TCL eyes private label space in retail sector

TCL Holdings, the Chinese consumer durables major, is eyeing the private label opportunity offered by the impending boom in the retail sector. The company plans to tap its strength in colour television manufacturing for the emerging new market.

At present, TCL sells about 4 lakh television sets in India, where the annual market size is 12 million units, for a market share of roughly three per cent. However, its manufacturing strength globally is in the range of about 27 million television units.

Industry experts point out that TCL's private label strategy could work as nearly 70 per cent of the global demand in consumer electronics is met by China.

C M Singh, CEO, TCL Holdings, told Business Standard, "One of the growth areas for the company is to become an OEM supplier to the organised retail players. The company is in talks with Reliance, Wal-Mart and other chains to primarily supply colour televisions, DVD players and air conditioners for their private labels."

He added that, currently, this business comprises a mere 2-3 per cent of the India operations, but the pie would grow as the organised retail matures in India.

Last year, Indian durable major Videocon Industries entered into an agreement with Future Group's Home Solutions Retail to supply electronics and home appliances for the Future Group's in-store brands, Sensei and Koryo. Home Solutions Retail launched its private labels Koryo and Sensei in 2006.

While Koryo targets first-time electronic appliances users, the Sensei range consists of digital products like MP3 players, LCDs and air conditioners. Currently, they contribute about 18-20 per cent of the sales, which the company intends to scale up to 25 per cent.

Other organised players like Tata Group's Croma and Reliance Digital are also expected to introduce their own labels. The organised retail is expected to account for 58 per cent of the sales in durables by 2010. A major chunk of these private label sales, nearly 70 per cent, is expected to occur in rural markets, with urban India accounting for the rest.

"The brand-conscious consumers will buy branded products, but the private labels will be growth drivers for the retail chains. LCDs, colour televisions top the preference list as they are still considered a once in a lifetime purchase. With the number of stores increasing, the private labels will also grow as the chains establish store brands," said Singh.

He further added that in China cathode-ray televisions still comprise about 75-80 per cent of the market.

In 2006, TCL sold about 4.15 lakh colour television sets in India. The company expects a 20 per cent growth this year.

During the last calendar year, TCL registered a turnover of Rs 325 crore (Rs 3.25 billion) and aims to cross Rs 400 crore (Rs 4 billion) this year.