Late last year, an innocuous observation by a regular customer got Richa Kar thinking.
Despite being India’s largest online lingerie-only store with numerous offerings for regular body structures, the customer said, Zivame.com had limited options for petite frames and the average price points were high for someone like her, a young professional who had recently started working.
Kar, founder and chief executive of Zivame, did some homework. She found that she wasn’t alone: Most of the other national and international brands had also overlooked the value proposition in this segment. Lingerie, by definition, is extremely intimate and customers want to feel, literally and metaphorically, comfortable with their purchases. But customers were having to compromise between aspiration and accessibility.
That was enough for her. “The products available with us were a bit limited in terms of offerings,” she says. “We saw a glaring gap in the assortment. The international brands’ price points were difficult to match in the Indian market. That is when we decided to provide private labels.” As a niche player, it needed to offer every possible product in the category. “It is our product strategy.”
A few weeks later, in January 2014, Zivame launched Coucou, an in-house brand offering reasonably-priced lingerie for younger customers with special attention to the needs of petite women.
Today, Zivame offers over 2,000 lingerie styles from 45 national and international brands such as Enamor, Triumph, Wonderbra, Jockey and more. But Coucou and Penny Goddess (Zivame’s first private label, aimed at fuller women, launched in November 2013), now comprise almost 40 percent of the site’s revenue.
Kar is not alone in her epiphany. Private labels (fashion-retail-speak for in-house brands, typically manufactured externally, under supervision, and exclusive to the e-store) suddenly seem to be everywhere.
And it’s early days yet, say industry experts. Pragya Singh, associate vice president, retail and consumer products, Technopak, a management consulting firm, says, “For private labels, the upside in terms of margins is very high. E-tailers make about 35-45 percent from regular brands while private labels contribute anywhere between 60 and 65 percent gross margin.”
India’s $3.1 billion e-commerce industry is highly commoditised and overcrowded, and companies clone each other’s services in no time. Negative margins are more the rule than the exception.
But online fashion retailers, at the very least, seem to have found a saviour in private labels, which help them build both profit margins and a differentiated offering. As Mario D’Souza, strategy head at Bangalore-based Fryed Advertising, says, “Not only do they build loyalty among fickle online customers towards the website, but also a strong private brand offering could possibly be taken offline as well, maximising the brand’s potential in terms of profit and equity.”
Myntra, the country’s largest online fashion retailer, certainly seems to think so. It plans to double its portfolio (currently seven private labels) across men’s formal-wear, kids-wear, handbags and other segments.
In May, Myntra had roped in Abhishek Verma from McKinsey & Co to lead its private label business; he is now senior vice president, Fashion Brands. “We are building this business as independent standalone brands,” he says. “For us, private labels are not category fillers. Each of these labels are independent strong brands targeted towards a particular consumer segment, creating a long-term brand equity value, quite apart from their obvious economic value.”
Currently, one in five units that Jabong ships is from these private labels and they bring in about 18-20 percent of overall sales. While Chandra Mohan does not specify a time frame, he expects this to rise to as much as 35 to 40 percent in the near future.
(This story appears in the 03 October, 2014 issue of Forbes India. To visit our Archives, click here.)