'Private labels to have better margins & boost growth'

BENGALURU: Private label brands are expected to report higher growth rates and yield better margins than the overall growth of e-commerce platforms, says a study by KPMG and Retailers Association of India.
Between 2019 and 2022, private labels are expected to grow 1.3-1.6x faster than ecommerce platforms and continue to generate nearly double the margins of external brands.“Private labels allow platforms to attract new consumers, improve consumer stickiness, and thereby increase market share,” the report says, adding that major players across product categories attribute more than 50% of their private label sales to repeat purchases.
The share of private labels is category dependent and could range up to 90% for fashion, approximately 15-20% in food, and 8-10% in general merchandise. The number of private labels is dependent on the width of category assortment for offline retailers. In certain categories with low brand presence, private labels have become main-stay brands.

The report also said that leading online multi-category platforms have already developed a presence in private labels. Platforms have between two to five brands in categories such as wellness, electronics and cosmetics, and10-20 brands in larger categories such as apparels and food and grocery. Category focused platforms were early to enter and launch private labels, and currently have 25-40% of sales contribution from such labels, while multi-category platforms have around 5-10% of sales attributed to private labels.
“Private labels could be used as a competitive differentiator for platforms. On the demand side, they can address market gaps through new and differentiated products, leading to higher purchase conversions and better ROI. In relatively unorganised and unbranded categories, private labels could offer greater brand assurance and credibility. On the supply side, private labels can drive higher margins on account of better value chain control, category anchorage on the platform and incremental revenue,” the report said.