From online marketplaces Amazon & Flipkart to fashion etailers Myntra & Jabong, investing and expanding private brand offerings is the strategy firms are relying on to achieve the profitability dream.
Online grocery startups like BigBasket and Grofers are too implementing the same strategy to become profitable.
Take private brands places
With wafer-thin margins and inherent issues in the online grocery sector, companies are looking for different ways to increase their revenue. And private labels help e-grocery startups to earn high margins – 30-40%, compared to slim margins offered by existing brands.
The food etailers are taking their own brands to hotels, hospitals, restaurants, and catering services to expand its reach. Grofers sells fruit, vegetables and staples under its private label — Freshbury. BigBasket owns Fresho (fruits, vegetables, idli/dosa batter, meat), BB Popular & BB Royal (grocery staples) and Tasties (coffee, snacks).
Speaking about BigBasket’s expansion strategy, the company’s Co-founder & CEO Hari Menon shared,
“We have launched a new business for hotels, restaurants and caterers about two to three months ago. Then we will look at how we can supply to larger stores going forward, built on our private label only. B2B (business to business sales) is already contributing close to about 15% to our revenues now and we think it will go settle at around 25-30% by the end of this financial year.”
Grofers reaches out to government for FDI in food trading
In June this year, government approved 100% FDI in online grocery to bring in investments in food infrastructure by international players.
It has been reported that Grofers has approached the government to get approval for FDI in food trading.
As per the filings with Department of Industrial Policy and Promotion (DIPP), the online grocery store is seeking consent ‘to undertake trading including through e-commerce in food products manufactured and/or produced in India’. Fresh round of funding around the corner for the startup?
The Indian online grocery industry is full of potential, but the existing players are going through a tough time. BigBasket is the leader and Grofers has managed to stay afloat unlike its rivals Peppertap and Local Banya.
Will private brands help the e-grocers to sustain in this highly competitive and complex ecommerce segment?