India’s e-commerce wars will be transformed by private labels

Bombay: For Lalit Bisht, buying Roadster jeans and T-shirts from Myntra, Flipkart’s fashion brand, is a no-brainer. It may take a week for the clothes to be delivered to Bishta’s small hometown in Uttarakhand, but it’s worth the wait.

“The fit is perfect and the price is just right. It is a value for money brand,” said Bisht, 32, a government employee living in Haldwani, which had a population of just over 360,000 at the time of the last census in 2011. It’s a place that lacks good quality, affordable clothing options.

Bishta’s purchases of at least 20 Roadster products from Myntra are symptomatic of the appeal of private labels to tens of millions of aspiring Indian customers who are looking for affordable alternatives to everything from clothes to smartphones. These are people who may want to look trendy and cool, but can rarely afford to splurge on big global brands.

And with Walmart now taking on Amazon Inc. in India with its $16 billion purchase of homegrown online retailer Flipkart, India’s e-commerce wars are likely to turn more toward private labels.

Until now, this fight has been fought primarily through flash sales of discounted electronics, but losses in this game are unsustainable.

Both Flipkart and Amazon spend a lot of money to offer these discounts, and a greater emphasis on private labels could help them make money because they control the pricing, marketing and supply chain of those brands, analysts said.

Retail analysts say nearly 500 million Indians used the internet in 2018, with many of them just getting started with online shopping. Private labels will attract price-sensitive customers, building loyalty and increasing margins.

For example, Roadster jeans for women on Myntra, which start at 389 rupees ($5.73), could attract many more buyers than the cheapest Levi’s jeans for women, which start at around 1,999 rupees ($29.47). on the Indian website of this jeans brand.

Brand Billion

Last year, Flipkart launched its private label Billion, which sells everything from T-shirts to air conditioners. It also owns electronics brand MarQ and furniture brand Perfect Homes. Myntra’s private label portfolio of 13 brands is profitable.

Amazon is also slowly making inroads into the private label market in India. Its portfolio includes global brand AmazonBasics, which sells everything from headphones to stationery; Solimo, which sells dry fruits and bed linens, ethnic wear brand for women Myx, menswear brand Symbol and budget smartphone brand 10.or.

“For us, the role of private brands is to fill gaps in specific needs that are not being met,” Amazon India chief Amit Agarwal told Reuters last month. “We will continue to pursue these opportunities.”

And while Amazon says it’s years away from making money in India, Arun Sirdeshmukh, its India head of fashion, told Reuters last month that private labels would help it begin its “overall long-term journey to profitability.”

One supplier, who asked not to be named, said retailers typically price the shoes he sells at three or four times their factory entry price, indicating the potential for private brands to price competitively and still turn a profit.

Others see an opportunity for Flipkart and Amazon to take some of India’s private label brands overseas.

After the deal, Flipkart co-founder Binny Bansal said many of the private brands he has created will be very popular with the Indian diaspora in countries where Walmart operates. “That’s something we’ll be keeping an eye on,” he said.

Sources familiar with Walmart’s plans say private label will be a major focus for the Bentonville, Arkansas-based Indian retailer, with Morgan Stanley forecasting the e-commerce market to grow to $200 billion annually within a decade.

Analysts say Walmart’s fashion brands, where clothes are priced between $5 and $30 apiece, could also prove to be a hit among Indian customers. These include, among others: women’s clothing brands Time and Tru, men’s George, and children’s Wonder Nation.

“Walmart’s U.S. private label has always been an entry-level, low-end price point. I think that’s probably going to be the case in India,” said Neil Saunders, managing director of consulting firm GlobalData Retail.

The Path to Profit

Bengaluru-based Flipkart, founded in 2007 by two former Amazon employees, has become India’s leading e-commerce company, thanks in part to its exclusive launches of heavily discounted electronics.

Analysts warn that flash sales on smartphones and TVs, usually only available at one online retailer, build brand buzz and help sell inventory, but hurt profitability and are therefore not a good idea in the long run.

Flipkart reported a net loss of Rs 8,771 crore in the fiscal year ending March 2017. Amazon’s international operating loss rose 29% to $622 million in the first quarter, partly due to expansion in India, where the company has pledged to invest $5 billion.

Sources say Walmart could accelerate Flipkart’s foray into private brands and help develop new brands to differentiate and counter Amazon, whose Prime loyalty program is growing faster in India than any other part of the world.