Can Flipkart Bank On Its Private Label MarQ To Make A Dent In White Goods Category Sold Online?

“When you are out of quality, you are out of business” – reads a plaque above an assembly line in the Dixon Technologies factory in Selaqui industrial area outside Dehradun. On a smog filled day in Delhi, I incidentally take the much needed trip to Dehradun (hosted by Flipkart). I find myself in a sprawling 230,000-sq ft manufacturing facility to figure out why Flipkart has tied up with one of the leading homegrown design-focused and solutions company engaged in manufacturing products in the Indian consumer durables, lighting and smartphones space. The partnership, I am told, will enable Flipkart to manufacture TVs under the company’s fifth private label brand, MarQ.

Right from mounting components on the PCB (Printed Circuit Board) to testing them, making panels in house, assembling TV components and testing TV sets for sound, picture, and final quality, which interestingly is done by keeping them switched on for full 24 hours at the highest volumes in an enclosed room, I get to see a full MarQ TV made from the scratch and packed off in distinguishable black colour-printed card box boxes. The black boxes are an extra marketing touch to delight the MarQ customer, as pointed out by Flipkart officials!

And the customer does seem to be interested, if not delighted, as is evident from the early sales figures of MarQ. Adarsh Menon, Vice President & Head-Private Label at Flipkart, reveals that since MarQ’s debut on the Flipkart platform last month, the etailer has sold close to 5,000 units of the product. And if this is the response in three weeks post the launch, Menon is confident that sales in the TV category will more than double every year.

So why exactly is Flipkart banking on MarQ to push its private label agenda in white goods and does MarQ have what it takes to delight the customers?

Over the course of this visit, this is what I tried to understand.

Flipkart, MarQ, And The Private Label Push

It was in October this year that Flipkart took the plunge with private label in the white goods category with MarQ.  Incidentally MarQ is the company’s fifth in-house brand, following a range of its own labels in fashion and furniture introduced over the past several months. It has been launched with the vision to make‘Better. Possible Today’.

Under the MarQ label, the ecommerce major first rolled out microwave ovens. Televisions followed a week after that and washing machines will follow soon in the third week of November.

 

Adarsh threw more light on the ecommerce major’s plans. He revealed, “Washing machines are just down the line in the next couple of weeks starting from November 21. We will be rolling out the semi-automatic ones first, priced 15%-20% cheaper than the market price.”

He further revealed that the etailer is looking to get into ACs for the summer too. However, that’s jumping the gun. Because as far as the white goods category for Flipkart is concerned (which comprises TVs, ACs, microwaves, washing machines, and chimneys), TV is the largest moving item.

While Flipkart has sold close to 5,000 units of MarQ TV within three weeks of its launch, Adarsh is quick to point out that it’s still early days. While the initial thrust has come on the back of early adopters who are die hard Flipkart loyalists as well as on the back of the Diwali season, it will be the coming months that reveal how much traction MarQ is able to garner among the customers.

However, the initial numbers reveal some significant trends.

“So customers in the East across all income tiers have actually bought the TV. Around 60% of MarQ TV sets sold were the 32 inch TV (costs $183) while the rest were 24-inch ones (costs $137),” reveals Adarsh.

In the pipeline are plans to introduce three to four additional screen sizes such as the 40 inch in the next six months, which would again be priced 10-15% lesser in comparison to competition.

But why exactly is Flipkart doubling down on its private label strategy?

It’s definitely not because of the margin up front. Adarsh explains, “Going after margin upfront is not what we do in private labels. Margin is an outcome of several things happening. First off, you have to have a really great quality product and the customer has to be happy with it. Then follows word of mouth and good reviews, so that sellers who sell the brand make more money, and that’s how we make more money. So only when all these things happen, that margins start picking up for us.”

So while margin may be the end game for Flipkart, for partner Dixon it’s something different.

