Tuesday 13 December 2016

Private labels – Flipkart, Amazon’s next battleground; both unveil own brands

In the quest of winning the Indian ecommerce race, Flipkart and Amazon are working on a hybrid strategy for their respective businesses. The ecommerce biggies are counting big on private labels for profitability as it allows them to earn high-margins, differentiate from competitors and have complete control over the business.
Home-grown player Flipkart as well as the American etailer Amazon has made several moves towards developing its own brands.

Flipkart’s private label business ‘Smart Buy’ makes its debut

The Indian etailer recently launched ‘Flipkart Smart Buy’, an umbrella private brand, which will sell products of approximately 25-30 categories. Some of the categories are electronics, tech accessories and home plastics.
Another private label is in the offing, which will cater to different cluster of product categories such as home appliances and furniture.
“Over the next 2-3 months, we will launch our second (private label) brand, which will play in a different set of categories in home decor, home furnishings, home appliances, and furniture. That should take us through to April —two umbrella brands and maybe 40 product categories,” said Adarsh Menon, Head- Private Labels, Flipkart.

Cloudtail driving Amazon India’s private label ship

While Flipkart is expanding its own-brands business by focusing on electronics, furniture and other home needs, rival Amazon is focusing on the fashion category.
Earlier this month, the US-based ecommerce giant launched its second in-house fashion brand Myx, 2 months after launching the first one Symbol. Besides the two fashion brands, Amazon also owns & sells kitchen essentials under Solimo brand and digital accessories under Amazon Basics brand.
The online marketplace’s biggest seller Cloudtail retails the abovementioned private brands. After the FDI guidelines Amazon had to reduce reliance on Cloudtail that used to sell the top-selling mobile phones. A new set of merchants were appointed to take-over the mobile brands and replace Cloudtail.
But now its biggest seller is entrusted with the important task of selling its private labels. Speaking on this development, Amazon’s spokesperson clarified,
“Launched in the USA in 2009, AmazonBasics products are available through varied sellers across most of Amazon’s global marketplaces. AmazonBasics brand is currently sold by Cloudtail. Amazon-Basics products are sold in India through purchase and sale agreements between Amazon US and respective independent sellers. We have and we will continue to operate within parameters of laws and policies of India as we do in each country we operate in.”
There’s 25% cap on sales from one seller. So how would Flipkart and Amazon ensure that this FDI rule is not broken and they maintain the ‘mediator’ status while expanding their own brands?

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