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Flipkart re-enters the private label business with Smart Buy

Business Standard:  December 09, 2016

India's largest e-commerce marketplace Flipkart has launched Smart Buy, the first of two new private labels, as it looks at in-house brands to boost earnings and fill gaps in its product selection.

This isn't Flipkart's first dabble with private labels. The company had launched products under the brand name DigiFlip as far back as 2012. However, the brand didn't stick around for long as Flipkart saw slow sales until it finally discontinued it couple of years later.

"Flipkart Smart Buy is the first brand that we're launching in the private label space. We're starting with electronic accessories, mobile cases, power banks, speakers and parallelly we will be launching a range of home plastics as well. Phase two of Flipkart Smart Buy would be personal care appliances," said Adarsh Menon, head of Flipkart's private label business.

The company plans to have two large umbrella labels under which it will serve 40-50 product categories. The second brand which is scheduled to be launched in February will cater to home decor, furnishings and home appliances categories. 

Flipkart's private label push comes at a time when it is struggling to raise fresh funds at a valuation it wants, hurting its efforts to effectively compete with deep-pocketed rival Amazon. Morgan Stanley, a small but strategic investor in the company, marked down its valuation to just $5.58 billion, from a peak of $15 billion last year.

While Flipkart's first foray into private labels might have been a failure, its subsidiary Myntra has enjoyed great success with building its own clothing brands. Roadster, Mast & Harbour and HRX are among the few successful private labels Myntra owns, which power a little over a quarter of the sales on the fashion retail platform.

Flipkart isn't the only large e-commerce player to be experimenting with private labels. Rival Amazon too has its own brands such as Symbol and Myx in the fashion space, apart from Amazon Basics in the electronic accessories market. 

E-commerce companies are turning to private labels at a time when competition is fierce and winning customers means offering big discounts. This has hurt margins as players such as Flipkart and Amazon earn on every product they sell. In turn, the margins on private labels are much higher, as high as 45 per cent on fashion products for Myntra.

Globally Amazon has several private label brands in nearly a dozen categories such as computer accessories, home goods, pet supplies, grocery etc. The focus is largely on plugging gaps in its offerings to customers, anywhere it sees quality and affordability of products being a problem. Flipkart too has adopted this mantra, saying its biggest focus will be to provide quality products at affordable costs to customers in India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.