Croma, the consumer electronics retail chain of the Tata group, will launch its private label to beat the slowdown in consumer spending and also to increase the profit margins.
Croma, which is promoted by Infiniti Retail —a wholly owned subsidiary of Tata Sons — will cover a wide range from televisions to electronic massagers. At the same time, the company is planning to phase-out products that are giving low margins.
“We are looking at various products that are in demand and offer high margins" said Ajit Joshi, chief executive officer, Croma. Investment details and time of launch were not disclosed.
Retailers like Croma are foraying into private labels as it offers higher profit margins - which ranges between 15-20 per cent in electronic goods as against 5-10 per cent margin in established brands.
Saying that the competition from big retailers has reduced margins in consumer durables, Purunendu Kumar, associate vice-president (retail and consumer goods), Technopak KSA, said, “The launch of private labels require a high class after sales service and back-end operation. If Croma is able to achieve economies of scale, I think they will have the required margins to do well in the market", Kumar said.
Croma will leverage its partnership with Australia-based Woolworths to bring out the private label. “Our tie-up with Woolworths for back-end operations improves our quality to that of high standard,” Joshi said.
So far, Croma has 23 stores in the country and plans to add 12 new stores by March 2009. Tata Sons has invested nearly Rs 200 crore in the retail chain out of Rs 800 crore to be invested by 2010.
For the Future Group, its private label ‘Koryo’ has been growing by 60 per cent year on year, but actual numbers were not made available. It however is looking at developing the high-end product portfolio under Koryo and also undertake some initiatives to push the brand in select markets.
While traditionally in a brand conscious nation like India, private labels have not found favour with the consumers but the current high inflation scenario seems to be the high point for private labels as more and more consumers are willing to try these new brands.
Retailers are also taking to private labels to fill the gaps in price points and categories and in turn providing a wider choice to the consumer. The challenge however is that since a private label is an in-house brand and retailers are skeptical of advertising the same which comes in the way of brand building.
