Private labels crowd the aisles in slow seasons

From detergents to electronic goods and fashion, retailers bet big on private labels as
consumers look for affordable options within the branded universe
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 FY 2019, private
labels accounted for nearly 40 % of the total sales of Rs.2,500 crores.”
Euro-monitor, 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 label 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 cost at-least 40-50% 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 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 label
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 7 brands that cut across 200 categories and over 10000 products, Adarsh Menon, Vice-
President private labels, electronics, furniture at Flipkart said. “What we realized in 2017
was 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%.”
Flipkart’s private label brands include Smart-Buy, Perfect Home, MarQ, Billion and Divastri
and around 2/3rds of its customers (for these labels) are from tier 2 cities and beyond.
Grofers said that it has been a strong buying for private labels in smaller cities like Meerut,
Rohtak. While the response has been good in all categories and across consumer cohorts,
staples, packaged foods 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 1200 by the end of 2020. Also by 2020 it is looking at increasing the share of own
brands from 40% to 60%.
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 be however tumult, as established brands
get cannibalised by this private labels play.” For instance in the liquid detergents categories,
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 mind-space
is not only a heated one but also one that is increasingly veering off the old rulebooks.