Private Labels in India. An Analysis of Consumer Perception and Attitude

CONTENTS

CHAPTER 1: INTRODUCTION
A Synoptic View of Indian Retail Industry
The Larger Picture
About NCR - Importance in Indian Retail
Need for Studying Buying Behavior
Role of Private Labels in Indian Retail
Importance of the Present Study
Literature Review - Private Label Studies

CHAPTER 2: INDIAN RETAIL SCENARIO
Trade in India
Position of Retail in Indian Economy
Category/ Segment analysis
Clothing & Textiles
Jewellery
Watches
Footwear
Health & Beauty Care Services
Pharmaceuticals
Consumer Durables and Home Appliances
Mobile Handsets, Accessories & Services
Furnishings, Utensils & Furniture-Home & Office
Food & Grocery
Out-of-Home Food Services
Books, Music & Gifts
Retail Formats in India - Current and Emerging
Hawkers - ‘mobile supermarkets’
Kirana/Grocers/ Provision Stores/Mom-and-Pop Stores
Department Store
Supermarkets
Hypermarket
Specialty Stores
Convenience Stores
Kiosks
Discount Stores
Branded Store
Factory /Company Outlet
Rural Retailing
Luxury Retailing
Airport Retailing
E-Retailing
Teleshopping
Catalogue Retailing
Network Marketing
Geographical Spread
Year 2009
Key Players in Organized Sector & Their Strategies
Future Group
Reliance Retail
Tata Group
Aditya Birla Retail Ltd
Lifestyle International
RPG Retail
Shopper’s Stop
Bharti Group:
Vishal Retail Ltd
Organised Retail Drivers
Favourable Demographics
Rising Consumption Expenditure and Disposable Incomes
Increasing Participation of Women in Workforce
More Choice Available To the Customers
Penetration of Credit/Debit Cards
Urbanization
Problems Faced By the Organized Retail in India
Key Challenges and Success Factors
Developing Efficient Supply Chains
Supplier Retailer Relationships
Innovations in Logistics
Ability to penetrate rural market
Socially and Culturally Diverse Consumers
Online Retailing
Leveraging Technology
Customer Relationship Management (CRM)
Success Strategies for Organised Retail
Regulation of Retail Industry in India
FDI Policy in the Retail Sector

CHAPTER 3: PRIVATE LABELS (STORE BRANDS)
Defining Private Label/ Store Brand
Reasons for Emergence & Growth of Store Brands
Historical Developments of Private Labels Globally
Private Brand/Label Orientation Strategies
The Process of Private Label Creation
Strategic Importance of Private Label Brands to the Retailing Industry
Present Status - Global
Presence in Different Category/ Segments
Private Labels in India
Future Group
Aditya Birla Retail
RPG Spencer
Reliance Retail
Vishal Retail Ltd
Bharti Retail
Heritage Foods (India)

CHAPTER 4: CONCEPTUAL FRAMEWORK
Concept and Role of Brand in Marketing
Manufacturer Brands
Private Labels
Theoretical Frame-Work of Consumer Perception
Theoretical Frame Work of Consumer Attitudes
Consumer Attitude Formation Models
Tri-Component Attitude Model
Multi-Attribute Attitude Models
The Trying-to-Consume Model
Fishbein Model (Individual Attitude to Brand Attitude)
Attitude Formation
Sources of Influence on Attitude Formation
Measuring Attitude
Measurement Scale
Primary Scales of Measurement
A Comparison of Scaling Techniques
Continuous or Graphic Rating Scale
Itemized Rating Scales
Factors Influencing Attitude toward Private Label Brands
Consumer Price Perception Dimension
Price Consciousness
Value Consciousness
Private Label Quality Perception Dimension
Private Label Quality
Extrinsic Quality Cues
Intrinsic Quality Cues
Private Label Source Dimension
Retailer’s Reputation
Manufacturer’s Reputation
Word-of-mouth (WOM) Dimension
Attachment to Brand Dimension
Proposed Model for the Current Study

CHAPTER 5: RESEARCH METHODOLOGY
Research Objectives
Scope of the Study
Geographical Scope
Product / Category Scope
Scientific Ideal and Paradigm
Ontological Orientation
Epistemological Orientation
Scientific Approach
Research Approach / Design
Development of Measurement Scale
Data Collection Tools / Questionnaire Design
Pre-Test
Sample Design
Data Collection Procedure

CHAPTER 6: ANALYSIS AND INTERPRETATION
Data Analysis Procedure
Empirical Findings
Profile of Respondents
Private Label Brand Purchase Frequency
Private Label Categories (Popular)
Private Label Purchase Motive
Descriptive statistics
Creation of Summated Measurement Scales
Analysis of Data
Preliminary Data Analysis
Missing value
Outliers
Normality
Advanced data analysis
Reliability tests
Validity of the New Measures
Examining Differences in Means for Demographic Variables
Gender
Age Group
Family Structure/ Size
Education
Employment
Family Income
Spending Per Month
Hypotheses Testing
Multiple Regression Analysis
Discussion of Results of Multiple Regression Analysis

CHAPTER 7: FINDINGS, SUGGESTIONS & RECOMMENDATIONS
Findings and Managerial Implications
Limitations and Suggestions for Future Research

LIST OF REFERENCES

APPENDIX A- QUESTIONNAIRE

PREFACE

Private Labels occupy a significant share of organized retail in Europe and United States. With recent growth of organized retail in India Private Labels also emerged in Indian retail landscape. Though private labels arrived in India long back but still Private Labels have not picked up in India, the way they have picked up in other countries.

