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<\/i>Alnoor\nPeermohamed, Business Standard\nBengaluru, 26 December 2016<\/i><\/p>\n
<\/i>Alnoor\nPeermohamed, Business Standard
\nBengaluru, 26 December 2016<\/i><\/p>\n
![\"\"](\"https:\/\/www.thirdeyesight.in\/wp-content\/uploads\/2022\/09\/ecommerce-private-labels.JPG\")
The\ncontribution of private labels in India’s online shopping segment is\nexpected to triple to around $5 billion in 2017 as e-tailers try to\nboost earnings and fill gaps in the market in high-margin categories\nsuch as fashion, furniture and home decor.
Private labels make\nup less than 10% of online sales today, or around $1.5 billion in\nvalue, largely driven by fashion retailers such as Myntra, Jabong and\nKoovs. Going forward, it is expected that this contribution could grow\ncloser to 20% and will also be driven by high-value items such as\nfurniture, according to RedSeer Consulting.
“What horizontal\nplayers are doing is they are consolidating buyers of unbranded\nproducts in electronic accessories and some few other categories and\nintroducing products in those gaps,” said Anil Kumar, chief executive\nofficer of RedSeer consulting. “This helps them earn additional margins\nwhere people really don’t care what brand they’re buying as long as the\nprice is right.”
The largest of the horizontal players, Flipkart\nand Amazon, are launching new private labels to improve margins in\ncommodity products such as electronic accessories. Flipkart recently\nlaunched Smartbuy, an umbrella brand for selling electronic accessories\nand home decor products, and plans a second brand next year.
Amazon, too, has its own private label Amazon Basics to sell electronic accessories and Symbol and Myx in the fashion space.
Rival\nFlipkart relies on subsidiaries Myntra and Jabong to drive private\nlabel fashion sales, with estimates suggesting around a third of the\nsales of the two brands being driven by fashion labels.
Amazon\ndid not respond for comments and Flipkart said it was too early to\ncomment as the private labels were launched this month.
With\nIndia’s e-commerce expected to grow by 60-70% in 2017, making it a\n$30-34-billion industry, a sizeable part of that will be driven by\nsales of private label products. The push for private labels largely\ncomes from investor pressure on e-commerce companies to improve\nearnings and get on their way to profitability.
“Given\nhow the market is at the moment, where there is pressure from investors\nwho have been asking about profitability or a route to profitability,\nproducts that earn additional margins are going to be a focus,” said\nDevangshu Dutta, chief executive at Third Eyesight.<\/span>
Globally,\nAmazon has adopted the private label route, selling everything from\ngroceries under its own brand to electronics such as Kindle tablets.\nWhile private labels will grow to contribute under 10% of sales on\nlarge platforms such as Flipkart and Amazon, smaller niche players will\nlook at them more deeply.
As of today, online furniture\nretailers see over 50% of their sales being driven by private labels.\nPepperfry and Urban Ladder, the two leading players in this space,\nalmost exclusively sell furniture under their own brand names. In\nonline fashion this contribution is 25-30% while for online groceries\nit is close to 20%, says RedSeer.
“One\nreason is that when you’re stepping into a gap in the market, there’s\nno competition so you are not forced to discount. Secondly, if you’re\nsourcing it directly and cutting out a brand, the cost of product\ndevelopment and marketing can be made by the retailer,” added Dutta.<\/span>
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