Following the trend of launching in-house brands, Amazon is set to launch its own brands of beauty and personal care products, reports Economic Times. It is likely to compete directly with Flipkart-owned Myntra, which is also set to launch its range of products in this category.
There are reputed manufacturers who take up contract-manufacturing for their customers and Amazon will tap into these entities for sourcing their requirements. Amazon is likely to start with skincare and makeup products under this arrangement.
The main reason for launching in-house products and brands is that it gives ecommerce players much higher margins in than what the popular brands they sell on their platform would bring in. These companies, many of them multinational corporations, spend huge amounts on advertising their products and expect their loyal customers to get “pulled” towards their products. They therefore offer limited margins to retailers.
For retailers like Amazon, the customer is already within their grasp and there is very little spend on advertising, except perhaps within their own real estate without any costs.
The only downside to this strategy of launching own brands of cosmetics or other products in any category is that the seller must first establish a strong customer base and have credibility and trustworthiness before taking on the established players.
Interestingly, Myntra not only plans to launch its in-house brand of personal care products through its ecommerce platforms, but wants to offer them through offline outlets as well, through associations. The online fashion retailer hopes to raise the contribution from the beauty and personal care products segment to their overall revenues from the current levels of 1% to 8% in a couple of years.
There are estimates that suggest that the Indian market for this category of products is hovering around the $300 million mark is likely to jump multiple times to around $3.5 billion by 2022 and everyone is chasing the same pie.
Another interesting development is that while the dominant online retailers are trying to use their platforms to launch their own in-house beauty and personal care products the established players, like Maybelline, Lakme and VLCC, for instance or keen on ramping up their online presence and some of them have seen a hefty increase in their sales revenues from online sources.
It has helped them reach out to the customers in Tier 2 and even Tier 3 cities and towns in India without having to spend on creating a sales infrastructure in the brick and mortar space.
It will therefore be very interesting to watch how the leading players approach their respective markets and to know who emerges successful.