Many of the Indian retailers like Shoppers Stop, Future Group, Tata’s Croma and Aditya Birla Retail’s More, Spenser’s etc are relaying on Private Label strategy in a big way as consumers seek quality products at affordable prices. Besides, rapid technological and socio-economic changes over the last decade have affected the buying behavior of consumers, forcing retailers to innovate and build new brands (private brands/ store brands) across different categories and various price points to attract more buyers to their stores. They have not only created new labels but have customized and localized those products to suit Indian tastes.

Private Labels have attracted attention of researchers from the western world for a long period of time. In India even after introduction of Private Labels by retailers very few studies have been conducted to understand different dimensions like introduction and management of Private Labels by retailers and adoption by Indian consumers.

The book presents an analysis of consumer perception and attitude towards Private Labels in India which is the outcome of study conducted in NCR region in India during 2008-10. It contains seven chapters. Chapter one introduces reader about retail industry in India and the NCR region where study was conducted. Chapter two presents a detailed analysis of organized retail in India in terms of different categories, formats, players, factors fueling its growth and challenges faced by industry along with regulatory environment in India. Chapter three introduces reader to the concept of Private Label and its status in select European countries, United States along with India. Chapter four builds conceptual framework and model for the study. This chapter presents different concepts involved in study and identifies different factors which researcher feels go in formation of attitude of consumers towards Private Labels in India. Here researcher develops a tentative model with the help of identified variables. Chapter five presents research methodology used for the study. It presents scientific ideals and paradigms of the research, development of the measurement scale and the procedure for actual data collection. Chapter six presents data analysis and interpretation from the data analysis. Chapter seven is the last chapter and it presents findings and managerial implications along with the limitations and suggestions for Future Research.

Author hopes that this book will provide a good insight to not only academic researchers but also to the professional who are interested in emergence of Private Labels in India.

ACKNOWLEDGEMENT

This study was performed as my doctoral thesis. Throughout the process of writing this, I have learned that writing a thesis is neither overly exciting, nor particularly fun. On the other hand, it has been a very useful and valuable experience, and I have learned a great deal, not only about the topic at hand, but also how to manage great workload within a limited timeframe. However, this workload would not have been manageable if I had not received help and support from a number of people who I would like to mention.

First of all, I would like to thank Professor Arun Kumar Tyagi, Associate Professor, J V Jain College, Saharanpur for his supervision and help provided from the conceptualization to completion of this research work. I confess that without his dedicated efforts and guidance, I would not have completed this onerous task. The thesis would not have been possible to realize without the important contributions and motivation provided by Dr. K. D. Gaur, Director, Indian Council of Social Science Research and Dr. S. P. Narang, Honorary Professor, School of Management, Indira Gandhi National Open University. Prof. R. K. Verma, Executive Director, Apeejay Institute of Technology, Greater Noida, deserves my special thanks for providing me infrastructural facilities and moral space in conducting my work.

Moreover, I would like to express my gratitude to all the professionals who were able to allocate their valuable time in order to share their knowledge with me out of their busy and hectic schedule. Further, I thank all the worthy authors whose celebrated works I consulted and used in the study.

My colleagues at Apeejay Institute of Technology, Greater Noida must be admired for having been very supportive and providing useful impetus every now and then. I also want to thank Mr. Vivek Vivekanand for providing me continuous motivation and support. - Thank you all!

On a personal level, I acknowledge with great respect my father Mr. G. R. Dixit and my mother Mrs. Usha Dixit. Their support, love and encouragement have been exemplary. I would like to give the greatest of thanks to my wife Sarita and son Anshuman Dev for their patience with me as well as their occasional delighters. Furthermore, I would like to show my appreciation towards my family, friends, and others who feel that they deserve it. - I will try to allocate more time for you now when I’m finally done.

Finally, it is my religious duty to thank Almighty God for showering his grace on me in my personal life and professional career. I confess that I am solely responsible for the shortcomings and deficiencies of this study and would like to be pardoned for those errors and mistakes.

LIST OF TABLES

Table 1: India- Key Macroeconomic Data

Table 2: Towns in the National Capital Region (as per Regional Plan 2001)

Table 3: Private Final Consumption Expenditure- Commodity Composition (Rs. in crore) ..

Table 4: Private Final Consumption Expenditure- Commodity Composition (1999-2000 prices, Rs. in crore)

Table 5: Share of Various Segments of Organised Retail

Table 6: Evolution of Private Labels / Store Brands

Table 7: Four Types of Private Labels and their Respective Strategy

Table 8: Private Label Share in Different Countries

Table 9: Top Ten Fastest Growing Private Label Markets

Table 10: Top Ten Private Label Markets Based on Share Point Gain

Table 11: Value Shares of Private Label by Category

Table 12: Top Ten Fastest Growing Private Label Categories

Table 13: Top Ten Private Label Categories in Share Gain

Table 14: Private Label Depth among Indian Retailers

Table 15: Private Label Status in India

Table 16: Sources of Measurement Scales from Previous Studies

Table 17: Comparison of Number of Usable Cases

Table 18: Demographic Information of the Respondents (Gender)

Table 19: Demographic Information of the Respondents (Age)

Table 20: Demographic Information of the Respondents (Family Structure)

Table 21: Demographic Information of the Respondents (Education)

Table 22: Demographic Information of the Respondents (Employment)

Table 23: Demographic Information of the Respondents (Family Income)

Table 24: Demographic Information of the Respondents (Family Earning Status)

Table 25: Demographic Information of the Respondents (Spending Per Month)

Table 26: Demographic Information of the Respondents (Private Label Purchase Frequency)

Table 27: Demographic Information of the Respondents (Private Label Categories)

