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Saturday, October 31, 2020

Skrubble, Scylone, Fresho – how Amazon, BigBasket, Grofers push private labels

From Grofers to BigBasket, most e-commerce grocery platforms have stepped up their private brands offering in a big way.

As more and more Indians find it easier and safer to shop online even for their daily needs, the e-commerce majors have capitalised on this trend to strengthen their private brand portfolio across categories, especially in food and grocery. For instance, if a consumer visits Amazon Pantry to shop for grocery and clicks on detergents or dishwashers, the search would invariably throw up names such as Skrubble and Scylone which are followed by popular brands such as Surf Excel or Ariel. Similarly, in staples one would invariably find names such as Solimo or Vedaka. 

These are Amazon’s private brands which the e-commerce giant has been aggressively pushing. In fact, several retail experts have pointed out that at a time when most FMCG brands were struggling to get their supply chain and distribution on track, Amazon was smartly pushing its private brands into the consumer’s shopping cart.

Amazon isn’t an exception. From Grofers to BigBasket, most e-commerce grocery platforms have stepped up their private brands offering in a big way. Around 2,000 SKUs of Big Basket comprise its own private labels (Fresho, BB Royal, BB Royal Organic, Good Diet and Happy Chef) and the online grocer hopes to end FY21 with 2500 SKUs of its own brands. 

“We at BigBasket treat our private labels like an FMCG brand and at present around 38% of the company’s revenue is generated from private labels. Private labels are an integral part of our differentiation strategy and we have carefully built them across categories,” says Seshu Kumar Tirumala, National Head (Buying and Merchandising), BigBasket. 

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Tirumala claims that since its private brands have been constantly available through the pandemic, a lot of consumers had no option but to try them. “They have stuck to our private labels because of our high quality and competitive prices. All our products are made with the highest quality ingredients and we continuously invest in ensuring that,” he further adds.

Similarly, Grofers has onboarded over 500 private label brands in the last few months and close to 50% of its volumes come from these brands. From food to personal hygiene and home care, Grofers private brands straddle across categories. 

“Our brands on an average are 20-30% cheaper than the national brands and we plan to invest a lot more on the brands which give us guaranteed volumes,” says Saurabh Kumar, Co-Founder, Grofers. Kumar says that through the pandemic the online grocer has been consistently partnering with local brands and MSMEs to sell their products on its platform. 

While it sells some of the products under the Grofers brands, it also allows the local manufacturers to sell under their own brands. “Most of these local brands are of high quality and match with our strategy of ‘everyday low pricing (ELP)’,” explains Kumar.

Grofers recently concluded its Grand Orange Bag Day sale, where it onboarded 800 MSMEs to sell their products. Out of the eight crore items it sold during the sale, over three crore products were sold by MSMEs. A bulk of the private brands on Amazon is an outcome of the Amazon Accelerator Programme through which it has partnered with local manufacturers and helped them launch their brands on Amazon’s marketplace. 

“Through our private brands programme we work with MSMEs from across India to expand their business. We do this both for Amazon-owned brands where the MSMEs work as contract manufacturers or with the accelerator program where we partner with local manufacturers and help them launch their brands on Amazon’s marketplace. The Indian manufacturers are confident of being part of both these programmes as under Amazon brands it enables them to manufacture quality products that would be sold under the Amazon brand name by the Indian licensee or under Accelerator program where they create a new brand for customers. We continue to explore relevant products looking at selection and need gaps. Customers are also assured of the quality, ingredients, compliance and other parameters,” says an Amazon India spokesperson.

Both BigBasket and Grofers are aggressively ramping up their respective private label portfolios. From bakery, immunity building products, speciality foods and vegetables and fruits, these online grocers are going to offer a better priced alternative to the consumers. 

BigBasket, says Tirumala, is planning to build capacity in storage, sorting , grading, cleaning and packaging of its private label products. “We will also be setting up ripening chambers for bananas and mangoes, and a controlled atmospheric chamber for apples in Himachal Pradesh. We will build additional cold chambers for storage of fruits and vegetables at all our distribution centres across the country.” 

Almost 38% of the company’s revenue is generated from private labels. “Going forward we will be betting big on our private labels and plan to invest upwards of Rs 200 crore in category expansion in the current fiscal year. Our aim is to increase monthly sales from Rs 250 crore to Rs 400 crore by March 2020,” adds Tirumala.

Private labels yield higher margins and are hence a profitable proposition for retailers. However, the private label strategy of retailers such as Future Retail hasn’t been particularly successful and has in fact been one of the reasons for its current debt crisis. Almost 35-40% of Future Retail’s merchandise comprised its own brands and the retailer’s aggressive push of its own brands didn’t augur well with its consumers. According to retail experts, quality was a huge concern with Future’s private brands. It will be interesting to see how the growing dependence of online grocers on their private brands would pan out in future.

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