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UrbanClap, Housejoy plan to introduce private labels soon, Retail News, ET Retail

M
UMBAI & NEW DELHI: On-demand service providers UrbanClap and Housejoy are looking to introduce private labels in their beauty and home appliance categories as they seek to capture a larger share of the mass market while squeezing the most out of margins.

The move will see these companies shift beyond services to extend their footprint on the product side as well.

“We work with OEMs (Original equipment manufacturers) and brands in the beauty space and are also looking to introduce our own private label products. The idea behind launching private labels is to also significantly bring down prices without impacting quality because the contract manufacturer could be the same. The margins in this segment are very strong,” Abhiraj Bhal, CEO of UrbanClap, told ET.

For on-demand service marketplaces, the beauty segment accounts for about a quarter of their revenue share, with gross margins for the category spanning 15-20% where a contractual service professional is involved and goes up to 40% when service providers are on the payrolls of the marketplace itself, according to industry estimates.

Introducing private labels in this segment allows UrbanClap and Housejoy to extend their footprint beyond just the mass premium market, which opts for brands such as Lotus, Sara Cosmetics and L’Oreal — currently available on these platforms — to tap into the main mass market, helping boost margins by at least 4-5%.

“The market is extremely fragmented, and it’s a natural extension of our product service, benefits the customer, and as an extension, benefits us as well, from an overall profitability standpoint,” said Saran Chatterjee, CEO of Housejoy, which is looking to launch private labels in moisturisers, sunscreens, night creams as also shampoos and nail paints for its beauty vertical.

“It’s a little early at this point, because we also have to understand the supply chain a little better. We have to work with the right kind of manufacturers, who conform to certain guidelines, as well as our product standards. Once we do that, it’s about experimenting with the product, and figuring out which one has the right product-market fit,” Chatterjee told ET.

However, experts believe a successful private label play in beauty, where brand recall plays a significant role in creating and sustaining customer loyalty, may be tough for such firms.

That would probably explain UrbanClap’s move to also introduce private labels for spare parts in its home appliances category. “As the core consumable component starts to increase in a service, using that price and being involved in the supply chain can help reduce pricing for the customer and create a new revenue pool for ourselves,” said Bhal.

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