Table 28: Demographic Information of the Respondents (Primary Purchase Motive)

Table 29: Descriptive Statistics of Interval Scaled Items

Table 30: Results of reliability tests

Table 31: Mean Values of Consumer Price and Quality Perception Dimension Factors According to Gender

Table 32: Mean Values of Private Label Source Dimension, Existence and Effect of Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Gender

Table 33: Mean Values of Consumer Price Perception Dimension Factors According to Age Groups

Table 34: Mean Values of Consumer Quality Perception Dimension Factors According to Age Groups

Table 35: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Age Groups

Table 36: Mean Values of Consumer Price Perception Dimension Factors According to Family Structure/ Size

Table 37: Mean Values of Consumer Quality Perception Dimension Factors According to Family Structure/ Size

Table 38: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Family Structure/ Size

Table 39: Mean Values of Consumer Price Perception Dimension Factors According to Education

Table 40: Mean Values of Consumer Quality Perception Dimension Factors According to Education

Table 41: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Education

Table 42: Mean Values of Price Perception Dimension Factors According to Employment

Table 43: Mean Values of Quality Perception Dimension Factors According to Employment

Table 44: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Employment

Table 45: Mean Values of Consumer Price Perception Dimension Factors According to Family Income

Table 46: Mean Values of Consumer Quality Perception Dimension Factors According to Family Income

Table 47: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Family Income

Table 48: Mean Values of Consumer Price Perception Dimension Factors According to Spending Per Month

Table 49: Mean Values of Consumer Quality Perception Dimension Factors According to Spending Per Month

Table 50: Mean Values of Private Label Source Dimension, Word Of Mouth Dimension and Attachment to Brand Dimension Factors According to Spending Per Month

Table 51: One-Sample Statistics for Hypothesis 1

Table 52: One-Sample Test for Hypothesis 1

Table 53: One-Sample Statistics for Hypothesis 2

Table 54: One-Sample Test for Hypothesis 2

Table 55: One-Sample Statistics for Hypothesis 3

Table 56: One-Sample Test for Hypothesis 3

Table 57: One-Sample Statistics for Hypothesis 4

Table 58: One-Sample Test for Hypothesis 4

Table 59: Results of Multiple Regression Analysis

LIST OF FIGURES

Figure 1: Indian Retail Market Size, (USD Bn)

Figure 2: Urban Population as % of Total Population

Figure 3: Retail Contribution to GDP

Figure 4: Organized Retail Penetration

Figure 5: Category -Wise Retail Market Share and Organized Retail Penetration

Figure 6: Category-Wise Share in Organized Retail

Figure 7: National Capital Region

Figure 8: Private Label Penetration by Value in Percentage Terms (2007-12)

Figure 9: Industry Size and Growth of Organised Retail (Rs. Crore)

Figure 10: Comparative Penetration of Organised Retail %

Figure 11: Share of cities of Operational Mall space in India

Figure 12: Trends in Per Capita Private Final Consumption Expenditure (PFCCE) and Disposable Income (In Rs.)

Figure 13: Percentage Share of Women Employment Out of Total Employment in Organized Sector

Figure 14: FDI Policies Milestone -India

Figure 15: Process of Private Label Creation

Figure 16: Private Label Market Share

Figure 17: Share and Growth Rates of Private Label by Region (Based on Value Sales)

Figure 18: Share of Private Label Sales Enjoyed By Leading Global Retailers

Figure 19: Depth of Private Labels among Indian Retailers

Figure 20: Perceptual Process

Figure 21: Tri-component Model

Figure 22: Three-Component Model of Attitude (Rosenberg & Hovland, 1960)

Figure 23: Hierarchies of Effects

Figure 24: Theory of Planned Behaviour

Figure 25: Categorization of Quality Cues

Figure 26: Proposed Model for the Current Study

Figure 27: Comparison of Consumer Price Perception Dimension Factors According to Gender

Figure 28: Comparison of Consumer Quality Perception Dimension Factors According to Gender

Figure 29: Comparison of Private Label Source Dimension, Existence and Effect of Word Of Mouth Dimension and Brand Attachment Dimension Factors According to Gender

Figure 30: Comparison of Consumer Price Perception Dimension Factors According to Age Groups

Figure 31: Comparison of Consumer Quality Perception Dimension Factors According to Age Groups

Figure 32: Comparison of Private Label Source Dimension According to Age Groups

Figure 33: Comparison of Word Of Mouth Dimension According to Age Groups

Figure 34: Comparison of Attachment to Brand Dimension According to Age Groups

Figure 35: Comparison of Price Perception Dimension According to Family Structure/ Size ..

Figure 36: Comparison of Consumer Quality Perception Dimension Factors According to Family Structure/ Size

Figure 37: Comparison of Private Label Source Dimension According to Family Structure/ Size

Figure 38: Comparison of Word Of Mouth Dimension According to Family Structure/ Size ...199

Figure 39: Comparison of Attachment to Brand Dimension According to Family Structure/ Size

Figure 40: Comparison of Price Perception Dimension According to Education

Figure 41: Comparison of Consumer Quality Perception Dimension According to Education ..

Figure 42: Comparison of Private Label Source Dimension According to Education

Figure 43: Comparison of Word Of Mouth Dimension According to Education

Figure 44: Comparison of Attachment to Brand Dimension According to Education

Figure 45: Comparison of Price Perception Dimension According to Employment

Figure 46: Comparison of Consumer Quality Perception Dimension According to Employment

Figure 47: Comparison of Private Label Source Dimension According to Employment

Figure 48: Comparison of Word Of Mouth Dimension According to Employment

Figure 49: Comparison of Attachment to Brand Dimension According to Employment ...

