Private Brands in Retail: Building Loyalty and Bargaining Power

Walk into a Westside, a Reliance store, or a DMart, and you will notice something interesting on the shelves. Alongside familiar names like Colgate and Surf Excel sit products carrying the retailer’s own label. These are private brands, and they have quietly become one of the most powerful tools in modern retail. They reshape how stores earn profit, how they keep customers coming back, and even how much leverage they hold over the big manufacturers who once called all the shots.

What are private brands? 🔗

Private brands, also called store brands or own brands, are products developed and sold by a retailer under its own name. The retailer does not necessarily run a factory. Instead, it sources products in bulk from manufacturers, often the same ones who make national brands, and then sells them under a label it controls. These products are usually available exclusively in that retailer’s outlets, which is exactly why the term “store brand” fits so well.

A good example is Shoppers Stop, which has built a portfolio of in-house labels including Stop, Kashish, Life, and Haute Curry, sold only across its own stores. The earlier Big Bazaar chain did the same with a range of own labels in groceries and household goods. The defining feature is ownership: the retailer designs, prices, stocks, and markets the product itself rather than simply stocking what a brand company asks it to.

Definitions of private labels vary slightly depending on whether a product is sold across many chains or restricted to one. When it is exclusive to a single chain, the more accurate terms are “store brand,” “own brand,” or “home brand.” What they all share is that the product reaches the customer under the retailer’s name, not the manufacturer’s.

Why retailers develop private brands 🔗

Retailers do not invest in their own labels by accident. There are clear strategic reasons, and most of them come down to control, profit, and loyalty.

Reducing manufacturer dominance 🔗

For decades, large manufacturers held the upper hand. A store that wanted to attract shoppers had little choice but to stock the leading national brands, and the manufacturer set the terms. By launching their own competing products, retailers shift this balance. Research on the topic finds that retailers gain bargaining power through lower wholesale prices once they introduce private labels, because the manufacturer now faces a credible in-house rival on the same shelf.

This effect is more than temporary. Studies show the retailer can secure a lasting advantage in negotiations, since the manufacturer of an imitated national brand keeps wholesale prices lower even after the initial competition settles. In short, owning a private brand gives the retailer a stronger seat at the negotiating table.

Building customer loyalty 🔗

A private brand can only be found in one chain. If a shopper grows to like a retailer’s own tea, biscuits, or apparel, they have to return to that retailer to buy it again. This creates a natural pull that national brands cannot offer, because national brands are available everywhere. Academic work on the subject links private labels directly to greater retailer loyalty and long-run profits, as own brands help a store stand apart from competitors.

Differentiation and tailored products 🔗

Because the retailer designs the product, it can shape it around what its specific customers want. A chain that knows its shoppers prefer a particular flavour, fabric, or price point can build that preference straight into the product. This is much harder to do when simply reselling a national brand designed for a mass market. Differentiation also builds credibility: when a store brand consistently delivers quality, customers begin to trust the store itself, not just the product.

Higher margins and lower promotion costs 🔗

This is often the biggest driver. National brands spend heavily on nationwide advertising, and that cost is built into their wholesale price, leaving the retailer with a thinner margin. Private brands skip most of that marketing spend, so they can be sold at lower prices to shoppers while still earning the retailer more profit per unit. Analysis of grocery retailing shows that while national brand gross margins often sit in the 25 to 35 percent range, private label margins can exceed 40 percent. That arithmetic alone explains why so many chains are expanding their own labels.

Private brands vs. national brands 🔗

To understand why private brands matter, it helps to compare them directly with national brands like Colgate, Rin, or Surf Excel.

The case for national brands 🔗

National brands carry built-in advantages. They are supported by large advertising budgets, enjoy widespread recognition, and benefit from strong customer trust earned over many years. Shoppers often reach for them automatically. For the retailer, however, this comes at a cost: national brands typically deliver smaller profit margins, because the manufacturer captures much of the value and dictates pricing.

