Online private labels drive growth for etailers: KPMG

Ecommerce marketplaces in India are consistently building private labels to increase profitability, says global accounting and professional services giant KPMG. 

Online private labels are expected to grow 1.3 to 1.6 times faster than the growth of ecommerce platforms. These labels will also continue to generate 1.8 to 2 times higher margins than external brands sold by these online retailers between 2019 and 22, according to a report released by KPMG in India and Retailers Association of India.

The growth of online private labels will help etailers lure in repeat shoppers, the report said.

Private labels contribute to a significant 25%-40 % in sales for platforms that sell fewer categories such as apparel and accessories, beauty and personal care products, according to the report ‘The online private label growth paradigm.’

Large online retailers have a limited focus on private labels and the segment contributes to 5% to 10% of their sales. Online private label purchases in such categories see repeat purchases exceeding about 60-65%, indicating that having a strong private label strategy will be a good initiative.

Online private labels allow platforms to attract new consumers, improve consumer stickiness, increasing market share. 

“With a gradual shift from unbranded to branded, online retailers are also launching their own private label brands, thus providing consumers a much wider choice of products and channels to choose from. Private labels have the potential to offer higher margins on account of supply chain efficiencies and better control over operations,” Harsha Razdan, Partner & Head, Consumer Markets and Internet Business, KPMG in India said.

KPMG surveyed a sample of over two dozen online and offline retailers with a pan-India presence across seven product categories for the study.

By 2022, private labels will contribute around 40%, up from 25% in 2019, for some apparel online players. The number could go up to 45% from the current 40% for select grocery retailers, according to KPMG.

According to media reports, Seattle-based ecommerce giant Amazon is aggressively pushing its offline retail play in India with its private-label AmazonBasics.

In May last year, Bengaluru-based Flipkart Internet launched its sports and fitness brand Adrenex, under Flipkart Private Brands.