E-commerce companies chase private labels

While e-commerce companies are exploring private labels, they have to be extremely cautious about the quality and value of their offerings to customers

E-commerce firms are looking at private labels to boost business, mirroring a move that offline retailers such as Shoppers Stop and Big Bazaar made in the past.

Myntra, the Flipkart-owned online fashion portal, owns brands such as Roadster, Mast & Harbour and HRX, which make up around 25 per cent of its sales. It says it will be among the first e-tailers in the country to become profitable, boosted by the higher margins it earns from private labels.

“E-commerce companies are realising that they have to enjoy larger margin structures. They are now turning to having their own range of items. This will give them larger margins as well as help them make their brand names stronger,” said brand consultant Harish Bijoor.

Myntra is now joined by Amazon, Lenskart and Flipkart, all of whom started off as storefronts. As the sector gains maturity, more firms are looking at profits, pushing them towards opening their own line of branded products.

Amazon, a late entrant in India, might have caught up with rival Flipkart in monthly sales, but the Indian firm still maintains a massive lead over it in fashion. With fashion being the second largest category for online selling, Amazon on Wednesday launched its private fashion brand Symbol.

“India has few brands. As the leading online fashion and lifestyle retailer, we should actually create brands. Myntra Fashion Brands, our core asset, creates brands,” said Ananth Narayanan, CEO of Myntra, in an earlier interview with Business Standard.

Fashion is not the only category where e-commerce firms are experimenting with private labels. Amazon has been working with its largest seller Cloudtail to launch its own line of mobile and PC accessories under the brand name AmazonBasics. Flipkart launched DigiFlip, its in-house electronics accessories brand in 2012, but shut the brand last year.

Globally, Amazon has one of the most successful private labels, Kindle, the largest seller of e-book readers in the world.

While private labels might seem like the way forward for sustainable e-commerce in India, not all players are on board, including India’s third largest e-commerce marketplace Snapdeal.

The company says it does not have any private label brands and does not plan to introduce any.

Shopclues, another e-commerce firm, says it does not have private labels, but encourages its merchants to start them. This might work for Shopclues, which largely sells unbranded wares to buyers in smaller towns, but the model is not as lucrative for larger players like Amazon, Flipkart and Myntra.

“When I purchase a product on sale, I am always wary of its quality, even if it is from a big brand. The same applies to these e-commerce companies, which have built their brands around offering discounts,” said Kartik Kompella, founder of Purposeful Brands.