Is Ecommerce a right channel to introduce Private Labels?
As the battle gets fiercer between ecommerce giants, the amount of money required to finance these battles is also increasing in the form of more investments required to stay ahead of the curve. Profits are hard to come by with ecommerce owners not making any from the sellers on their marketplaces. Now, ecommerce solutions provider have started to tweak their ecommerce strategies. It’s time to think about the profitability aspect by experimenting different strategies.
One such proven strategy implemented by ecommerce giants across the globe is private labels. As the eCommerce players move towards maturity, they have shifted their focus from “growth to sustainable growth and profitability”.
What is a private label?
Private label is a brand owned by a retailer or supplier who gets its products manufactured through a contract manufacturer, while meeting strict quality standards and then sells them under its own brand name.
Here are the most profitable private label brands across the globe introduced by ecommerce market place owners.
• Amazon was the first to introduce the concept of private labels long ago in the US. However, Amazon’s Kindle – an e-book reader, Amazonbasics – which include products like headphones, batteries, travel accessories, Bluetooth speakers etc. made their mark in India in 2015.
• Best buy sells hundreds of electronic products under house brands Insignia and Dynex (televisions), Geek Squad (Flash Drives), Rocketfish (video cables), and Init electronics (cases and accessories). These Private labels not only give Best Buy an edge over competitors but also soared up the Best Buy private label electronics sales upto 40 percent.
• Zalando is Europe’s leading online fashion destination and its private label zLabels (apparels) is doing very good work in the value-for-money segment, while making 10-15 % of Zalando’s revenues.
How E-commerce and private labels complement each other?
Private labels satisfy the customers by providing almost similar kind of value proposition at a lower price. It has also enable the retailers to play with the pricing thus allowing them to maintain sustainable low price while driving more users and spinning the fly wheel.
E-commerce has assisted private labels to capitalize on customer’s higher propensity to experiment online and they have proved to be a very good approach for already existing brand. It has also helped promotion of private labels by creating touch points and channelizing their traffic to promote the in-house brands.
6 Important things to consider when developing Private Label Brands
While developing a private label brand it is important for the team to make sure the following points are in place.
1. Vision – The retailer should have a long term vision about the private label brand how it will be positioned in the market.
2. Visibility – The Company needs to make sure that their private label brand is getting enough visibility.
3. Right Price – The price of the product under a specific brand should be competitive so that it is able to penetrate into the market.
4. Design- By assessing the market and similar brands in the particular product category, insights should be taken to design a product according to the needs of the customers.
5. Sourcing strategy – The retailer needs to make sure that he has right sourcing strategy in place to meet the requirements of the retailer. He should also have capability to work with multiple manufacturers.
6. Human Resource – It is very important to have an in-house team in place to ensure that brand is travelling the path which leads it to its predefined destination.
If private labels work for e-tailers the same way as it does for the offline retailers, profitability may not be too far away for online marketplaces. However, the more options you offer in products and prices, the customer emerges the winner. With private labels, the ecommerce players like Amazon have more room to play in terms of pricing, allowing them to maintain sustainable low prices, keep driving more users and spinning the flywheel.