Flipkart follows Amazon into private labels, intensifies competition
Flipkart, the country’s largest e-commerce company, will launch a slew of private label products starting Friday, to stay ahead of Amazon, which for months has been trying to knock off its Indian rival from the top position.business Updated: Dec 09, 2016 12:41 IST
Flipkart, the country’s largest e-commerce company, will launch a slew of private label products starting Friday, to stay ahead of Amazon, which for months has been trying to knock off its Indian rival from the top position.
“We realised that almost in every category there is a gap in quality and selection, and we wanted to fulfill that,” said Adarsh Menon, head of private labels at Flipkart. “There shall be three umbrella brands, and we have identified 50 categories.”
Flipkart will focus on bringing in high quality products at an affordable price. To start with, it will launch Smartbuy, the umbrella brand for electronics and appliances, and then enter the home category, followed by furnishing and apparel.
Amazon has already launched Amazon Basics (for electronics) and Symbol (for its clothing line).
However, Menon denied that Flipkart was following Amazon. “We are not doing it because Amazon or Walmart is doing it. That is not the intent, we looked at the categories and wanted to fill the gap,” he said.
For example, Menon said that in an unbranded category like mobile phone chargers, there is a problem of quality, so Smartbuy chargers will come with two years warranty. In case of headphones, the platform had few Bluetooth headphones, so Flipkart wants to fulfil the need of selection.
Flipkart’s move comes at a time, when the private label market is already cluttered, with large format store chains such as Croma and Pantaloons, and e-commerce companies such as Reliance’s AJIO, ABOF and Koovs, are betting a fortune on private labels.
Private labels have its own virtues – it gives higher returns (very important for Flipkart, which is running at huge losses of Rs 2,306 crore in 2015-16). Private labels also allow Flipkart to give desired promotional offers on its own brands, which can become a hook for its first time buyers.
“There is a larger profit pool to be dipped into. But, the profit that we make on the private label will be a by-product of what we offer in quality,” said Menon, who also hopes to bring down returns, which is a major drain on profitability.
According to Chicago-based market research firm IRi, 80% of buyers feel that private labels offer good or better quality compared to its national counterparts.
Menon said that Flipkart will be sourcing goods from factories around the world, bring them to its warehouses in India, brand them under Flipkart Assured, and then give it to a few handpicked sellers to sell it on the platform.