According to a study by KPMG in India and Retailers Association of India, online private labels are expected to grow 1.3 to 1.6 times faster than e-commerce platforms and continue to generate 1.8 to 2 times higher margins than external brands. The study titled ‘The online private label growth paradigm’ says that online private labels will continue to be a driver for profitable growth for e-commerce marketplaces. The rise of private labels comes against the backdrop of exponential growth in the e-commerce market in India.
Between FY16-19, the e-commerce market grew at a compound annual growth rate of 29.8% to reach Rs 1.4 lakh crore and is projected to grow at an estimated 30% in the period for FY19-23. The e-commerce market in India accounted for 2.3% of the overall retail market and 21% of the organised retail market in 2019. Its share in organised retail is set to grow to around 28% by FY22.
Harsha Razdan, Partner and Head for consumer markets and internet business at KPMG in India said that with a gradual shift from unbranded to branded, online retailers are also launching their own private label brands, thus providing consumers with a much wider choice of products and channels to choose from. Razdan added that in the long run, the journey of private labels will gradually move to brands which will shape the future of retail.
The study says online private labels allow platforms to attract new consumers, improve consumer stickiness and thereby, increase market share. Big e-commerce players, across product categories, attribute greater than 50% of their private label sales to repeat purchases.Online private label purchases in categories such as apparel, grocery and cosmetics see repeat purchases exceeding about 60 to 65%, indicating that having a strong private label strategy will be a good initiative. Private labels offer supply chain efficiencies and greater product customisation abilities that later translate into higher margins.