Inside Zepto’s 20-20-20 formula for private label expansion

In India's quick commerce sector, which is flooded with new entrants, customer expectations are rising and competition is at its sharpest. In this environment, Zepto is turning to a structured 20-20-20 strategy to carve out a niche through its private labels.

"The product has to be 20% cheaper than the nearest indexed brand, it has to give us at least 20% more margin, and it has to get an opportunity to take around 20% share in that category," shares ​Vikas Sharma, COO, Zepto.

Quick commerce players have been steadily building new moats, as assortment and speed become hygiene factors rather than diffrentiators. With a heavy price competetion already weighing down on the companies bottomline, private labels have emerged as a key way to increase repeat orders and also improve margins.

The latest entrant in the space being Noice by Swiggy, which offers everything from paneer to murukku produced by local suppliers and packaged under Swiggy's Noice label.

Zepto, however, has a head start. Launched two years ago, Zepto's Daily Good brand has seen strong adoption in certain categories like dry fruits. According to Sharma, the brand dominates significant parts of the segment today.

"When we started, we started with a process of whitelisting the product. We wanted to see whether customer adoption was there. Once we saw adoption reaching a certain level, we moved it into private label," explained Sharma at the second edition of Consumption Economy event hosted by 3one4 Capital.

Zepto built in-house quality control teams stationed at across contract manufacturing units, ensuring consistency.

Another private label, Relish, is a meat brand by Zepto that competes with well-established brands like FreshToHome and Licious. According to a person aware of the details, on an annualised basis, the segment is on track to close upwards of Rs 500 crore in revenue by the end of this year.

A better margin on own brands allows marketplaces to display it right next to brand names in the category at a better price point, gently nudging consumers toward them and effectively eating into platform sales for those brands.

"We explain to them (sellers) that private label gives us a moat. And at no point do we see private label becoming the single most dominant player across all categories. But in categories where we see strong traction and scaling opportunity, we want to grab that," rationalises Sharma.

Marketplace-led private labels have long created tension with sellers. Amazon has Solimo and Presto; Bigbasket has BB Home, BB Royal, and BB Popular; and Flipkart offers MarQ and SmartBuy.