary application with the capital markets regulator SEBI for launching an SME platform. "We have filed a preliminary application with SEBI for an SME exchange" said Madhu Kannan, MD & CEO, Bombay Stock Exchange (BSE).
Mr Joshep Massey, MD & CEO of Multi Commodity Exchange Ltd (MCX) also shared a similar plan "We have applied for an SME exchange." Even the National Stock Exchange is believed to have expressed its interest to launch an SME exchange. However, Mr Bhave did not clarify on the timeframe it is looking to launch this platform and said that "the ball is their (exchange's) court."
Economic indicators, corporate earnings will drive the market this week
The market is likely to see a positive opening on the back of positive global cues and ahead of the April-June corporate earnings seasons, which kicks off this week. However, key economic indicators will also be instrumental in giving direction to the market.
On the global front, Wall Street witnessed a positive close on Friday, making it the best weekly closing in the year. The Dow gained 59.04 points (0.58%) to 10,198.03. The S&P 500 gained 7.71 points (0.72%) to 1,077.96. The Nasdaq gained 21.05 points (0.97%) to 2,196.45. All major indices rallied around 5% for the week.
Markets in Asia have opened in the positive zone this morning. Key indices like the Shanghai Composite, Hang Seng, Nikkei 225 and Straits Times are trading with gains in the range of 0.31% to 0.48%. The SGX Nifty is trading 16 points higher at 5,369 (0.30%).
Back home, investors will keenly watch the Index of Industrial Production (IIP) data to be announced later in the day. IIP for the month of April grew 17.6% as against 13.5% in previous month led by growth across all the sectors. However, while the data for May is expected to be marginally lower, it will be in double digits though, indicating that the economic recovery is on track.
Besides, the wholesale price based (WPI) inflation for June will be announced by the government on 14th July. The inflation figures are expected to touch 11% following a hike in fuel prices by the Centre late last month.
The first quarterly corporate earnings seasons kicks off this week, with IT strongman Infosys will announce its results on Tuesday (13th July). Estimates indicate that the numbers would be slightly lower. On the whole, the earnings are expected to be in line with market expectations.