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Online private labels look beyond price

In-house brands of etailers are focusing on their own design studios and roping in celebrity endorsers to work around discounting of other brands

Raghavendra Kamath nbsp;nbsp; Sayantani Kar  |  Mumbai 

Ahead of his latest release around Diwali, fans of Shah Rukh Khan, the King Khan of Bollywood, will see a lot more of him over the next few weeks. But one of the brands he will soon be seen endorsing is a first for him too. Yepme, a private-label (selling products under its own brands), has signed him as the brand ambassador. For Yepme, this is not the first Bollywood endorsement deal. It has three other actors including Farhan Akhtar as ambassadors for its various in-house brands. Myntra, acquired by earlier this year, has Ranveer Singh (for its Rs 100-crore jeans brand, Roadster) and Kangana Ranaut as brand endorsers.

Online private labels sell both on pure-play and multi-brand etailer platforms. Besides cutting celeb endorsement deals, owners of in-house brands are sharpening their fare for specific need-gaps. The biggest edge, as with private labels offline, is pricing power. However, with brands being heavily discounted by multi-brand such as Flipkart, and Snapdeal, do private labels, even with their celebrity pull, stand a chance?

Bent on design

Some players are choosing to raise the bar on their differentiation to get around the price conundrum. Fashion e-commerce site, Jabong, a multi-brand stop, set up a 15-member fashion design studio in London to design all its private labels. While online retailers choose to source locally, there is a steady trend of players focusing on upping the design ante.

Praveen Sinha, co-founder at Jabong, says, "We differentiate our products by launching styles which are not available in the market. We have brought out celebrity designs by the likes Rohit Bal."

Myntra, another multi-brand store, has tied up with Italian fashion house, Parabellum, led by popular designer, Vani, to work on a new brand. Pure-play private labels portal, Donebynone, which sells clothes, shoes and accessories under its own name, resorts to stylised photography and presentation of its offerings, positioning itself as a chic option for young buyers.

Jabong claims that one in five products that sell on its site belongs to one of its seven private labels. While private labels' share in revenues is around 18 per cent, Jabong is gearing up to take it to 40 per cent in a couple of years. Myntra's eight fashion brands account for 20 per cent of its revenues. FabAlley, a pure-play private-labels seller and a start-up, is clocking more than Rs 1.4 crore per month, growing at 25 per cent.

However, Prashant Agarwal, joint-managing director at Wazir Advisors, says establishing a private label as being of the same quality as brands is a challenge. But barring costs, are able to save on real estate and inventory costs. As a result, "if an offline retailer sells a product at three-four times the original value, online retailers can sell it for just 1.5 times," says Agarwal.

Celeb count
Celebrity endorsers seems to help. Myntra's senior vice-president, fashion brands, Abhishek Verma, who joined from McKinsey & Co, says, "Both endorsements have helped elevate the brands' positioning." While Singh promotes Roadster, Ranaut is onboard for Dressberry. Taking celebrity endorsments a step ahead, Jabong even launched a clothing line designed by actor and current Bollywood favourite, Alia Bhatt.

All for reach
held an offline fashion week, setting up stalls to reach out to consumers. For reach, some players like sells on other multi-brand portals.

Kavindra Mishra, chief executive of Pepe Jeans and co-founder of Zovi, another strong pure-play player that services small towns too, says "Private labels online let you reach customers at multiple levels. You can price them sharply and get repeat customers."

Low cost no more
The pricing advantage is undeniable. Even at prices 20-30 per cent lower than national brands, get 40-50 per cent margins.

For example, jeans in the Farhan Akhtar collection on or of Roadster on cost Rs 1,100-1,500 compared to a tag of atleast Rs 2,200 of a mainstream brand. However, price alone can't be the winner when established brands are getting discounted online.

Rohan Dighe, founder & CEO of ViralMint, an on-site social commerce platform, says, "Since many portals are discounting national and foreign brands, etailers have to make their private labels competitive. But discounting further can only be a short-term strategy."

Sinha of Jabong says, "We also have private labels which are priced lower than others. But we balance it with differentiated styles."

To gun for its target of 40 per cent share, Jabong is planning to source more from China, Turkey and Vietnam, and plough the resultant savings in heavier branding.

Experts say that with investments from foreign funds, e-commerce players can take bigger bets on private labels. Mishra of Zovi predicts that in the next five years, the first $5 billion private label will be owned by online retailers and not offline retailers.

First Published: Thu, October 16 2014. 21:40 IST