Amid heightened buzz around the quick delivery segment, Swiggy’s Instamart and Mumbai-based Zepto will soon launch private label products.

Zepto cofounder Aadit Palicha told that the ultrafast delivery startup will likely start selling its private labels by the second or third quarter of 2022. Swiggy is likely to launch private labels as soon as next month, a person in the know said.

Palicha said Zepto will launch private labels across staples, general merchandise and cooking essentials. “When you’re doing private labels, you need to focus on categories that have a high degree of substitutability,” Palicha said. “These are categories in which customers have the least amount of brand loyalty. Atta, for example, isn’t a great category for private labels because people love (ITC’s) Aashirvaad.”

He said the company will operate its private label business in an asset-lite model where it ties up with hub partners. “We have partners for our hubs that sell inventory and we’ll be supporting them down the road with logistics if they would like to do private label,” he added.
Palicha said private labels will help the company in two important ways: it will add 3 per cent to the operating earnings margin and it may also become a competitive advantage.

“If you execute it extremely well, the private label might become a moat because customers will come to your platform for your branded products (presumably because it’s good quality and well-priced),” he said.

“A majority of the catalog that is housed by these quick-commerce stores are name-brand products (Coke, Pepsi, Tide, etc.) that have really low margins and a fixed market price,” said an investor in quick-commerce companies in the Middle East. “The quick commerce platform cannot really change the price of a bottle of Coke for example. So, they find certain categories where they can have their own private-label product offering and cut out all the middlemen and distributors that take a commission.”