D2C x Private Labels

Hey readers,

Welcome to the Thirteenth edition of D2C Cents!

This edition? We talk about:

• The real cost of platform private labels (it's way higher than they admit)

• Why Slot 1 isn't free, even for the platform's own brand

• How D2C brands can flip the script using economics

BigBasket's private labels (Fresho, BB Royal) account for about 35% of overall sales, and they're considered one of the most successful PL strategies in India.

So, Flipkart launched MarQ home appliances. Amazon keeps pushing Solimo across staples and personal care. Blinkit has its entire range - Simply Staples.

The common belief? Private labels will eventually dominate because platforms control distribution, have no listing fees, and can undercut any brand on price.

But every time a platform features its own private label, it's making a costly trade-off.

That Presto bottle better deliver insane margins to justify losing ₹15 lakhs in pure advertising revenue.

Spoiler: it usually doesn't.

Even BigBasket knows that they treat private labels as FMCG brands themselves, investing heavily in quality, packaging, and distribution.

Everyone thinks platform private labels win because: no advertising costs, no listing fees, pure profit margins of 40-50%.

Nope.

Every featured slot has an opportunity cost

Platforms make money in two ways: product commission and advertising revenue. When they push their own private label, they're making a trade-off most people don't calculate properly.

Let's do the maths.

Loss of Advertising Revenue

Every prime slot given to a platform's own brand = direct advertising revenue lost from D2C brands competing for that space.

Let's take tissues as an example:

So far, PL looks like it wins by ₹9. But wait, this still doesn't account for the hidden costs of actually running a private label business...

Hidden Costs That Kill PL Margins

And here's where it gets worse for private labels:

Hidden Cost 1: FMCG Compliance & Legal

Especially for FMCG, India has strict regulations on ingredients, labeling, and licenses. Every product needs legal clearance, quality testing, and certifications. That's time, money, and expertise that platforms don't naturally have.

Hidden Cost 2: Building a PL Team

Platforms are tech companies, not product companies. To launch private labels, they need product managers, quality control teams, supply chain specialists, packaging designers, and a whole new vertical. That's overhead eating into margins.

Hidden Cost 3: Branding & Marketing

A generic white-label product won't sell just because it's cheap. Platforms need to build brand recognition, educate customers, and create packaging that looks premium. All marketing spend that cuts into that "40% margin."

Hidden Cost 4: Inventory Risk

With D2C brands, platforms don't hold inventory risk. With PL, if it doesn't sell, they're stuck with dead stock.

Now let's recalculate Scenario B with ALL costs:

Suddenly, selling Beco at ₹28 total revenue looks WAY better than Amazon Basics at ₹17 net.

Yes, Beco also has a category team and operational costs, but for Amazon, the per-brand cost of working with Beco is negligible compared to bearing 100% of PL costs.

This is the hidden tax nobody calculates.

This is why Amazon planned to reduce its private label offerings to fewer than 20 brands. Even Amazon realized: Most categories don't make economic sense for PL.

And it's not just Amazon. Future Group aggressively pushed 35-40% of its merchandise as private brands, and quality concerns became one of the reasons for its debt crisis. 

Formula X was Sephora’s in-house nail polish line launched in 2013 as a big, 200-shade push by the retailer. It was widely carried at Sephora for a few years but was quietly discontinued around 2016–2018. Industry and community discussion at the time points to weak sales, heavy discounting/clearance, and overlap with other nail brands as the major reasons behind the phase-out. 

The success stories? BigBasket's private labels (Fresho, BB Royal) account for about 35% of sales and brought in close to ₹4,000 crore in revenue. But that took YEARS of investment, tight quality control, and operating at thin margins initially.

For every BigBasket Fresho, there are 10 failed private labels you have never heard about.

Start using platform economics AGAINST private labels. Here's how:

Tactic 1: Show Them the Opportunity Cost

Walk into the negotiation with data: "You're giving prime placement to your PL. But we'll pay you ₹10 lakhs/month for that slot AND drive 3x more GMV because our brand has customer pull. You make more money featuring us than your own product."

Tactic 2: Prove Your Customer Pull

If you have branded search volume (people typing YOUR name in the search bar), you have leverage. Show them: "Our brand gets 40,000 searches/month on your platform. Your PL gets 3,000. Push us = more organic traffic. Push your PL = you have to buy that traffic with ads."

Tactic 3: Bundle the Deal

"We'll commit ₹20 lakhs in advertising spend over the next quarter IF you guarantee us placement parity with your PL in featured slots and category pages." Make it a package deal where they can't say no.

Tactic 4: Category Leadership Play

If you CREATED the category or own mindshare (like Minimalist with "actives" in skincare), platforms need YOU. Their generic PL can't replicate category creation or consumer education you've already done.

Tactic 5: Build Your DTC Channel Aggressively

Brands dependent on platforms will always lose. If 80% of your revenue comes from Amazon or Blinkit, you have zero negotiating power. They know you can't afford to leave.

But if 40-50% of your sales come from your own website? Now platforms know: "If we push them out, they'll just shift that GMV to their owned channel (Shopify page / own website), and we lose both the commission AND the traffic they brought to our platform."

The Brands That Beat Private Labels in "Commodity" Categories

The brands that win are the ones that make platforms need them more than they need platforms.

Examples of brands that built names in "non-branded" categories:

Where D2C Actually Wins

D2C wins when:

• Brand loyalty is high: Premium personal care (Minimalist, Dot & Key), specialized nutrition (Oziva, Wellbeing Nutrition), craft food brands with stories

• Product requires trust: Skincare, baby products, supplements, customer research, and repeat purchase based on results

• Innovation matters: New ingredients, formats, benefits that generic PL can't replicate quickly

• Repeat purchase rate >30%: If customers come back for YOUR brand specifically, you own the customer, not the platform

PL wins when:

• True commodities: Generic paper plates, aluminum foil, basic plastic bags, where quality is identical.

Even in "commodity" categories like tissues or dry fruits, brands CAN win if they create differentiation through positioning (sustainability, quality, packaging). 

But in TRUE commodities where differentiation hasn’t happened, like generic aluminum foil or paper plates, PL has an advantage.

What do you think?

Look, platforms will keep launching private labels. That's not stopping.

Every time they feature their own brand, they're making a bet: "Our margin on this product is worth more than the advertising money we could've made."

Sometimes that bet works. Sometimes it doesn't.

Your job? Make that bet look stupid.

Show them you drive more searches than their generic PL. Prove you bring traffic they can't buy with ads. Commit to ad spend that makes featuring you more profitable than featuring their own product.

And if they still won't play ball? Build your DTC channel so strong that leaving their platform doesn't scare you anymore.

They're the ones that made themselves too expensive to ignore, and too risky to lose.

The platform's PL might be cheaper. But you? You're more valuable.

Now go prove it.

See you next edition - same time, deeper insights.

Until then, keep building strategically.
Abhishek