Why Indian etailers are bullish about private labels?

Online retail in India has seen rapid growth over the past one year with increasing population of shoppers on the internet. During the initial days of etailing in the country, we have seen the evolution of players such as fashionandyou.com, yebhi.com, 99labels.com and myntra.com selling the branded products (especially in apparels & accessories) on discounted price. As online retail takes off further in India, a host of private labels have gathered to tap the growing population of online buyers in India—27.2 million, according to ComScore, a digital measurement agency.

After Shersingh, Zovi and freecultr, latest to join the bandwagon of private label is yepme.com and Pudulifestyle.com. In addition to that myntra.com, one of the leadPrivatelabel imageing etailers of lifestyle and fashion products is also slated to launch its own private label later this year. So the question arises – why these players are bullish on introducing private labels? Ask Michel Piers, co-founder,  Pudulifestyle.com, a Bangalore based etailer of its own label and he flatly answers, “We strongly believe that the next big lifestyle brand in India will be an ecommerce brand. We already have enough of the Jabongs and Myntras and host of others all selling the same range of products. While the numbers of products they sell per day are impressive to say, the least it begs the question “what are they doing that is different”? We are selling you a “lifestyle” not just a product”.

The major reasons for etailers getting into private label seem to be margin as most of the etailers are selling branded products at a very thin margin and importantly, are passionate about creating their own product line. By selling branded products etailers usually make 10 – 15 percent margin; however in private labels it is as high as 30 to 60 percent. Throwing light on margins in private label, Satish Mani, Co founder, Zovi.com said “across the world, private labels enjoy healthy margins of 30 to 60 percent. Zovi’s margins vary in this range across categories of apparel and accessories”.

Branded products offered by etailers usually have expensive price tag as opposed to private labels. And around 50 percent of major lifestyle etailer’s orders such as Myntra and Jabong come from non-metro cities where price point is a major factor. Speaking about opportunities for private labels in non-metro cities, Vivek Gaur, CEO, and Yepme.com said “our focus is mainly the non-metro audience and they contribute about 70 per cent to Yepme’s turnover. Consumers in non metros and small towns don’t have easy or at all access to brands; however their aspirations have been growing quite fast. We seek out to democratize fashion.  Indians living in even the most remote part of the country can now order the latest merchandises in fashion through our portal”.

Meanwhile, wardrobe size of Indians has also grown significantly, creating an opportunity for private clothing labels in online space. According to comScore, in 2011, the apparel and accessories category grew 166% (in terms of unique visitors) over 2010. Pointing out the opportunity in private label space, Ganesh Subramanian, Chief Merchandising Officer, Myntra.com said that we see a good opportunity in filling fashion – value gap for youth in private brands to start with and later stages across other categories. He also added “there are clear customer segments we see who needs great products at an affordable price”.

According to India Private Labels Apparels& Accessories Market Forecast & Opportunities, 2017′, the apparel & accessories segment is expected to grow. The consumers have accepted private labels well in the apparel & accessories market as they increase the number of options to choose from. The introduction of private label products in the apparel segment has increased the customer base for organized retailing (including online retail) by attracting people afraid of the high price tags of the branded products.

Challenges:

The biggest challenge in building a private label brand over internet is to establish credibility and aspiration for the brand , where the customer lacks an offline touch and feel experience to relate to the brand.

When consumers buy a “brand” they know what to expect and when they buy a new label, there are bound to be quite a few “doubters” that what they see on the website is what they get or if the fit will be right or not. “The challenge is to get them to buy for the first time and we need to “WOW” each and every one of them because the old adage rings true a satisfied customer is your best brand ambassador”, said Michel.

Some of the experts in the industry raise concern over return rate of COD orders attached with private labels and argue that leading etaliers selling branded products have been grappling with higher COD returns. In this scenario private labels are bound to register more COD return rates as trust factor is greater with them in contrast of branded products. However, interestingly zovi.com, one of the early evangelizer of private labels in online space negates the concern over higher COD return rates as they account around 5 percent of COD return rates only.

Subramanian has different view to it as he points out “one of the key reasons for returns is fit. With us owning the entire supply chain, we will have a better hold on the consumer needs and product specification. We don’t see any reason why returns would be more”.