Flipkart says it does not believe in putting all its eggs in one basket. It is therefore spreading its labels across many categories and varied price points. “At the bottom of the table is Flipkart Smartbuy which deals in low-ticket everyday items in categories where customers are usually doubtful about the quality of products they get. We then went into small appliances and personal care devices, still low cost but a little more high-involvement. Early on, we began seeing good conversion rates and great feedback, which sort of helped prove our hypothesis,” says Adarsh K Menon, head of Private Labels at Flipkart.
Moving beyond low-ticket items and into more premium categories, Flipkart has rolled out brands such as Marq in the large appliances space. While the brand does not compete with the big guns such as Samsung, LG or Sony, the buy-in cost into the category was a significant step up from data cables and even mixer grinders. Here the company says it utilised its significant understanding of customer preferences to tailor the perfect product.
Data is a valuable tool in the Flipkart consumer toolkit as is the additional surrounding infrastructure that it has built around its e-tail business. For instance for the in-house personal electronics and appliances brands, it has acquired Jeeves and F1 Info Solutions to deal with sales and post-sales service.
Flipkart is also careful with its pricing. “If we provide something with similar specifications and quality to the market, then our cost must be lower. If we provide a television at the same cost and quality as other manufacturers, then our specifications must be better. This has been our thinking with Marq and we’ve seen some of our products going on to dominate categories they play in,” says Menon.
Trust by association
In the coming months, the goal is to not only introduce more products in more categories, but also sustain sales and ensure customer satisfaction and quality with the private labels portfolio. For this the company wants customers to trust the private labels and judge them, not by the time spent in the market but, by their association with the Flipkart name.
Analysts see a risk here because the company is giving its brands a three to six month period to prove themselves. A brand is then like a unicorn, everyone has heard of one and wants to believe in it, but can’t seem to spot one, say experts. But Flipkart says it has seen initial success. In the 2017 Big Billion Day sale, the company says two months of inventory of small appliances and furniture was sold out in five days.
Menon says that the company has achieved its 12-month goal of launching private label products in 100 categories. The long term goal is to earn 15-20 percent of its revenues from in-house brands in the next 2-3 years. Experts are skeptical. They see the sales figures being inflated because of the special offers and deals that are being structured around the private labels and while discounting has helped the brand establish its mettle as a marketplace, it could backfire with its own labels.
“Flipkart does not have a premium image. So when you slap the Flipkart brand name onto a television, it will have the image of a low-end television set. There’s no way this brand name can attempt premiumisation and that’s a downside,” says Harish Bijoor, branding and consulting expert.
There is a counter argument to this: While many e-commerce players have built their reputation giving heavy discounts, they are not stuck being manufacturers of low-end products. Be it Walmart, Costco or Best Buy—they operate across the spectrum. The difference here is that the global players have not built their brands overnight. “There are retailers with robust private label programmes, but they have not done it on day one, it has taken some time. With Flipkart being a venture backed player, I have my doubts if they will get enough time to execute such a strategy,” says Devangshu Dutta, chief executive at consulting firm Third Eyesight.