Amazon to Big Bazaar: Companies push their own labels on shopping aisles

Private labels perform an important function in a downturn said experts
Scroll down the online shopping aisles or walk over to the local supermarket, everywhere the rows are overflowing with smartly packaged but little-known brands, all jostling for space with larger, storied names in their categories. Be it fresh milk or cosmetics, electronic goods or home care, private labels are all the rage today. Flipkart, Grofers, Amazon and Big Bazaar among others are pushing their own brands more aggressively, their enthusiasm fuelled by the higher margins that these labels earn and the buy-in from a widening consumer group. 

Online grocery retailer Grofers said that in just over a year, it has expanded to over 800 private labels across categories, from staples and kitchen ingredients to personal care, cleaning products and others. Saurabh Kumar, founder of Grofers said, “In FY2019, private labels accounted for nearly 40 per cent of the total sales of Rs 2,500 crore.”

Euromonitor, in its country report earlier this year, said that in the offline space, the chained supermarkets and hypermarkets are actively pushing their private label products by allocating greater shelf space, offering discounts and products that are priced to cater to both ends of the consumer spectrum. Aditya Birla Retail, Future Consumer Enterprises and Trent Hypermarket are the leading private label players in the country according to the report that also noted that the presence of private labels is more pronounced in laundry care, surface care and toilet care.  

Private labels perform an important function in a downturn said experts. Many consumers, in similar situations in the past, would opt out of branded purchases, stepping into the unorganised segment within these categories. Instead they are switching to more affordable in-house labels. “The demand for private label brands is on the rise as consumers see value in getting a quality product that costs at least 40-50 per cent lesser,” said Kumar.

While price is the hook that lets consumers into the private label space, they stick on only if the quality matches their perceived value of the purchase. Otherwise as Harish Bijoor, founder Harish Bijoor Consults points out, it could be a short-term phenomenon. “In a downturn scenario, down-trading does happen. Brand-consumption caves in and private-labels dominate. But this is mostly a short-term affair,” he said.

However a sustained push from the retailers towards their private labels business is ensuring a long-term buy-in said many. For instance, Flipkart Private Brands has since 2017 built seven brands that cut across 200 categories and over 10,000 products. Adarsh Menon, vice president-Private Labels, Electronics, Furniture at Flipkart said, “What we realised in 2017 was that there were some gaps between what consumers were looking for and what the market had to offer. This was the reason we decided to foray into this space. Over the last year, the selection has been scaled (under private labels) by more than 50 per cent.”

Flipkart’s private label brands include SmartBuy, Perfect Home, MarQ, Billion and Divastri and around two-thirds of its customers (for these labels) are from Tier II cities and beyond. Grofers said that it has seen a strong buy-in for private labels in smaller cities like Meerut, Rohtak. While the response has been good in all categories and across customer cohorts, staples, packaged food and cleaning supplies are the best performing categories for us, Kumar said. Grofers is planning to expand its private label portfolio from 800 products to over 1,200 by the end of 2020. Also by 2020, it is looking at increasing the share of own brands from 40 per cent to 60 per cent.

While small towns and semi-urban areas have been keen on such brands, affinity for private labels is geographically agnostic. This is encouraging many e-commerce and offline retailers to invest in the business. Bijoor said, “E-commerce players will continue to seek better margins in private labels of their own. There will however be tumult, as established brands get cannibalised by this private label play.”

For instance in the liquid detergents category, Future Consumer has just launched its own label, Whirlpool has its own too that retails online and is also directly marketed to those who have purchased its washing machines. These labels are going head to head with HUL and P&G. The battle for consumer mindspace is not only a heated one, but also one that is increasingly veering off the old rulebooks.

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