Presently valued at Rs 13 billion, the private label sector and D2C segment constitute a noteworthy 10-12 percent of India’s organized retail sector. These labels exert a substantial influence in offline retail, commanding a remarkable 90 percent of sales in the expansive apparel and fashion retail sector. Furthermore, they contribute significantly, making up 40 percent of sales in the thriving online grocery retail segment.
InGovern has published a research report titled “Private Labels and Direct to Consumer Brands: Democratising Retail Commerce in India.” This comprehensive analysis delves into the burgeoning role of private labels and Direct-to-Consumer (D2C) brands in the Indian retail landscape, shedding light on their increasing adoption and the myriad benefits they bring to retailers, small businesses, and consumers alike.
Major retailers, including Pantaloons, Tata Group’s Trent Ltd, Shoppers Stop, and Spencer’s Retail, are actively emphasizing private-label retailing. Private labels represent a staggering 90 percent of Trent’s sales, 80 percent of Reliance’s, and 75 percent of Pantaloon’s overall sales. Aditya Birla Retail is also planning to increase its own brands’ contribution to sales from the current 3 percent to 10 percent over the next 2-3 years.
Shriram Subramanian, Managing Director of InGovern, emphasized the mutually beneficial scenario created by private labels and D2C brands in India’s retail sector. These initiatives empower Micro, Small, and Medium Enterprises (MSMEs) with increased revenue streams, brand recognition, and global access. Simultaneously, consumers benefit from cost-effective, customizable, and trusted alternatives. As the e-commerce industry continues to flourish, Subramanian underscores the importance of regulatory clarity and streamlined oversight for sustained growth and innovation.
Subramanian suggests that the government can facilitate the start-up community by creating a policy environment that encourages more investment opportunities and selling platforms both online and offline. He advocates for equitable treatment of e-commerce entities and marketplaces, calling for the government to allow Direct-to-Consumer approaches as long as they comply with the law.
The report highlights how private labels and D2C brands are owned and manufactured by retailers and marketplaces. Retailers pursue this strategy to achieve higher profit margins, fill gaps in product ranges not covered by branded suppliers, differentiate their stores from competitors, and enhance overall profitability and customer loyalty. The report emphasizes the myriad benefits MSMEs can derive from partnering with retailers for private label and D2C products, including diversifying revenue streams, reducing reliance on single products, and fostering stable collaborations that enhance financial stability through increased sales.
In conclusion, the report emphasizes how sharing marketing and distribution responsibilities with retailers and marketplaces through private labels and D2C products enables MSMEs to focus on innovation, product enhancement, and economies of scale. This approach, by cutting production costs, elevates profitability, fuels economic growth, and expands the customer base.