Figure 50: Comparison of Consumer Price Perception Dimension Factors According to Family Income

Figure 51: Comparison of Consumer Quality Perception Dimension Factors According to Family Income

Figure 52: Comparison of Private Label Source Dimension Factors According to Family Income

Figure 53: Comparison of Word of Mouth Dimension Factors According to Family Income ..

Figure 54: Comparison of Attachment to Brands Dimension Factors According to Family Income

Figure 55: Comparison of Consumer Price Perception Dimension Factors According to Spending Per Month

Figure 56: Comparison of Consumer Quality Perception Dimension Factors According to Spending Per Month

Figure 57: Comparison of Private Label Source Dimension Factors According to Spending Per Month

Figure 58: Comparison of Word Of Mouth Dimension Factors According to Spending Per

Month

Figure 59: Comparison of Attachment to Brand Dimension Factors According to Spending Per Month

Chapter 1: Introduction

This chapter introduces the reader to the topic that thesis will discuss. It begins with a synoptic view of Indian retail industry where a larger picture of Indian economy and retail industry is presented. Then a brief of National Capital Region which is the geographical coverage of the study is presented. The chapter also covers importance or need of studying buyer behavior and importance of private labels for retail industry. The chapter ends with literature review about the private label studies.

A Synoptic View of Indian Retail Industry

In the post liberalization era the retail industry in India is experiencing an unprecedented boom. Recently, India witnessed a lot of dynamism in this industry in terms of retail formats, structures, players, regulations etc. Traditionally, the Indian retail industry was dominated by unorganized local players, with consumers shopping at mom-and-pop operations, roadside markets, and small grocery stores for their daily needs. While an estimated 85 percent of retail outlets continue to operate in these traditional formats, the last few years has seen a rise in modern retail formats such as hypermarkets, department stores, multi-storied malls, and specialty stores—particularly in urban and semi-urban areas.

Retailing in India is receiving global recognition and attention and this emerging market is witnessing a significant change in its growth and investment pattern. International retailers are also keenly watching the Indian government’s policies, which presently allow foreign retailers limited entry only—either through franchising deals with local partners or joint venture partnerships with Indian companies. It is not just the global players like Wal-Mart, Tesco, Carrefour and Metro group are eying to capture a pie of this market but also the domestic corporate behemoths like Future Group, Reliance, Tata Group, Modi, Aditya Birla group, K Raheja Corp, and Bharti group too are at some stage of retail development. They are slowly expanding their retail operations with a number of innovative experiments and strategies.

These players have announced their ambitious retail plans. The industry is buoyant about growth and the early starters are in expansion mood. There is increased sophistication in the shopping pattern of consumers, which has resulted in big retail chains coming up in most metros; mini metros and towns being the next target. Consumer taste and preferences are changing, leading to radical alteration in lifestyles and spending patterns which in turn are giving rise to new business opportunities. Companies need to be dynamic and proactive while responding to the ever-changing trends in consumer lifestyle and behavior.

The generic growth is likely to be driven by changing lifestyles and by strong surge in income, which in turn will be supported by favorable demographic patterns. Rapid growth in international quality retail space brings joy to shoppers and shopping malls are becoming increasingly common in large cities. The number of department stores is growing at a much faster pace than overall retail. Supermarkets have been taking an increasing share of general food and grocery trade over the last two decades.

The last couple of years have been rosy for real estate developers and the retailers are finding suitable retail space in prominent locations. Development of mega malls in India is adding new dimensions to the booming retail sector. Shopping experience in the nation of shopkeepers is changing and changing very fast. There is significant development in retail landscape not only in the metros but also in the smaller cities. Companies’ like ITC and DSCL went one step ahead to revolutionize rural retail by developing ‘Choupal Sagar’ and ‘Haryali Kisan Bazar’ rural malls. On one hand there are groups of visionary corporates working constantly to improve upon urban shopping experience and on the other hand some companies are trying to infuse innovative retail experience into the rural set up.

The Larger Picture

Retailing in India is emerging as one of the largest industries, with a total market size of USD 320 billion in 2006 and growing at a healthy CAGR of 5 per cent till date. Indian retail sector is growing, driven by increasing urban population with higher disposable income. Rising incomes and increased consumerism in urban areas along with an upswing in rural consumption will further fuel this growth to around 7-8 per cent. This driver is further illustrated in the statistic that the percentage of people in urban areas in India has been growing steadily to reach 29 per cent from just 17 per cent fifty years ago. In a recent article in Frontline, the UN's Department of Economic and Social Affairs estimates that by 2050, 55% of India's population will be living in urban areas - about 900 million people!

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Figure 1: Indian Retail Market Size, (USD Bn)

Source: Economist Intelligence Unit (EIU), A. T. Karney analysis (Retail in India: Getting organized to drive growth, A CII - A.T. Kearney report, Page: 3)

Many factors contribute to India being the most attractive retail target market. A stable democracy provides an economic and social background that comforts big international organizations. On the economic front, the country has seen over 7% GDP growth for the last few years, driving increasing prosperity and consumerism. A look at India's demographics further lends credibility to the retail story. India's consumer market today encompasses over 400 million people with rising disposable incomes. Population shifts towards urban areas and income shifts towards higher income classes are key factors driving consumerism. Also higher incomes are now in the hands of a younger population with lesser dependencies. This implies more income available for spending rather than for savings and investment. All these factors make India as a very attractive market for the retailers.

