Ecommerce Majors Continues Bet on Private Labels

Amazon.com is tapping some of the biggest athletic-apparel suppliers to make a foray into private-label sportswear, according to people familiar with the matter, setting the stage for further upheaval in an already-tumultuous industry.

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Makalot Industrial Co., a Taiwanese retailer, is making apparel for the Amazon line, a person with knowledge of the arrangement said. Makalot is famous for manufacturing the clothing sold by Gap, Kohl’s and Uniqlo. Another supplier is also a Taiwanese firm by the name of Eclat Textile Co., this company has the honor of making clothes for the brands like Under Armour, Nike, and Lululemon.

According to people involved, the manufacturers are producing small amounts of products for Amazon as part of a trial.

Etailers Venture into Private-Label Retail

In the past, several ecommerce companies have made incursion into private labels of fashion or clothing.

Amazon’s bevy of in-house brands is large — 34, to be specific, according to Morgan Stanley — and its clothing collections include dressier women's lines such as Society New York, Lark & Ro and James & Erin, intimates lines Arabella and Mae, men's lines Franklin Tailored and Goodthreads, and Scout & Ro kids clothing.

Meanwhile, just ahead of Diwali, Flipkart has launched its third fashion private label Anmi to offer women shoppers a range of contemporary ethnic wear. Anmi is the sixth in-house brand Flipkart has launched this year. Flipkart’s other two fashion private labels Divastri and Metronaut, have already garnered attention during the festive season sales held recently.

Flipkart has been betting on its private label game since the launch of its digital music store Flyte in 2012.

Besides, last month, ShopClues launched its exclusive label brand called Meia in fashion and lifestyle category.

“We generate close to 60% of our revenue from fashion and lifestyle category which includes apparel, footwear and other fashion accessories. As far as fashion is concerned compared to last year, we have seen close 360% growth in revenue,” said Radhika Aggarwal, co-founder and CBO ShopClues.

Boosting Revenues and Filling Inventory Gaps

Ecommerce majors benefit from a number of ways by foraying into private label retailing.

Flipkart is going the private label way to combat its negative unit economics, in order to walk towards stability and enjoy higher margins over the other sellers on the platform. A clear example of this was portrayed by Flipkart’s fashion subsidiary Myntra. As claimed by the company, Myntra’s private labels and brands business have turned profitable, and it expects its portfolio of 13 fashion brands to double growth and generate revenues of around $300 Mn this financial year.

On the other hand, Amazon normally do not look for creating its own products but when it feels that there is a gap in its inventory in terms of products consumers usually want then it looks into the manufacturing of its own merchandise.

As some brands do not sell their certain products on Amazon and the e-retail giant wants to offer even those products to its customers, so that the customers may stick to the giant and may not go elsewhere.

"Private labels will be one of the important pillars for their efforts to become profitable," says Kartik Hosanagar, John C Hower professor of technology & digital business at The Wharton School, US.

Private labels have around 15-20% more margins than external brands. Also, there is more control over assortment design and pricing. As these etailers bolster their private-label offerings, experts suggest that they need to learn to think less like operators of technology marketplaces and more like oldschool retailers.

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