Anatoly Kostyrev’s column about private label retail hobby

Keeping track of major foreign competitors, Russian retail market participants got a rare chance to learn from the mistakes of others. Recently, The Wall Street Journal (WSJ) announced the intention of the American online giant Amazon to reduce its private label portfolio by dozens of positions in the clothing and home goods categories. According to the WSJ, the refusal of part of the private label will reduce the pressure of regulators, who pointed out the conflict of interests of Amazon in the promotion of private labels and other products, which could form the basis of an antitrust case against the site.

In Russian retail, the passion for private labels is only gaining momentum. According to the Association of Retail Companies (AKORT; includes X5 Group, Magnit, M.Video-Eldorado, Detsky Mir, Leroy Merlin, etc.), food chains that are members of AKORT have the average share of private labels in sales for 2022 year grew from 15% to 20%, and in the non-food segment – from 34% to 42%.

Online platforms, according to AKORT, still account for more than 5% of private labels in turnover, but, judging by the latest news, they do not plan to lag behind. Wildberries announced the launch of private label electronics and household appliances in the spring, and recently the media learned about the company’s plans to create a sportswear brand. Yandex Market develops its brands of electronics, accessories and food products, expands the range of private labels and Ozon.

The interest of networks and online platforms in private labels is understandable – such products allow you to get a higher margin compared to supplier brands. But for the latter, competition from private labels can create problems. Some of my interlocutors among food chain suppliers are already complaining about pressure from private labels, which, for example, can occupy a better place in the store. Similar questions with the growth of the share of private labels are likely to arise from sellers of online platforms. And the latter have already proven that they can express their dissatisfaction very loudly and at the same time achieve an effect.

A series of conflicts between Wildberries and counterparties led to the refinement of self-regulation standards for online trading market participants and sharpened the issue of government intervention in the sector. And if in the future the confrontation between sellers and online platforms will spin due to unfair competition from private labels, as in the case of Amazon, then it is likely that such proceedings will also affect traditional retail. Moreover, the Ministry of Agriculture came up with the idea of ​​legislative regulation of private label retail chains back in 2018, and it will hardly be difficult to revive it. Then, contrary to the usual use of the experience of tightening the screws of offline retail for the online market, the latter can already show an example of a new regulation for traditional retail.