(Repeating to additional subscribers)
* Amazon, Flipkart private labels woo price-sensitive
* Key to creating loyalty and higher margin business:
* To use private brands to meet consumers’ specific needs:
* Flipkart, Amazon may take Indian private brands overseas
By Sankalp Phartiyal
MUMBAI May 30 (Reuters) – For Lalit Bisht, buying Roadster
jeans and T-shirts off Myntra, Flipkart’s fashion operation, is
a no brainer. It may take a week to deliver clothes to Bisht’s
small hometown in India’s hilly northern Uttarakhand state, but
the wait is worth it.
“The fit is perfect and price is just about right. It’s a
value-for-money brand,” said 32-year-old Bisht, a government
worker who lives in Haldwani, which had a population of just
over 360,000 at the time of the last census in 2011. It is a
place where options for good quality, affordable apparel are
Bisht’s purchases of at least 20 Roadster items from Myntra
are symptomatic of the appeal of private label brands for tens
of millions of aspirational Indian shoppers looking for low-cost
alternatives for everything from clothes to smartphones. These
are people who may want to look hip and cool but can rarely
afford to splurge on the big global brandnames.
And with Walmart now taking on Amazon Inc
in India with its $16 billion purchase of the homegrown online
retailer Flipkart, India’s e-commerce wars are likely to pivot
more toward private label brands.
Up until now, the battle has more often been fought through
flash sales of discounted electronics but the losses in that
game are unsustainably large.
Both Flipkart and Amazon have been burning through cash to
offer those discounts and a bigger push into private labels
could help them make money as they control the pricing,
marketing and supply chain of these brands, say analysts.
With nearly 500 million Indians using the internet in 2018
and many just dipping their toes into online shopping, private
labels will woo price-sensitive customers and create loyalty and
higher margins, say retail analysts.
For example, Roadster jeans for women on Myntra that start
at 389 rupees ($5.73), could lure many more buyers than the
cheapest Levi’s for women that begin at about 1,999 rupees
($29.47) on the denim brand’s Indian website.
Last year, Flipkart launched its private brand Billion which
sells everything from T-shirts to air conditioners. It also owns
electronics brand MarQ and furniture label Perfect Homes.
Myntra’s private brand portfolio, which comprises 13 labels, is
Amazon too has been slowly pushing into private labels in
India. Its portfolio includes its global AmazonBasics brand that
sells everything from headphones to stationery; Solimo for dry
fruits and bed sheets, women’s ethnic-wear brand Myx, men’s
clothing brand Symbol, and a low-cost smartphone brand 10.or.
“The role of private brands for us is to fill in specific
need gaps that are not being serviced,” Amazon India head Amit
Agarwal told Reuters in an interview last month. “We’ll keep
looking for these opportunities.”
And although Amazon says making money in India is years
away, Arun Sirdeshmukh, the head of its fashion business in
India told Reuters last month that private brands will help it
embark on “a overall long-term profitability journey.”
One supplier, who asked not to be named, said retailers
typically price the shoes he sells at three or four times the
factory gate cost, indicating how much potential there is for
the private brands to price competitively and still make a
Others see opportunities for Flipkart and Amazon to take
some of these Indian private label brands overseas.
Following the deal, Flipkart’s co-founder Binny Bansal said
a lot of the private brands it has created will be very popular
with the Indian diaspora in the countries where Walmart
operates. “That’s something we’ll be looking at,” he said.
Sources familiar with Walmart’s plans say private labels
will be a key focus for the Bentonville, Arkansas-based retailer
in India, an e-commerce market forecast by Morgan Stanley to
grow to an annual $200 billion in a decade.
Walmart’s fashion brands, with clothes priced from $5 to $30
an item, could also be a hit with Indian shoppers, including
labels like women’s apparel brands Time and Tru, men’s clothing
brand George and kids label Wonder Nation, say analysts.
“The U.S. private label for Walmart has always been an entry
price, it tends to be at the lower end of the pricing spectrum,
I think that’s how it will probably work in India as well,” said
Neil Saunders, managing director of consultancy GlobalData
ROAD TO PROFIT
Bengaluru-based Flipkart, founded in 2007 by two former
Amazon employees, has grown to become India’s top e-commerce
firm, thanks, in part, to the exclusive launches of electronics
with deep discounts.
Flash sales of smartphones or TVs, typically exclusive to
one online retailer, create hype around a brand and help move
inventory, but hit profitability – making them a bad long-term
bet, analysts warn.
Flipkart reported a net loss of 87.71 billion Indian rupees
in the year to March 2017. Amazon’s international operating loss
grew 29 percent to $622 million in the first quarter, partly due
to its expansion push in India, where it has pledged a $5
Sources say Walmart could expedite Flipkart’s push into
private brands and help develop new brands to differentiate and
counter Amazon, whose Prime loyalty programme is growing faster
in India than in any other part of the world.
($1 = 67.8300 Indian rupees)
(Reporting by Sankalp Phartiyal, additional reporting by
Editing by Miyoung Kim and Martin Howell)