Attempt all the problems.
problem1) Describe in details the Cost and Retail Methods of accounting for Inventory Valuation? Use appropriate exs and Data Tables to describe your understanding?
problem2) prepare brief notes on any TWO from following giving appropriate exs?
a) Merchandise Security & types of Inventory Shrinkage in Retailing
b) Re Order point in Inventory levels and the significance of EOQ
c) Compare Basic Stock Method to Percentage variation method in Inventory Planning
d) Planned Reductions and Planned Purchases in Inventory Planning by Retailer
problem3) What are the main factors affecting vendor negotiation?
problem4) describe Electronic point of scale (EPOS) system. How it is used in improving stock control system?
Read the case and answer the following problems:
Private labels are products which are manufactured by retailer itself, rather than the manufacturer who generally markets them through separate retailers. As is evident, private labels are mostly prevalent in organised retail. Europe is the largest market for private label products globally. Within Europe, United Kingdom is the largest private label market by size, followed by Germany. Private label penetration in United Kingdom is close to 37 per cent at present, and is forecast to exceed 40 per cent by 2011. Should manufacturers really lose sleep over what retailer is doing? Well, private labels are large in developing markets — they account for 40 per cent of Wal-Mart sales ($126 billion or Rs 5,16,600 crore), 50 per cent for Tesco ($36 billion or Rs 1,47,600) and are eating into a larger chunk of organised retail sale in developed markets. In Germany, for ex, private label has shot up from 12 per cent of sales to 34 per cent. This has, in effect, changed balance of power between brand manufacturers and retailers, giving latter a decided advantage when negotiating terms with brand manufacturers. And apart from the multibrand retailers, category of private label-only retailers has also been created — like, Toys ‘R’ Us, Zara — who sell only private label brands.
The writing is on wall: private labels are growing faster than manufacturer brands. They are ubiquitous across categories and they now compete on quality — in fact, they are now brands! Private label share is expected to grab almost 22 per cent of sales in developed markets by 2010.
Private labels have evolved from ‘cheap and nasty substitutes’ to the real thing. Indeed, ‘copycat’ private labels still remain a strong strategy for retailers. However, the copycat no longer depends on the price advantage to fight branded product; it has improved on quality and offers the value proposition to the consumer. Likewise, the earlier theory that recessions fuelled private labels while the economic boom resulted in growth of brands no longer holds good.
Among he leading retailers of private labels is Tesco, that has the large portfolio spanning the entire price range. So from a ‘pile it high, sell it cheap’ approach, Tesco has moved into a more consumer-focused chain where private label offerings are the core of the strategy.
Wal-Mart, on the other hand, casts the net wider on private labels to create a ‘house of brands’. The only caution for retailers is that there should be a judicious mix of private labels and brands.
With India on cusp of the retail revolution, some of the case studies must provide food for thought. In the ACNielsen consumer survey in 2008, only 56 per cent Indians agreed that private labels are good option in comparison with brands – as against four in five consumers in developed countries. Further, same survey also concluded that the majority of Indian consumers associate private labels with low cost, and are, hence, apprehensive about compromising on quality. Target segment for organised retail in India is still predominantly urban, and in the context of private labels, it is more inclined towards ‘upwardly mobile' urban consumers. This segment gives high priority to quality, and the ‘budget label' perception does not help at all.
Further, Indian retailers have not been able to develop the bond with consumers. Consumer loyalty has been seen to provide impetus to private label growth in developed countries like the United Kingdom. The lack of this bonding and loyalty can hamper private label penetration in coming years.
With entrance of different corporate majors like Reliance, Birla, Pantaloon there is intense store-level competition in the present Indian retail scenario. Though, if Indian retailers were to follow UK model, this can actually turn out to be the boon for private label growth. Main UK retailers like Sainsbury and Tesco have successfully used private labels to distinguish themselves. This scenario can be replicated in India in near future. At the same time, though, the Indian consumer's psyche also provides an opportunity for retailers. The Indian urban consumer is price-conscious, but also expects high quality.
problem1) What are private labels? What is the share of private labels for a) Shopper Stop b) Westside c) Pantaloon?
problem2) Suggest strategies by which potential of Private label could be tapped in Indian Market.
problem3) What are the categories in which Private labels likely to exhibit maximum penetration? Justify. Why?