E-commerce firms Amazon, Flipkart, others pad up to save private labels biz

E-commerce majors such as Flipkart and Amazon are working overtime to figure out how to continue with the business of their private labels after a recent Department of Industrial Policy and Promotion (DIPP) diktat has cast a shadow on their future. 

Between the two of them, Amazon India and Flipkart have 30 private labels covering 200 different categories. They have together spent $1.5 billion in the country to expand their private labels, and have major expansion plans. Under the new guidelines, issued by the DIPP on Wednesday, online marketplaces will not be allowed to sell products of companies in which they have equity.

“If we go by the guidelines, we might have to shut down the private labels. We are on the verge of suffering huge losses as a lot of capital has been spent on infrastructure, staff, and marketing. We need to have a clear dialogue with the DIPP to see what can be done to prevent this,” said a senior vice-president of an e-commerce major.

‘Unfair deal’

E-commerce firms are being targeted as offline retails have traditionally owned private labels, said industry experts.

“Physical retailers also have private labels — not only in India but all over the world. This is a legitimate business practice. These are not publicly held firms. So they have every right to run with their business plans. Let the Competition Commission of India (CCI) look into issues if there are any,” said Arvind Singhal, chairman, Technopak Advisors.

Sources in the know said Amazon India and Flipkart are planning to approach the government together.

The companies believe if they have to shut down or cut the amount of business they do from their private labels it would have an impact on the number of direct and indirect jobs they provide. This might also make them rethink of their expansion plans in the country.

Big business

At present, private labels comprise almost 15 per cent of the total business of e-commerce firms. Over the past year, these companies have been expanding their operations in this space.

The Kalyan Krishnamurthy-run Flipkart has been bullish of the growth of its six private labels comprising 160 categories and is planning to concentrate more on sales of its private label brands in 2019. 

It claims to have seen a 550 per cent rise in the sales of its private labels in the festive season. “Seventeen private brand products sold every minute this festive sale,” said Adarsh Menon, vice-president, PL and Electronics, Flipkart.

Flipkart has been planning a major expansion and plans to bring out more products in under the six brands next year. 

The company has witnessed a major traction for its private labels in tier-II, tier-III and rest-of-India markets. With the products being almost 20 per cent cheaper than the competition and the company improving its after-sales services, Flipkart has managed to increases sales on the back of price-sensitive customers. 

Amazon has also been expanding its various in-house brands, including AmazonBasics.

Future at stake

Amazon

Symbol and Myx: Fashion and apparels 

Solimo: Small furniture and home appliances 

Tenor: Smartphones 

AmazonBasics: Amazon global in-house brands

Flipkart 

Flipkart Smart Buy: Mobile phone accessories, home furnishing, and sports goods

MarQ: Television, washing machines, microwave, and other electronics

Perfect Homes: Furniture

Miss & Chief: Toys and  babycare products

Billion: Mobile phones and white goods

Super mart: FMCG