Flipkart bets on private labels to reduce smartphone dependence
Bengaluru: India’s largest online retailer Flipkart is expanding its private label business to 35 new product categories, including furniture and grocery, as it looks to improve margins and reduce dependence on smartphone sales.
Flipkart will add private label products in electronic accessories, personal audio, home decor, home and kitchen appliances, personal care and other categories by the end of July.
The new categories will be introduced under Flipkart’s umbrella private label brand, SmartBuy, which was launched by the company in December across low-priced products such as chargers, cables, mobile cases and other accessories.
“Work is on in full swing for both the furniture and staples private labels. We also have a brand which plays in higher-end consumer electronics, like smart watches and televisions. We should be in market with furniture by end of July. As we speak, there are people working with suppliers in Malaysia to put the launch together,” said Adarsh Menon, vice-president and head of private labels at Flipkart.
Private labels, which offer higher margins to online marketplaces, is a crucial area for e-commerce firms such as Flipkart, at a time when large investors in India’s consumer internet economy are pushing start-ups to focus on building sustainable businesses, with sound business models.
If Flipkart’s private label push is successful, it will help the company reduce its dependence on smartphones, which contributes a majority of its sales but is a money-losing category.
Flipkart has hired a number of mid-level executives to grow the private label business. Last month, the company hired former Urban Ladder executive Rushabh Sanghvi for the furniture business. Flipkart also recruited a former Sandisk executive Tarun Gupta to oversee quality control and quality assurance for private labels.
“The staples brand should also be in market by end of July,” said Menon.
“The high-end consumer electronics brand should be in market by end of August. The idea is to launch everything before the festive season begins, before Big Billion Day (BBD)—because it is a fantastic platform for us to present the entire range to all of India,” said Menon, referring to the company’s flagship Diwali season sale, which is a major growth driver for Flipkart.
Flipkart is also betting that its upcoming, five-day ‘Big 10’ sale event—which the company is holding to celebrate its 10th anniversary—on May 14 will help the online marketplace boost its private label sales.
Arch-rival Amazon is hosting a competing sale event called the Great Indian Sale from 11 May.
Flipkart, which last month raised $1.4 billion from investors led by Tencent, eBay and Microsoft, has also set aggressive growth targets for the private label business.
“By the end of December 2017, if we get to 10% of top-line units, then that’s a very good milestone to get to by the end of the first year,” said Menon.
Flipkart’s entry into private labels comes at a time when Amazon is also looking to expand its in-house brands.
Amazon’s private label efforts have so far mostly been concentrated in the fashion category—a category where Flipkart will also soon make a play with private labels.
Flipkart’s independent fashion marketplaces Jabong and Myntra already have several private labels.
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While pursuing private labels is a good strategy for online marketplaces, categories such as furniture and groceries are inherently difficult to crack, as building out and managing their supply chains has proven to be a major challenge for top retailers, said Harminder Sahni, managing director of consulting firm Wazir Advisors.
“I doubt if any e-commerce firm can pull this off successfully, even with the right kind of investments,” said Sahni.