A survey of private labeling strategy by supermarkets in Nairobi

Abstract

The survey for this report was done between 16th July and 17th August 2001. The study sought to determine the awareness of retailers on private labeling, why retailers would go into private labeling and the problems they encounter while introducing and managing their brands. The study gave a special reference to supermarkets in Nairobi. The population of interest included all supermarkets operating within Nairobi. The information sought in this study was collected using a questionnaire having both structured and unstructured questions. Thirty-eight supermarket executives responded to the questionnaires and this gave the primary data for this study. The findings of the study suggest that retailers in Kenya are moderately aware of the practice of private labeling with only a few having their own store brands. Those who have store brands are majorly in the grocery, frozen food & vegetables, confectionery, bottled water/ beverage, stationary and personal care product categories. These products are either under the outlets specific name or a name the outlets owns: The results of the supermarkets surveyed reveal that most of those with private labels rated them highly compared to competitor's products in terms of quality, features, packaging, design, variety services and the brand name. They also rated the prices of the private labels as being generally low compared to competing products and that the store brands are allocated good shelf space compared to the competing brands. The supermarkets mostly do target all customers with their store brands. The findings also suggest that there are many reasons why retailers would go into private labeling. After carrying out a factor analysis on the responses, then seven factors emerged. These were named: the supermarkets desire to control the distribution channel, winning more customers into the store, the need for higher margins, the general state of the economy and business cycle, expansion of the store, differentiating the store, and reducing the cost of supply. The stores were also found to be facing a myriad of problems to varying degrees in their pursuit to introduce and manage their store brands. These problems include increasing competition, quality standards, the pressure to compete on price, marketing the products, capital, and difficulty in differentiating the products. Other problems reported were the pressure to invest elsewhere, choosing the supplier, fragmenting markets, unfavorable bylaws and decreasing brand loyalty in many categories