The case for private brands 🔗

Private labels flip several of these dynamics in the retailer’s favour. The store controls pricing, stock levels, shelf placement, and the product itself. It can decide how much to produce, when to discount, and where to display the item. Importantly, retailers price private labels well below national brands, often 20 to 40 percent lower, yet still earn a higher percentage margin because the supply cost is so much lower. A study of major retail chains even found that in categories where a chain has a strong private label presence, its margins on the national brands themselves are significantly higher, an indirect bonus of owning a competing label.

The trade-off is that private brands lack the national advertising muscle and the instant recognition that national brands enjoy. Convincing shoppers to switch takes time and consistent quality. But that gap is closing fast in India, where own labels are gaining real ground.

The growing popularity of private brands in India 🔗

What was once a small slice of the Indian retail market is now a major growth story. As organised retail expands and shoppers become more comfortable trying new labels, private brands are moving from the margins to centre stage.

The numbers tell the story. A recent EY report found that 52 percent of Indian consumers are opting for private label products, with 70 percent saying these brands now offer better quality. Retailers have noticed too, with shoppers reporting that own labels are displayed more prominently, often at eye level, signalling a deliberate push by stores. Among grocery e-retailers in particular, private labels have grown to contribute a large share of sales.

Major Indian players are leaning in hard. Reliance Retail has been intensifying its focus on private labels, even moving into consumer durables to challenge established global brands, and has acquired food companies to widen its own portfolio. Trent, the company behind Westside and Zudio, is frequently noted for its private-label strength and fast turnaround, with collections built specifically for local shoppers.

Why India is leapfrogging the usual timeline 🔗

In developed markets, private brands grew steadily over decades. Large international chains such as Marks & Spencer, Tesco, and Carrefour built deep own-label ranges, and in Europe private-label penetration has climbed to around 38 percent. India is following a different path, growing much faster from a low base. One analysis notes that while private label penetration remains low in markets like China and Latin America, India’s retailers are compressing this timeline by using their control over physical store space as their main weapon. As organised chains like Westside and earlier grocery players expanded, private branding gained the kind of momentum that took Western markets far longer to build.

How private brands build bargaining power 🔗

It is worth returning to one of the most strategic benefits, because it is easy to overlook. When a retailer launches a private label that imitates a leading national brand, it changes the entire negotiation. The manufacturer can no longer assume the store needs its product, because the store now has a substitute it fully controls.

Detailed research describes this as the “bargaining power” hypothesis, and the evidence supports it: retailers secure lower wholesale prices on the national brands they imitate. The gain tends to be larger in niche categories, where a national brand has limited pull, and the advantage proves durable over the long term. So a private brand is not just a product on a shelf. It is leverage. Every own-label item a retailer launches strengthens its hand against the manufacturers it buys from.

Challenges retailers must manage 🔗

Private brands are powerful, but they are not effortless. A poorly made own-label product can damage the trust shoppers place in the entire store, since the retailer’s name is directly attached. Quality control therefore matters far more than it does with a national brand, where any failure reflects on the manufacturer instead. Retailers also have to invest in design, sourcing, and shelf space, and they take on the risk of unsold stock. Building recognition without the heavy advertising budgets that national brands enjoy demands patience and consistency. The reward, greater margin, loyalty, and control, comes only when the products genuinely deliver.

What do you think? If you were running a retail chain, which product category would you choose to launch your first private brand in, and why might that category be easier or harder to win against established national brands? And as a shopper, what would it take for you to trust a store’s own label as much as a brand you have known for years?

References

1. https://www.statista.com/topics/8166/private-labels-in-india/
2. https://link.springer.com/article/10.1007/s11129-010-9085-9
3. https://www.researchgate.net/publication/225158101_Do_private_labels_increase_retailer_bargaining_power
4. https://www.just-food.com/comment/private-labels-growth-surge-and-the-us-brand-battle-ahead/
5. https://tuck.dartmouth.edu/news/articles/private-label-products-in-the-manufacturer-retailer-power-balance
6. https://www.ibef.org/industry/retail-india
7. https://www.entrepreneur.com/en-in/news-and-trends/indias-retail-sector-witnesses-rising-demand-for-private/498673
8. https://www.indianretailer.com/article/retail-business/retail-trends/top-retail-brands-india-driving-organised-retail-growth
9. https://indiadispatch.com/p/retail-private-label
10. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1550419