Amazon India set to expand private-label offerings
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Bengaluru/New Delhi: Online marketplace Amazon India plans to create its own private brands in fashion and expand its existing private label offering in electronic accessories and related products, two people familiar with the matter said.
The company, which operates the Amazon Now grocery ordering app, is also considering launching private labels in groceries and has hired legal consultants to help it figure out structures that comply with regulations, the two people said on condition of anonymity.
Amazon has hired former Myntra chief creative officer Gautam Kotamraju to lead its push into private brands in fashion. Kottamraju, who has worked 18 years in the fashion business, helped create Myntra’s large private brands business, which generated more than 20% of Myntra’s gross sales within two years of its launch. Now, brands such as Roadster, Mast & Harbour and Dressberry account for nearly 25% of Myntra’s sales. Roadster is one of the top five brands on its platform.
Kotamraju started as a freelance fashion designer and later worked with Arvind Ltd, owner or licensee of brands such as Flying Machine, US Polo and Arrow, before joining Myntra in 2012. He headed the company’s private brands business and then moved on to the role of chief creative officer before leaving in May.
Amazon has tasked Kotamraju with replicating his Myntra success in private brands, said the people cited earlier. Amazon hasn’t decided on a timeline for the launch of its proposed private brands in fashion, they said.
Expanding its fashion business is important for Amazon in its e-commerce battle with Flipkart, which owns Myntra and Jabong, two of the largest specialty online fashion retailers in India. Fashion is expected to be the single largest product category in online retail by 2020 and also offers much higher margins than books and electronics, according to a May report by Google Inc. and A.T. Kearney. Within fashion, private brands offer fatter margins to marketplaces than third-party brands.
Mint reported on Tuesday that Amazon surpassed Flipkart in gross sales in July. But while Amazon dominates book sales and has caught up fast with Flipkart in the smartphone business, Flipkart is the market leader in fashion sales by a comfortable distance. Last month, Flipkart bought Jabong from Rocket Internet and Kinnevik in a $70 million deal to extend its lead in the segment.
“Amazon wants to take on Flipkart in fashion and they’ve identified private brands as a potential big driver of growth. Private brands give you exclusivity and the margins are higher; so, it’s potentially a very attractive business,” one of the two people cited earlier.
Amazon didn’t respond to an email seeking comment.
Launching private labels is tricky as India bans foreign direct investment (FDI) in online retail, but allows 100% FDI in the marketplace model, under which sites such as Amazon and Flipkart are supposed to simply connect third-party sellers with customers.
Amazon currently offers headphones, charging cables, bags and a few other accessories under the AmazonBasics brand. Its largest seller, Cloudtail India Pvt. Ltd, sells these products.
Cloudtail is Amazon’s e-commerce retail joint venture with Infosys Ltd co-founder N.R. Narayana Murthy’s Catamaran Ventures. Cloudtail started operations in the middle of 2014 and soon became Amazon’s largest seller, contributing more than 40% of its business in some months.
Amazon will significantly expand its AmazonBasics brand this year, said both the people cited earlier.
Flipkart is also making a renewed push into private labels, two years after it poured hundreds of crores of rupees into making and marketing Digiflip tablets, Flippd clothing and Citron home appliances.
In May, Flipkart chief executive Binny Bansal proposed building a large private-label business by September, and put Mausam Bhat, a product and marketing expert, in charge of this push. The company has delayed its plan by a few months but it still wants to launch private-label products before the end of the year.