Online marketplace Flipkart expects its private-label category to contribute 10 per cent of its overall transactions in the next 12 months, to boost its flagging earnings and fill gaps in its products.

Flipkart — which had launched its private-label category under the brand of SmartBuy in January, starting off with electronic accessories, mobile cases, power banks, speakers and USB cables — will now launch newer categories.

“We are looking at newer categories such as home staple foods, furniture, cookware, curtains, towels, white goods and other electronic accessories,” Adarsh K Menon, Head of Private Labels, Flipkart told BusinessLine . Flipkart currently has around 3,500 categories with a customer base of 100 million registered users.

Part of the optimism for the additional push stems from the fact that SmartBuy witnessed a 10-fold increase in transactions during the e-tailer’s Big 10 Sale.

Flipkart has been putting in place its strategy for the past 10 months, according to company insiders. “The leadership team identified private labels as a strategic lever for enhancing profitability going forward,” said Menon. The push towards private labels also seems to be gathering additional momentum after Kalyan Krishnamurthy, a former Tiger Global Management executive, took over as CEO. Tiger Global is the leading investor in Flipkart.

One of the main reasons for Flipkart to get into the private-label segment is improved margins that come from this category, as historically seen from brick-and-mortar stores.

“We found there are gaps in every category, including price gap, quality and specification gap, and we have created these products to fill those gaps, explained Menon.

An example is with regard to bedsheets, which are often priced high, lack designs and often come with poor fabric quality. This effort can improve margins 5-10 per cent in a sector which constantly battles with downward pressure on margins. “A large customer base and low customer-acquisition costs, in addition to better margins, will help the retailer,” said Bharat Mandot, MD, Jhakaas Technologies, which makes apps for kirana stores.

The online major will design the specifications of a product, get it manufactured by third-party manufacturers, use its ecosystem of sellers, and deliver it through its logitics arm Ekart.

However, industry watchers have some concerns. The question is will people accept this. “It has been done in the offline world by Future Bazaar and others. So far, nobody has replicated it online,” said Sanchit Vir Gogia, Founder, Greyhound Research.

Flipkart has launched private labels in the past. Before SmartBuy, it had launched it’s own home-appliances and personal healthcare brand Citron, apparel brand Flippd consumer electronics brand Digiflip.

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