Big retailers push sales of high-margin private labels for growth

Big names from India’s apparel retail industry like Aditya Birla Retail, Bharti Retail, Reliance Retail to Future Group are focusing on high margin private labels at their stores, which are making an adverse impact on the sales of popular brands. Not only offline retailers but online fashion portals like Myntra, Jabong and others too are also launching their own labels to drive growth. With margins from major brands failing to match costs, retailers found private labels as a viable strategy to push sales.

Margins driven by the apparel segment are about 40 percent and private labels’ contribution is higher. No wonder most of the apparel retailers focus on increasing number of in-house labels, which are attracting higher footfall as well as better sales. Shoppers Stop, for instance, for the quarter ended September 2014, registered Ebitda margin of 6.1 percent, 98 basis points more than in the year-ago period. Also the margin of its loss-making hypermarket chain, HyperCity, rose 140 basis points in the September quarter and the company is looking forward to a further rise 50-80 basis points in FY16, by when the contribution of fashion to HyperCity’s overall sales will increase to 19 percent. The chain recorded Ebitda break-even during the September quarter.

For the quarter, Kishore Biyani-led Future Retail too reported an Ebitda margin of 10.7 percent, 157 basis points more than in the year-ago period owing to a higher share of the apparel and home segments, which enjoyed higher margins. Even Pataloons, now owned by Aditya Birla Group posted an increase of 400 basis points in its Ebitda margin for the September quarter despite losses.