The Dixon And Flipkart Partnership

Dixon is the one of the largest homegrown design-focused and solutions company engaged in manufacturing products in the consumer durables, lighting and mobile phone markets in India. Started in 1993, Dixon has a fully integrated end-to-end product and solution suite as an original equipment manufacturer (OEM) ranging from global sourcing, manufacturing, quality testing and packaging to logistics. With deep product expertise and an in-house R&D centre at Noida, Dixon produces TVs for major global brands like Panasonic, Sanyo, Akai and a host of major Indian brands. In fact, in terms of revenue consumer revenues, 30% of Dixon’s revenues in FY2016-17 came from TVs, followed by mobile phones and then lighting.

So what exactly is Dixon aiming to get out of this partnership with Flipkart as it chases its vision to emerge as the largest complete solutions provider in consumer appliances, lighting,  home appliances, and mobile phones?

As Sunil Vachani, Promoter and Chairman, points out, it is scale.

Sunil explains, “The core philosophy of the company is that first we need to create scale and that is benchmarked against not only local but global companies. We already have a production capacity of 1.2 Mn TVs and we are setting up another facility in Tirupati.”

So while Dixon’s manufacturing unit in Noida produces mobiles, in Dehradun it produces lighting, TV, washing machines.  In the upcoming Tirupati plant, all of the company’s current products would be manufactured. The Tirupati facility will take the total TV production capacity to 1.8 Mn units per annum, as per Pankaj Sharma, CEO at Dixon. This year alone, Dixon produced closed to 1.1 Mn TV units FY 17-18.

Given that the total TV market in India is around 12 Mn as per Sunil, Dixon’s plan is simple.

“The idea is to be the number one or number two in every field we are in. That’s why we are excited to be partnering with Flipkart. Because despite the huge growth we have seen, the overall sales of ecommerce as a percentage of total retail sales in India, is still very small.”

So with Flipkart and MarQ, Dixon also has a chance to land some percentage share in the growing ecommerce pie. But how exactly will MarQ, a brand virtually unknown as compared to established players like Panasonic, Samsung, and the others acquire a share of the burgeoning TV market in India?

Meet MarQ: A Combination Of Seven Best TVs

For a moment, let’s forget about Dixon’s formidable prowess as a manufacturer, its six state-of-the-art manufacturing facilities across the country, its in-house testing facilities and panel repair facilities, the many certifications the manufacturing plant has been credited with or the fact that it is a major OEM and ODM manufacturer for global TV brands.

Let’s try to understand how an ecommerce brand like Flipkart gets into commissioning a TV unit that can stand its own ground at the price point it is being offered.

The answer is simple – by learning from both its customers and its competitors.

Adarsh explains, “In ecommerce, the speed of response from customers is instant as compared to an offline channel. Even before the installation of a TV or a product happens, a customer starts sharing feedback. So one thing we focus on is mining that data, creating that voice of customer and constantly feeding it back both internally as well as to all our partners.”

It is this voice of customers and the intelligence from brands in the market that Flipkart took to Dixon when it chose seven TV sets whose best features they wanted the manufacturer to incorporate in MarQ.

Reveals Pankaj, “They brought in seven sets with them to our R&D facility in Noida, each having some good feature, based on the feedback given by Flipkart customers on the site. We together tried to create a product which was meeting, bettering or at least near to those specifications. That’s how MarQ was created – it’s not an off the shelf product. The picture, sound, brightness, all has been designed based on the feedback given by Flipkart customers.”

He further reveals that one of Flipkart’s quality guys was sitting on the production line when the production commenced and testing those sets!

Because that is what essentially Flipkart is good at. Adding to this Adarsh revealed that Flipkart has built a lot of capabilities in sourcing and in quality-QC and QA. There is a team that sits in China and India. “And their job is to build a supply of high quality sourcing partners high quality QC partners. But the team that actually does the product development is the extended OEM team,” he said.

And thus essentially, the R&D and production was all in Dixon’s hands.

But given that it was the first time that Dixon was producing a product for not a conventional brand but rather India’s first ecommerce behemoth, were there any hurdles in this process?