Figure 2: Urban Population as % of Total Population

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Source: Economist Intelligence Unit (EIU), A. T. Karney analysis (Retail in India:Getting organized to drive growth, A CII - A.T. Kearney report, Page:3)

Table 1: India- Key Macroeconomic Data

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Source: Hidden heroes: Emerging retail markets beyond China, Planet Retail: 2010, Page: 9; GDP and other data presented in annual average exchange rates.

Given the attractiveness of the Indian market for retail, it is no wonder that retailing already accounts for 39 per cent of India's GDP, which is quite a significant proportion if compared with other developed and developing economies. However the proportion of retailing which is in the organized sector is still a very small portion, with penetration at 6 per cent.

Organized retail itself has been growing at a frenetic pace and this growth is expected to continue at a blistering rate of approximately 35 per cent per annum till 2010.

Figure 3: Retail Contribution to GDP

illustration not visible in this excerpt

Source: Economist Intelligence Unit (EIU), A. T. Karney analysis (Retail in India: Getting organized to drive growth, A CII - A.T. Kearney report, Page: 5)

Figure 4: Organized Retail Penetration

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Source: Economist Intelligence Unit (EIU), A. T. Karney analysis (Retail in India: Getting organized to drive growth, A CII - A.T. Kearney report, Page: 5)

Figure 5: Category -Wise Retail Market Share and Organized Retail Penetration

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Source: CRISINFAC (Cited in Retail in India: Getting organized to drive growth, A CII - A.T. Kearney report, Page: 6)

Retail as a whole can be broken into categories, depending on the type of products offered. For India, food and groceries form the biggest category in the retail pie, accounting for close to 70%. However this category has the lowest organized retail penetration of 1%, which is indicative of the greater opportunity available for organized retail and also explains why so many retailers have plans for this category in the pipeline. In comparison, footwear and clothing segments boast the highest penetration of organized retail, as international brands like Nike, Reebok and Levis had started setting up shop almost a decade ago. This segment may see further activity, given the recent government guideline allowing FDI up to 51 per cent for single brand retailing.

In terms of category-wise split of the organized retail market clothing and textiles has the largest share at 40%. This is apparent from the existence of exclusive brand stores as well as specialty chains for apparel, other than the upcoming hypermarkets and department stores which also stock and sell apparel. Next is food and groceries which occupies 19 per cent of the organized market share, and with increased organized retail penetration, this share is expected to move up.

Figure 6: Category-Wise Share in Organized Retail

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Source: Retail in India- Getting organized to drive growth, A CII - A.T. Kearney Report (Cited in Retail in India: Getting organized to drive growth, A CII - A.T. Kearney report, Page: 6)

About NCR - Importance in Indian Retail

The National Capital Region (NCR) in India is a name for the conurbation or metropolitan area which encompasses the entire National Capital Territory of Delhi as well as urban areas ringing it in neighbouring states of Haryana, Uttar Pradesh and Rajasthan. With a total area of about 33,578 km² (12,965 sq mi), it is the world's ninth largest urban agglomeration.

The genesis of the National Capital Region lies in the recommendations of the first Master Plan for Delhi (MPD) notified in 1962 wherein, a broad area consisting of the Union Territory of Delhi and a few ring towns around it was conceived for being developed as a metropolitan region to reduce the population pressure on Delhi and the growing demand for more space owing to large scale industrialization. The Parliament of India enacted the Planning Board Act in 1985 with the concurrence of the constituent States of Haryana, Rajasthan and Uttar Pradesh. The Schedule to the Act has defined the region consisting of NCT Delhi and parts of the adjoining States. The State-wise area covered under National Capital Region is as under:

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Within these districts, the Board has identified several priority towns all over the region for its growth and balanced development. In addition, in order to arrest the migratory population to the region, counter-magnet areas have also been identified for accelerated growth.

Table 2: Towns in the National Capital Region (as per Regional Plan 2001)

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Source: Compiled from NCR Planning Board data available at http://ncrpb.nic.in/ncrconstituent.php

The counter magnet areas include Hissar in Haryana, Patiala in Punjab, Kota in Rajasthan, Bareilly in Uttar Pradesh and Gwalior in Madhya Pradesh.

With the inception of NCR region, Delhi has been relieved of the burden of growing demands from corporate bodies and government establishments. With globalization hitting the landscape of Delhi, the city needed more expansion and a better infrastructure to meet those demands. However, with the development of satellite cities like Gurgaon and Noida, this problem was solved to a great extent. Most of the government and corporate offices found their place in these satellite cities.

MNCs and corporate bodies from all over the world are turning their heads towards NCR sighting the availability of skilled manpower and better infrastructure along with the presence of Government and other offices in the region. NCR region is now the home to major international and domestic companies, be it IT, ITES, BPOs or other manufacturing and service industries. Better connectivity and improved infrastructure between Delhi and NCR make life easier for commuters to reach their work place. New roads and flyovers make sure that traveling is an easy ride from Delhi to any of the satellite cities. Owing to the proximity with New Delhi, there has been a tremendous growth in the infrastructure and economy of these cities. States like Haryana and Uttar Pradesh have benefited a lot from the recent developments in sectors like real estate, IT, ITES, manufacturing and other service industries.

Some ten years back, these cities were like small villages with no infrastructure and basic facilities. But, the landscape has transformed completely with the construction of new shopping malls, skyscrapers, roads and flyovers. Modern style residential societies have been developed with luxury homes, apartments, flats and bungalows. Commercial buildings and offices are ever increasing owing to growing demand from foreign and domestic companies. Gurgaon, Noida, Faridabad and Ghaziabad have emerged as important cities in this region.

