BENGALURU: The private label businesses of Amazon and Walmart-owned Flipkart may come under regulatory lens, following fresh guidelines issued to e-commerce companies on Wednesday.
The government’s directive prohibits entities with equity participation in e-commerce marketplaces from selling products on its platform. The norms highlight how other sellers, who aren’t offered similar terms of engagement, are crying foul over unfair and discriminatory practices.
For Flipkart and Amazon, private labels contribute around 10% of the business and is growing as a category with a wider assortment and attractive price points as these marketplaces control the full spectrum – from contract manufacturing to logistics and pricing. With new norms, the in-house brands may face the heat.
Amazon’s in-house brands include Symbol, Mix, Amazon Basics. Flipkart has SmartBuy, MarQ, Perfect Homes. Myntra houses Roadster, one of its largest private brands. Over the past two years, these companies have been investing in the private label business to reduce dependence on third-party brands, so that they have a better negotiating power with other brands.
“If a pen drive is being sold 20% cheaper, then why would you pay more to buy the expensive ones? This is impossible to match for anyone without deep pockets,” said a seller on both Flipkart and Amazon.
Executives at both Amazon and Flipkart have publicly claimed attractive pricing as a major differentiation compared to other brands available in those segments. This gives a pricing advantage to e-tailers to push these brands to end-customers. A small- or mid-sized seller online would find it challenging to sell products at those price points. “E-commerce players need to have a re-look at their operating strategy in India on account of the new rule. Going forward, suppliers will not be permitted to sell their products on the platform run by such marketplace entities. This will impact back-end-related wholesale group entities and need to remove them from the e-commerce value chain,” said Rajiv Chugh, national leader, policy advisory & speciality services, EY India.
Many sellers claim Amazon- and Flipkart-owned brands appear as top searches in a certain product category. However, both companies have denied any move to prioritise in-house brands over seller brands. Satish Meena, a senior analyst with Forrester, said the new changes will hit private label business and could slow down sales momentum after they’re recovering from aftermath of double whammy – demonetisation and GST.
The development was reported by ETRetail.com