Reliance Retail has started pushing its array of private brands with kiranas across metro and non-metro markets, offering high margins of 20% as in-house label sales jump in online grocery. Multiple sources said that this would result in higher availability of private labels on Reliance’s e-commerce platform JioMart, which is aggressively on-boarding kiranas across the country as part of its new commerce initiative.
“This is a kind of backward integration for JioMart. While most JioMart orders are being fulfilled through Reliance Retail stores for now, they are on-boarding kiranas through the newly launched platform. In sync with that, their brands are being stocked so orders fulfilled through kiranas have enough private brands for consumers to choose from,” a person aware of the plans said. JioMart, which has also now started apparel sales, is not the only one being bullish on private brands.
JioMart’s daily average order volume is learnt to be inching up from the previously announced 2.5 lakh and private brands, which are typically 10-20% cheaper, could boost that further.
BigBasket, which has over 30% of total sales from in-house brands before the pandemic, now sees new customers doubling for its brands. Its private labels like Fresho and BB Royal, account for 38% of its total monthly sales. The development comes at a time when grocery e-sales continue to see increased growth with Covid induced online demand for essentials.
Grocery e-sales are expected to surpass $3 billion this year compared to just under $2 billion in 2019, a report from RedSeer and BigBasket last week showed. Other platforms like Grofers and Amazon India have been scaling up with their brands too, with the former having more than half of its sales from private brands. These private brands are present across categories like staples, household cleaning items, fruits, vegetables and meat.
BigBasket National Head (buying and merchandising), Seshu Kumar Tirumala said the company treats its private brands as standalone, with product development and quality teams. Typically, private brands offer higher margins due to multiple reasons, including the fact that platforms don’t have to spend as much on marketing as compared to external brands. Besides, there is better control on logistics cost and inventory, giving it 5% higher margin as compared to external brands.
“They ensure the product is well-differentiated and it has some unique properties due to which a customer buys the product and the quality is consistent. This year, we should end at around 40% (private brand sales), which was around 34% before the virus outbreak,” added Tirumala. It has a total 8 in-house labels.
According to the RedSeer report, the total online grocery market would swell to about $24 billion in four years. “We have observed that traditional brands, which pivoted quickly to be digitally ready brands, have seen over two times jump in sales compared to offline brands,” RedSeer Founder & CEO, Anil Kumar said on the overall growth in the e-grocery market.