Gurgaon is located in the northern part of Haryana and the city's population is around 1,000,000 (as per the 2001 census). Gurgaon is the main city of the National Capital Region of Delhi because it is the home to major IT companies and provides the best infrastructure in terms of schools, roads, housing societies and medical facilities. Gurgaon is famous for its outsourcing and off shoring services that contribute the most towards the economy of Gurgaon. Among the major industries in Gurgaon, IT, ITES, auto manufacturing and pharmaceuticals have the maximum existence.

Noida is one of the most modern cities of India with world class amenities and infrastructure. Noida is home to many big international as well as national companies like LG, Honda, Yamha, GlobalLogic, EXL, Birlasoft, Impetus, STMicroelectronics, Mtron, PTI, Fiserv, Adobe Systems, TCS, CSC, HCL, ATC Labs, Interra and Xansa. Some of the main reasons behind the existence of these companies in Noida are the proximity of the city to Delhi and good infrastructure.

Faridabad is one of the main industrial cities of Haryana. The city is bounded by Delhi on the north, Gurgaon on the west and the parts of Uttar Pradesh on the east and south. It is surrounded by river Yamuna in the east and the Aravalli hills in south and west regions. Newly developed Faridabad or New Faridabad is the most preferred destination for industries, IT companies, corporate bodies and government departments.

Ghaziabad, the wild west of UP is now among the 10 most dynamic cities of the world. A Newsweek survey, which put the city on the global map, happened in 2006 and since then Ghaziabad has been hip and happening. In two years, it has done a complete makeover by adding malls, hi-tech cities and golf courses to its new face.

Because of this Ghaziabad, Noida, Faridabad and Gurgaon witnessed hectic development in last ten years. The population has ballooned because of the many opportunities available in these cities. With growing population all civic facilities and commercial services also developed very fast in this region. This region also witnessed one of the fastest growths in retail sector including that of organized retail.

The proposed study will be a study of consumer’s perceptions and attitudes about private label brands in NCR. NCR contributed to US$ 16,342 million of retail revenues in 2005-06, and is projected to open doors to markets worth US$ 19,522 million by 2010-11. Delhi, the retail capital of India and home to the highest number of rich and super-rich households, contributes US$ 12,683 million to the retail revenues.

The total number of households in Delhi stood at 2.8 million in 2005-06, with more than 7,000 households belonging to the rich and super-rich category, with incomes higher than US$ 243,902 per annum. This is the highest for any city across the country. The reasons for selecting the NCR for the purpose of this study are as follows:

- It houses a very rich mix of retail formats both from traditional and modern categories.
- It houses majority of organized retail players operating in India and stores here houses major product assortment irrespective of the source of brand - whether manufacturer or the retailer.
- This area houses a very rich mix of consumers in terms of income, age, education, regional linkages etc. The findings of a study in the NCR region may be applicable to a larger segment of the country.
- It is also convenient for the researcher to conduct a study in this region.

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Figure 7: National Capital Region

Source: NCR Planning Board available at http://ncrpb.nic.in/ncrconstituent.php

Need for Studying Buying Behavior

The study of consumer behavior enables marketers to understand and predict consumer behavior in the marketplace; it is concerned not only with what consumers buy but also with why, when, where, and how they buy it. Consumer research is the methodology used to study consumer behavior; it takes place at every phase of the consumption process: before the purchase, during the purchase, and after the purchase.

Consumer behavior is interdisciplinary; that is, it is based on concepts and theories about people that have been developed by scientists in such diverse disciplines as psychology, sociology, social psychology, cultural anthropology, and economics.

Skilled marketers make the customer the core of the company’s organizational culture and ensure that all employees view any exchange with a customer as part of a customer relationship, not as a transaction. The three drivers of successful relationships between marketers and customers are customer value, high levels of customer satisfaction, and building a structure for customer retention.

The formal definition of consumer behavior is “the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.” In other words consumer behavior is defined as the behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs. Most marketers recognize that consumer behavior is an ongoing process, not merely what happens at the moment a consumer hands over money or a credit card and in turn receives some good or service. Narrow view of consumer behavior focuses on the exchange process which involves a transaction where two or more organizations or people give and receive something of value. On the other hand the expanded view emphasizes the entire consumption process. This view would include issues that influence the consumer before, during, and after a purchase.

Consumers can be seen as actors on the marketplace stage. The roles that consumers perform are among the most important elements to be studied in consumer behavior. Consumer behavior is also an economic process where exchanges take place. These exchanges often involve many players such as consumers, marketer and influencer. A consumer is generally thought of as a person, who identifies a need or desire, selects a product or service to satisfy the need, makes a purchase, and then disposes of the product during the three stages in the consumption process. In many cases the purchaser and user of a product might not be the same person. A separate person might be an influencer. This person provides recommendations for or against certain products without actually buying or using them. In fact, consumers may even take the form of organizations or groups (in which one person may make the decision for the group). Whatever the composition, the decisions made by the consumer and these other players are critical to an exchange being carried out successfully to the benefit of all concerned parties.

The field of consumer behavior is rooted in the marketing concept, a business orientation that evolved in the 1950s through several alternative approaches, referred to, respectively, as the production concept, the product concept, and the selling concept. The three major strategic tools of marketing are market segmentation, targeting, and positioning. The marketing mix consists of a company’s service and/or product offerings to consumers and the pricing, promotion, and distribution methods needed to accomplish the exchange.

Understanding consumer behavior is good business. It is paramount to developing good marketing strategy. A basic marketing concept states that firms exist to identify and satisfy consumers’ needs. So, consumers are the focus of all the marketing activities. Consumer response is the ultimate test of whether a marketing strategy will succeed. Data about consumers helps organizations to define the market and to identify threats and opportunities to a brand.

