Private label saving Korean retailers

As South Korea’s large retailers are suffering from negative growth, private brands (PB), or private labels (PL) are offering a ray of sunshine to Korean retailers.

Sales of private branded goods have increased 20 to 30 per cent in the first quarter compared to the same period last year.

PB goods are usually 20 to 30 per cent cheaper than other brand goods, and as they are becoming increasingly popular, more customers are building trust in certain brands.

Sales of Home Plus PB goods in the first quarter increased 21 per cent, while sales of all goods combined only increased 0.9 per cent. PB products now account for 28.4 per cent of Home Plus products.

Sales of PL goods also increased 15.4 perc ent at E-Mart, whose management report their  1.1 per cent sales increase in the first quarter – the first year-on-year positive growth rate in 13 quarters – was due to the popularity of PB goods.

Sales of PB goods at the CU convenience chain also increased 7.6 per cent for the first quarter in 2013, 9.1 per cent in 2014 and 22.8 per cent for the same period this year. Sales of such goods at 7-Eleven increased a record-high 34.8 per cent.

An individual with knowledge of Lotte Mart’s operations said that although there was some mistrust in private brands in the past, these days they are among the most competitive goods, as they are produced by well-known manufacturers.

CU said that it would focus on developing personal hygiene PB goods in the future, as it has been only developing snack PB goods so far.

Home Plus also said that it would increase PB production, saying that as more than 90 per cent of PB manufacturers are SMEs, the current boom could also result in a positive synergy effect on them.

Original reported by Lina Jang. Photo: Yonhap.

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