“The most difficult thing in bringing out MarQ was the time. The time was very short to understand what the other products were and then develop MarQ. We have a R&D team in Noida and China. So it’s not that it was a very high technology product that my team was not able to decipher but time was a constraint. There was lot of pressure from Flipkart’s side to keep the standard of the product very high. In fact, we are still trying to improve it further by working on the sound aspect.” Something which is also pointed out in the customer reviews on the site.

So while improvement will remain a continuous process as Flipkart adds more products to the MarQ range, one thing will remain constant i.e. focus on delivering quality at a cost effective price.

Pankaj adds here, “The glass used in the TV, which is 65% of the bill of material, is the same being used by top A brands as there are only 7 FABs (semiconductor fabrication plant) in the world who make that glass. So don’t be misled by the low prices of MarQ. Also, the TV panel for MarQ is being made in-house, which means that almost 70% of the product is made in-house. Even PCBs are made in-house thought PCB components are imported by us. In this very factory, starting right from components, we are manufacturing a full TV.”

And thus in many ways, MarQ is just not a first for Flipkart, but also in many ways a first of its kind for Dixon.

Here Adarsh adds that while MarQ will come into the fold of Jeeves, a service network set up by Flipkart of about 300 walk-in service centres for customers of its entire private label range, the ecommerce major will be relying hugely on customer feedback and reviews through this channel as well as through ratings and reviews on the site.

Flipkart And Private Label: The Way Forward

Given that there is a lot of integration happening between offline and online channels, and Flipkart itself is closely taking that path, will MarQ take the omni channel route too?

“Not any time soon,” says Adarsh.  The reason being that consumer durables as a category when shopped online, is still underpenetrated. And MarQ is just one of the brands that will be offered to customers online. So he feels that there will a lot of headroom to grow online alone though there is no denying the fact that there is a clear use case for offline channels given that white goods are touch and feel products.

Although Adarsh did not reveal how much of the GMV percentage Flipkart is expecting its private labels to bring in or even how many MarQ units the Dixon factory will produce at Dehradun, for now it is content with selling its private labels online. He did mention that most private labels are contributing in double digits for most categories across the platform. Reason for this, as per Adarsh, is that Flipkart as a platform gets 2X the number of hits any offline publication so far as advertising is concerned.

But what about Dixon? How much does it see Flipkart playing a role in its revenues?

“It’s too early to say how much of Dixon’s revenues will come from Flipkart. But we see them getting a significant share with their private brands. With their growth, we will grow as well,” says Sunil.

For the moment, it’s too early to say whether the MarQ private label will be able to make its mark among the branded TVs and that too with an online presence alone. But one thing is clear, Flipkart is not shying away from its private labels any time soon. Just last week, the ecommerce player announced its foray into launching its own smartphone, Billion Capture+, under its ‘Made For India’ brand Billion.

Here’s a quick look at the other private label brands launched by Flipkart ever since the launch of its digital music store Flyte in 2012. Since then, Flipkart has to date launched nine private labels. Not all were a success though.

 

 

Talking about Flipkart’s biggest rival Amazon, the global ecommerce giant too has expanded it foray in the private labels in India. Back in September 2015, Amazon launched its private label brand AmazonBasics. Geared towards expanding its consumer base, AmazonBasics offers a range of high-quality products for customers to enjoy at value pricing. In September 2016, it followed it up with  men’s private fashion lab, Symbol. Myx, an in-house private label for women’s ethnic wear. Besides these, it has Solimo for home and kitchen and recently launched its much awaited smart, wireless Echo speakers in India.

It’s clear that both the rivals will be banking more and more on private labels in times to come.

Besides washing machines and ACs, MarQ might also roll out products like sound bars and premium speakers. The vision of the brand is to make excellent quality products affordable to value customer segments, which is over 70% of large appliance buyers on Flipkart. While pricing may be a pull factor here, the question still remains, will the Indian consumers be willing to buy a white good brand developed by an ecommerce player as compared to renowned global brands? A look at early MarQ reviews on the site is a bag of mixed opinions. And that’s where lies MarQ’s ultimate test – moving from just another decent buy to becoming a formidable brand in Flipkart’s private brand portfolio.

 

[The writer was in Dehradun on a sponsored trip by Flipkart]