It is often important for companies to continuously conduct marketing research studies to monitor consumers’ needs and preferences with respect to the products and services that they currently market and what they might develop in the future.

Many of such researchers have found that consumers are highly complex individuals, subject to a variety of psychological and social needs quite apart from their basic functional needs. The needs and priorities of different consumer segments differed dramatically. The objectives of a company should be to target different products and services to different market segments in order to better satisfy different needs. In order to design new products and marketing strategies that would fulfill consumer needs, they had to study consumers and their consumption behavior in depth.

An excellent approach to understanding consumer is market segmentation. Consumers can be segmented along various demographic and psychographic dimensions. One of the important reasons for segmenting markets is to be able to build lasting relationships (relationship marketing) with the customers. Marketers are currently implementing many practices that seek to aid in forming a lasting bond with the often fickle consumer. One of the most promising of these practices is database marketing wherein consumers’ buying habits are tracked very closely. The result of this practice is that products and messages can be tailored to people’s wants and needs.

Role of Private Labels in Indian Retail

Retailing in India is still very primitive mostly dominated by traditional unorganized sector. But post libralisation period has witnessed fast growth in organized segment of retail with entering of many Indian corporates along with a large number of foreign players. Many of the retailers from organized retail section has started offering Private label brand (also referred to as store brand or distributors’ or retailers’ brand) which is defined as “a brand name or label name attached to or used in the marketing of a product other than by the product manufacture; usually by a retailer” as an alternative to national and international brands. More specifically the private labels are retail chains` own brands manufactured by third parties and priced nearly 20-30% lower than established branded products as they spend less on innovation, distribution and marketing, which is limited to in-store display and promotions. At the moment, private labels share in total organised retail business in per cent terms is estimated between 5 to 12% by different agencies.

Though private labels are late entrants, they are catching up fast. In the last couple of years, private labels have seen unprecedented growth with the entry of retailers such as Future Group, Bharti-Walmart, Reliance, Tata Group, Spencers, Shopper's Stop and Vishal Megamart. By doing so, retailers are moving from a position of being solely a distribution channel member to become direct competitors to the manufacturers. Viewed in another way, the retailers are transforming themselves from pure customers to the manufacturers of national brands to direct competitors to the manufactures (Dhar and Hoch, 1997).

Since doing business in private labels is fetching huge profit margins to retailers, the interest in these products is growing rapidly. The margins range from 15-20 per cent in the FMCG sector, around 20 per cent in electronic goods and 30-70 per cent in apparels as compared to established brands. This is because they cut out middlemen costs and pass on the benefit to the consumer. Private labels enhance the bargaining power of the retailer while negotiating with national brand manufacturers. In the long run, the retailer can use the Private Labels to attract customers to their outlet and in-turn increase store loyalty. Thus, many retailers are considering increasing their private label offerings significantly.

Future Group, Reliance, Aditya Birla Retail etc. is aggressively pursuing private label strategy. Aditya Birla Retail, which operates supermarket and hypermarket formats, under ‘More for You’ food and grocery chain, is targeting to increase private label sales to 10-15 percent in the next 2-3 years. "For Future Group, it accounts for 20-25 per cent of its sales," according to Technopak Advisors, a consulting firm specialising in the retail sector. According to Prof. Nirmalya Kumar as much as 50 per cent of Indian retail would be occupied by private labels within the next 10 or 15 years if the government opens up retail sector for international players. Mr. Amit Kumar, Retail head, Fashion@bigbazaar plans to increase private labels from 60 percent to 90 percent in the next three years. For him private labels provide four key merits:

- Gives the opportunities to stand out from the crowd
- Helps maintain consistency in stocks. Outside brands may or may not be available in the future leading to a potential loss of customers.
- Enables retailers to control margins by improving their bargaining power
- Facilitates movement into a planned environment. Since private labeling requires long term planning, it enables the retailers to understand all the nuances of its products

Figure 8: Private Label Penetration by Value in Percentage Terms (2007-12)

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Source: Private Label Shares- Retailers and Market, Planet retail, September, 2008. (Cited in Issues Monitor, May 2009, Volume Three. KPMG INTERNATIONAL, Page: 11)

Globally, private labels contribute 17 percent of Retail Sales with a growth of 5 percent per annum. International Retailers like Wal-Mart of USA and Tesco of UK have 40 and 55 percent private label representation in their stores, respectively. Private label sales are expected to grow at CAGR of 3.7 and 4.2 percent for US and Europe respectively during 2006-11. Private label penetration in developing countries is low but is expected to grow rapidly by 2012. Increased acceptance, lower cost, increased shopper loyalty, direct interaction with customers and economic slowdown are the reasons for expected growth in private label sales. Private label penetration in the emerging markets is lower than the global average - only 2 percent in the emerging markets of China and Russia vis-à-vis the global average of 19 percent in 2007. However, the figure for the emerging markets is expected to grow rapidly.

The increasing popularity of private label products in all product segments can be

attributed to the following reasons.

- Private label products are good substitutes for branded ones: Private label products are no longer considered to be lower quality, cheaper alternatives to branded products. In a survey conducted by the Nielsen Company in the US in 2008, almost 72 percent of consumers thought that private labels were good substitutes for branded products.

- Private labels cost less than the branded ones: According to John Williams, a partner with Toronto retail consultant firm J.C. Williams Group, private label products can cost at least 20 percent less than the national brands. With the global economy in recession, consumers are looking to reduce their spending and hence are switching to cheaper, private label products. The Nielsen survey revealed that two-thirds of consumers viewed private label products as providing “extremely good value” for money.

