In tune with the evolving market trends, both customers and brands are increasingly embracing the ‘new normal’. Many big players like Amazon, Reliance Retail, Spencer’s, and BigBasket are betting big on the expansion of private-label portfolios in quest of higher profit margins, gross profit, and business growth. The reasons are simple. Through private labels, they can offer competitive pricing to customers due to better supply chain efficiencies and direct control over operations. As digitization becomes the key to changing market trends, offering good quality products at the best price can help them amplify future growth and sustain in volatile times.

The trend of private labels that was picking up was further fuelled by the pandemic as more value-conscious customers started opting for the best bargains.

As per a report by KPMG on online private labels, “Most of the e-commerce platforms have at least two-five private label brands in categories such as wellness, electronics, and cosmetics, while larger categories like apparel and grocery have nothing less than 15-20 private labels.”

Adarsh K. Menon, Vice President at Flipkart said in a blog post, “If you look at any successful retailer globally, they have a pretty large and sustainable business of private brands across categories. Somewhere in the middle of 2016, as a leadership team, we sat down and looked at our business over the next 3-5 years. One of the many things that came out as an area of opportunity was the lack of a private brand business.”

Leaping on to the opportunity, Flipkart launched its first private label ‘Smart Buy’ in 2016. The umbrella brand sells products in 30+ categories including household goods, staples, electronics, home appliances, kitchen, dining, etc.

India’s largest retail giant, Amazon India is also building its private label business through brands such as Solimo, Echo, and Amazon Basics among many others. Globally, the brand is slated to earn $25 billion from its private labels by the end of 2022.

Offering High-Quality Premium Brands

Joining its competitors in the private label race, the Bengaluru-based bigbasket has also launched many brands.

According to Hari Menon, Co-Founder, and CEO of bigbasket, “The approach of bigbasket to private labels is different from the market. Typically, retail brands offer private products as low-cost packaged alternatives for higher-priced popular brands. However, bigbasket has consciously focused on building its private labels as high-quality premium brands which may not be cheaper, but offer superior quality to the customers.”

“We have various private labels in almost every category of groceries, raw foods as well as in ready-to-eat and bakery products categories. For instance, we have Fresho which offers milk, bread, cheese, eggs, meats, fruits, vegetables, etc. bbRoyal is our private label brand which comprises quality staple products such as rice, atta, dal, dry fruits, and spices. Two new additions in the range of our private label are bbGooddiet and Tasties Origins,” he added.

BBGooddiet is a brand of Healthy Foods like snacks, cereals, nutrition bars, ready-to-cook products, and superfoods that appeal to health-conscious millennials and Gen Y/Z customers.

Tasties Origins is a range of ethnic snacks which cover ethnic snacks from all states of India. For example; one can get their favorite Banana Chips from Kerala, Murukku from Tamilnadu, Jhal Muri from Bengal, or Khakra from Gujarat from any city.

“We are constantly scaling our private label sales, and expect the segment to contribute to about 40 percent of our revenue by coming fiscal compared to about 37 percent of our revenue as of now,” he shared.

Private Label Categories

The major product categories focused on by the retail big wigs for launching the private labels are food and beverages, grooming, fashion, and personal care.

As per a KPMG report, “these brands are expected to grow 1.3-1.6 times faster than the e-commerce platforms generating 1.8-2 times higher profit margins than external brands sold on the same platforms.”

Super Stockists: Moving A Step Ahead

Reliance Retail has begun appointing super-stockists to distribute its private label products in multiple FMCG categories.

According to a report by Kotak Securities, Reliance Retail already has a wide range of private labels across several entry-level foods and non-food FMCG categories and will likely acquire more brands. "We believe own FMCG sales can add a margin layer to the overall Jiomart business," the report said.

In its AGM held recently, Reliance Retail announced its foray into the FMCG business, by developing and delivering high-quality products at affordable pricing.

Reliance Retail already has a large private label portfolio across categories. These brands have been hitherto available on RIL's own sales channels (own stores, websites, etc.) but should now be available at third-party kiranas and stores as well.

RIL's FY2022 Annual Report mentions that RR had a 15 percent share of its own brands in the hand wash and hygiene category (under Puric brand) in its stores/websites.

Conclusion

The fabulous combination of the four Ps including product, pricing, packaging, and perfect placement has helped the brands to penetrate their private labels deeper into the market.