Private label brands in online retail are expected to grow seven-fold to touch the size of $15 billion in five years. Electronic accessories, fashion, beauty and personal care are some of the high-growth categories.
Private labels are intrinsic for retail businesses as they drive sales growth by being highly competitive against third-party brands and improve profitability by providing better margins. Among e-commerce companies, private label business is still nascent and a major push happened in 2018 when both horizontal and vertical players launched several private label brands. In the coming years, these brands are poised for significant growth.
In the $26 billion e-tail market, private label currently accounts for around 8 per cent or $2 billion. According to the study by RedSeer Consulting, this is poised to grow seven fold to touch $15 billion by 2023.
Electronic appliances and fashion are two major categories in terms of size. However, electronic accessories, grocery and furniture fall into the high potential category as these segments are dominated by unbranded pl?ayers in the offline market. Along with fashion, beauty and personal care products too have displayed high gro?wth potential in 2018, said Mrigank Gutgutia, he?ad, consumer internet, RedSeer.
Among the big horizontal players, Flipkart last year launched its private label furniture products named ‘Perfect Homes” and expects it to contribute 30-40 per cent of the category’s revenue in a year. Amazon too was aggressive in the private label space with Symbol and Myx in fashion and apparels, Solimo in categories such as small furniture and home appliances and Tenor in smartphones. Its global in-house brand AmazonBasics also was launched last year.
Most of the fashion portals thrive on private label products. Cross-border online fashion portals Shein, Club Factory, Romwe and JollyChic sell private label products at 50 per cent cheaper prices compared to products of similar quality in other e-commerce platforms. These portals have grown significantly in recent times and have grabbed 5.2 per cent share of online fashion business.
Though beauty and personal care is largely a branded play, private label brands introduced by online platforms Nykaa and Purple have seen good demand among customers. Nykaa introduced its first private label in the same name in 2015 with nail paints and expanded it with bath and body products, makeup and wellness products. Purple launched its private label StayQuirky in April 2017 and currently high share of its nail colour sales is attributed to StayQuirky.
Private label brands offer 30 to 50 per cent margin in beauty and personal care compared to 15-18 per cent margin provided by third party brands. These brands accounted for $36 million sales in 2017 and this grew to $84 million in 2018, improving its share from 8 to 12 per cent in one year.