The retail sector in India is undergoing a remarkable transformation, with forecasts indicating that it will reach $2 trillion in value by 2032, as per a recent analysis by the Boston Consulting Group (BCG). This projected growth is fuelled by several key factors, including shifting consumer preferences, rapid urbanization, increased digitization and the rise in disposable incomes. 

As a result, India has solidified its position as the world's fourth-largest retail market and is firmly on course to becoming the second-largest e-commerce market by 2034. 

Notably, the organized retail sector in India, both online and offline, has extended its reach beyond major cities and metros, reaching Tier 2 and Tier 3 cities. This expansion is a testament to the retail sector's significant role in India's economy, contributing over 10 per cent to the country's GDP and employing approximately 8 per cent of the workforce. 

With increased purchasing power and a growing demand for branded products across various categories, such as apparel, cosmetics, footwear, and food, consumers in these regions are experiencing the benefits of organised retail. 

As the Indian retail market continues to expand, consumers are looking for private labels and Direct-to-Consumer (D2C) brands for their aspirational purchases. For instance, a private label collection of apparel can allow the same comfort and designs of established trend at an affordable price. 

More importantly, sellers do not stock up on established brand products in quantity due to the availability of capital, but private labels and D2C brands allow them to sell in volumes.   

Private labels and D2C brands have become powerful options for both online and offline retailers in response to the changing retail landscape. These products offer several advantages, including control over pricing, production, and branding.

In recent years, the private label and D2C market in India has witnessed significant growth, currently accounting for 10-12 per cent of the organized retail sector. Major e-commerce players like Tata, Reliance, Aditya Birla Group, Amazon, and Flipkart have strategically introduced private label brands, further fuelling their popularity and adoption among consumers.

For India's small and medium-sized enterprises (MSMEs), private labels and D2C brands offer a plethora of opportunities including differentiation, higher quality, wider reach, collaboration, and adaptability, leading to increased revenue streams, brand recognition, and improved marketing. 

Collaboration with retailers enables MSMEs to leverage well-established supply chains and access a broader customer base, including international markets. This aligns with India's aspiration to become a manufacturing hub for quality products, contributing to the 'Make in India' initiative.

Private labels and D2C brands also bring significant benefits to consumers. They provide customization, cost savings, and quick responses to changing trends, all while building trust and loyalty with retailers. The association of these brands with retailer trust often results in quicker repeat purchases and more satisfied consumers.

A recent research report by InGovern, titled ‘Private Labels and Direct to Consumer Brands: Democratising Retail Commerce in India’, provides valuable insights into the advantages that private labels and D2C brands offer to retailers, MSMEs, and consumers. These benefits encompass more affordable and higher-quality products, innovative solutions, and market democratisation.

Government support for the entry of MSMEs can sustain the growth of private labels and D2C brands in India's retail sector. This can be achieved by simplifying regulations and reducing compliance burdens, which will encourage more MSMEs to enter the market, thereby fostering innovation and entrepreneurship. 

By facilitating local manufacturing that aligns with international standards, we can bolster the production of private labels in India, enabling them to compete effectively with national and international brands.

As India's retail sector continues to evolve and expand, private labels and D2C brands should be encouraged to play an increasingly significant role. The government's role in clearing regulatory hurdles and creating a favourable environment for these brands will be pivotal in unlocking their full potential. It is imperative that government regulations be supportive of the MSME sector and encourage their entry into the private labels and D2C space.

The growth of private labels and D2C brands in India's retail sector presents an exciting opportunity for retailers, MSMEs, and consumers alike. 

With the retail market poised to reach $2 trillion by 2032, it is crucial for the government to provide the necessary support through conducive regulatory and compliance frameworks to unlock the full potential of private labels and D2C brands. This support will drive innovation, entrepreneurship, and economic growth, making India a hub for quality products and further strengthening its position in the global retail landscape.

-    Lloyd Mathias is an Business Strategist and an Independent Director