InGovern, a leading corporate governance advisory firm, released a research report titled, ”Private Labels and Direct to Consumer Brands: Democratising Retail Commerce in India,” analyzing the role of private labels and D2C products and their growing adoption in retail. The report highlights the advantages that private labels and D2C brands bring to retailers and small businesses while simultaneously helping consumers by providing more affordable and higher-quality products.
India’s private label sector and direct to consumer sector is currently valued at Rs 13 billion, making up 10-12% of the organized retail sector in the country[1]. These labels also enable a significant influence in the offline retail space, dominating a staggering 90% of sales in the large apparel and fashion retail sector, while making a substantial 40% contribution to sales in the thriving online grocery retail segment[2]. Prominent retailers like Pantaloons, Tata Group’s Trent Ltd, Shoppers Stop, and Spencer’s Retail have been increasingly emphasizing private label retailing, with private labels accounting for 90% of Trent’s sales, 80% of Reliance’s, and 75% of Pantaloon’s overall sales. Aditya Birla Retail is also planning to boost the contribution of their own brands in sales from the current 3% to 10% over the next 2-3 years.
Speaking on this, Shriram Subramanian, Managing Director, InGovern, said “Private labels and direct to consumer brands offer a mutually beneficial scenario in India’s retail sector, empowering MSMEs with increased revenue streams, brand recognition, and global access while providing consumers with cost-effective, customizable, and trusted alternatives. As the e-commerce industry soars, regulatory clarity and streamlined oversight are imperative for sustained growth and innovation. The government can enable the start-up community by creating a policy environment that creates more investment opportunities and selling platforms in both offline and offline. There is no reason for the government to bar D2C approach as long as they are compliant to the law. The government must allow the same equitable treatment of e-commerce etailers / marketplaces as they do for offline sellers. ”
The report also mentions how these brands are owned and manufactured by retailers/marketplaces for reasons such as generating higher margins, filling product range gaps not covered by branded suppliers, differentiating their store’s product range from competitors, and enhancing profitability and customer loyalty. Additionally, it emphasizes how partnering with retailers for private label and D2C products offers MSMEs numerous benefits, including diversifying revenue streams, reducing reliance on single products, and fostering stable collaborations, which, in turn, boosts financial stability through increased sales. These partnerships aid in building brand recognition and loyalty by exposing products to a wider audience over time.
The report concludes by pointing out how sharing marketing and distribution duties with retailers/marketplaces through private labels and D2C products can help MSMEs focus on innovation, product enhancement, and be part of economies of scale by cutting production costs, elevating profitability, fueling economic growth and expanding the customer base.
