Govt regulations should support MSME sector's entry into private labels

Ingovern also pointed out that private label and D2C are here to stay

The government regulations should be supportive for the MSME sector and encourage their entry into the private labels and direct-to-consumer (D2C) space, Ingovern said in its report.

According to the corporate governance firm's report titled—Private Labels and Direct to Consumer Brands: Democratising Retail Commerce in India—it stated that a conducive compliance regime will help them compete with national and international brands.

It said in its report, "With multiple ministries controlling the e-commerce sector, which has already created misunderstandings, the government must clear up the regulatory space. There is a dire need to understand the different business models adopted by e-commerce players."

The report also added that, "At this point in time, the regulations should focus on facilitating the sector's growth, including private labels, instead of subjecting the sector to more regulations and compliance requirements."

It emphasised the fact that private labels or D2C brands have the ability to respond to changing consumer trends and preferences effortlessly at a fast pace.

Ingovern also pointed out that private labels and D2C are here to stay.

It said that consumer preferences will continue to move towards affordable products, which offers an investment opportunity for retailers and MSMEs to offer value-driven products that are high in quality as well.

"Moreover, they offer tremendous opportunities for exports. These might pave the way for India-made affordable and quality products to be sold worldwide," the report said.

Private labels and D2C products are typically produced by third-party manufacturers but sold by retailers as their own brands, which in turn gives the retailer control over pricing, production, branding among other aspects.

According to the Indian Retailing Bureau, the private labels and D2C market in India is currently estimated at Rs 1,300 crore, which accounts for 10–12 per cent of the organised retail in India.

Retailers such as Pantaloon, Trent, Shoppers Stop and Spencer's have increased focus on private label retailing.

The report stated that private labels constitute 90 per cent of Trent's, 80 per cent of Reliance's and 75 per cent of Pantaloon's overall sales.

Aditya Birla Retail plans to increase the share of its own brands in sales from the present 3 per cent to 10 per cent in the next 2–3 years.