- Increased shopper loyalty: Customers frequently choose to shop with the same retailer as a level of trust has been developed and they can identify with its brand values. This enhances the acceptance of private label brands sold by the retailer across all segments. Further research, conducted by the Nielsen Company in 2008, suggested that shopper loyalty results in increased private label sales. According to the study, markets in the US that are dominated by a few retailers with an opportunity to establish shopper loyalty are the top markets for private labels. On the contrary, markets with numerous small grocery chains have a lower private label share, since it is difficult for customers to establish loyalty with a particular retailer in such a scenario.

- Retailers can interact directly with customers: Retailers can interact directly with their customers and use the feedback for developing better private label products. Using shopper insights, propositions to be tested can be immediately placed in store, and results data seen in near real time. On the other hand manufacturers of branded consumer products might take months to test a new product through the retailer channel. Hence, R&D costs for retailers developing private label products are lower as compared to branded consumer goods manufacturers. This offers an opportunity for retailers to capture increased share of consumer spending through their private label products.

- Favorable impact of the economic crisis on discounters: The current economic conditions are favoring discounters. For instance, growth of discounters, along with an increasing acceptance of private labels, is expected to push private label sales in most of the western countries.

In India there is an increasing trend towards acceptance of Private Label brands and thus their penetration is on the rise especially in the Apparel, grocery, packaged food, Consumer Durables, Home Care and FMCG segments. Interestingly Indian retailers had huge success with private labels in apparel and fast-moving consumer goods segment. Overall, in India, Private Labels constitute 10-12 percent of the organized retail product mix. Players like Reliance Group, Future Group, Tata Group, Aditya Birla Group, Shoppers Stop, Spencers, Subhiksha, and Vishal have moved towards adopting private labels to address consumer needs and to increase profitability of their retail businesses. Very few retail players in India are into own manufacturing of private labels and are dependent on third parties - For example, Vishal Retail is increasingly shifting from manufacturing to third party sourcing primarily because of increase in categories for private labeling and volumes. However, all big players are putting increasing focus on private labels and there share in their outlets is continuously increasing.

As pressure on the consumer’s wallet mounts with food Inflation in India touching 18.32% for the December, 2010 and product prices across categories going up, there is a fair chance that private labels in modern retail stores would get a boost. Primary reason for this is that private labels in the value segment are usually priced below branded products. With daily use items becoming a cause of concern, consumers are likely to shift to private labels which offer attractive prices.

“Each of our private brands has a defined role to play, whether providing value, recruiting consumer and growing category. In those categories where our role is to provide value, like in many food & home care categories, higher sales can be expected in these times for all those brands, including private ones, positioned on providing value as affordability for a certain section of consumers takes centre stage,” said Devendra Chawla, head private brands, Future Group.

In low-involvement products like hand wash, dish wash and commodities, consumers are more likely to make that shift. “In the entry level products meant for functional usage, people are likely to shift to a private brand. That may not be the case in high-involvement categories like personal care,” said Sanjay Gupta, vice president, Spencer’s Retail. Fabric and apparels have also been stretched as raw material costs are concerned. This category has a large presence of private labels in modern retail, which may prompt consumers to shift to them.

Importance of the Present Study

With increasing globalization and liberalization a number of non-traditional players have entered the retail segment of Indian economy. With their organized expertise coupled with advances in technology and financial strength these players are giving tough competition to each other. An increasing number of brands are competing for a larger share of retail pie. The retailers are facing increasing difficulty to keep their customers loyal with increasing competition along with greater pressure on the profit margins. The industry is witnessing an expanding battleground as retail chains and their private labels (store brands) compete with big national and global brands for consumer loyalty and market share.

The consumer motives, perceptions, preferences, patterns of purchasing and influences differ from product to product and industry to industry. So the marketers in each industry have to study consumer perception and attitude to develop marketing stimuli that consumer will perceive relevant to their needs.

The need to understand the consumer perception and attitude towards private labels, is therefore important to the decision makers, be they the marketers or intellectuals interested in academic research. The rapid development of the Indian retail industry stimulated lot of academic and professional research in this segment. But, the private label (store brand) phenomenon is quite new and relatively very little attention has been paid by academic and professional researchers to it in Indian context.

Given that the major retailers see consumers as the main driving force for the continued existence and future development of private label brands, it would be of interest to identify the factors that determine the attitude toward private label brands among Indian consumers. It is expected that the findings from this study will allow the Indian retailers to effectively target the consumers by managing the important factors that affect the attitude toward the private label brands and consequently make promotional decisions that can create long-term brand loyalty toward these brands.

Literature Review - Private Label Studies

With an increased set of brands to choose from, consumers are deciding the purchase of a particular brand by weighing various factors like price, quality, manufacturer, store image etc. Both the manufacturers’ brands and private label brands are fighting to attract the consumers on these factors.

Traditionally, the retail chains generally priced their private label brands lower than that of the major brands (Steiner 2004), which is a characteristic of most private label brands even today. This results in the so called “price gap” between manufacturers’ brands and private label brands. The existence of this “price gap” has important implication as it has been documented that in the absence of familiarity with the private label brands, consumers are more likely to use extrinsic cues such as price, brand name, and packaging to judge the quality of these brands (Dick et al. 1996, Richardson et al. 1996). Thus, traditionally, this “price gap” has been used by the consumers to infer a “quality gap” between the manufacturers’ brands and private label brands leading to the perception that private label brands are of poor quality (Quelch & Harding 1996, Steiner 2004). Moreover, this association is likely to lead consumers to develop unfavorable attitude toward private label brands.

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