Private Label Economics: Quick Commerce Margin Trade-Offs

Key takeaways

• Selling somebody else brand earns a thin retail spread. Zepto product gross margin in FY26 works out near 13 per cent. In-house brands are reported to earn roughly three times that.
• BigBasket is the domestic benchmark: own brands are 36 to 37 per cent of turnover, with a stated target near 40 per cent and Rs 500 crore committed to expanding them.
• On my model of the Zepto numbers, private label needs to reach about 14 per cent of product revenue to cover fulfilment. If a quarter of ad income goes with it, the requirement rises to about 22 per cent.
• Advertising is the catch. Blinkit, Zepto and Instamart advertising revenue is put near Rs 4,900 crore for 2026. Own brand takes the shelf those advertisers are paying for.
• Swiggy shareholders approved an Articles amendment on 18 August 2026 with 93.97% support and separately approved a 49.5% foreign-ownership cap with 99.9996% support. Swiggy had not said it had already obtained Indian-owned-and-controlled-company status.

Verified ownership facts

Item	Verified result	What it means
Articles amendment	93.97% support on 18 August 2026	The governance change passed.
Foreign-ownership cap	49.5% cap; 99.9996% support	Shareholders approved the separate cap resolution.
Operating model	Marketplace today; IOCC status not yet confirmed	Inventory-led control remains a later legal and corporate step.

Source: Swiggy corporate announcements and the Zepto UDRHP.

In Part 1 I showed that Zepto gross profit of Rs 69 an order does not cover Rs 82 of delivery and dark store cost. There are only two ways to close that. Raise the basket, or raise the margin on the basket you already have. Everybody talks about the first. The second is private label, and it is the more interesting lever, because it does not require the customer to change behaviour at all.

Why own brand is the only real margin lever

When you sell a branded biscuit pack you are a distributor with a warehouse. When you sell your own biscuit you collect the manufacturer margin and the retail margin on the same unit. Inc42 reports in-house brand margins at roughly three times branded resale. That is why every grocery operator eventually does this, and why quick commerce cannot avoid it once discounting has already compressed branded category margins to modern trade levels.

What it can realistically reach

BigBasket has spent a decade on bb Royal, Fresho and bb Popular and is now at 36 to 37 per cent of turnover, aiming near 40, with Rs 500 crore committed to expansion. DMart proves the offline version: store brands around 20 to 25 per cent of sales, on a gross margin near 16 per cent, used to move inventory faster rather than to replace price discipline. Quick commerce is far behind. Zepto is pushing Relish in meat and seafood, reported heading to Rs 500 crore of revenue in 2026, and Daily Good in staples. Blinkit has Whole Farm. Instamart is building exclusive SKUs and own labels. None of them is anywhere near BigBasket yet.

Complication one, you are cannibalising your best customer

This is the part the bull case skips. Advertising is the highest margin line these platforms have. Zepto booked Rs 1,636 crore of advertising revenue in FY26, which is 37 per cent of its entire gross profit, and the three big platforms together are put near Rs 4,900 crore of ad income for 2026. Redseer has beauty brands spending up to 10 per cent of their quick commerce sales on ads. Every search result you hand to your own brand is a slot an FMCG company was paying you for. You are not adding margin, you are swapping a high margin rupee for a slightly higher margin rupee and hoping the arithmetic nets out.

Complication two, you cannot hold stock unless you are Indian owned

Indian policy does not permit an inventory-led e-commerce model when ownership sits majority offshore. A marketplace can connect buyers and sellers, while private label can require the platform to own goods. Swiggy shareholders approved the Articles amendment on 18 August 2026 with 93.97% support. They separately approved a 49.5% foreign-ownership cap with 99.9996% support. Those votes clear a governance hurdle, but Swiggy had not said it had already established Indian-owned-and-controlled-company status. Inventory-led control therefore remains a later legal and corporate step.

Now look at what that means. To run the only strategy that fixes your margin, you have to shut the door on foreign capital, in a year when India took just 5.2 billion dollars of a record global venture year and recorded zero rounds above 100 million dollars in the first quarter. Indian e-commerce was built on foreign money. A cap means new capital has to come from domestic pools, family offices and mutual funds, at exactly the moment those pools are being asked to absorb an IPO pipeline as well. That is the squeeze, and it is structural, not a sentiment cycle.

Complication three, inventory is a balance sheet

A marketplace holds no stock. An inventory-led grocer holds working capital, and in fresh it holds shrinkage. Zepto procurement was Rs 18,199 crore in FY26. Move even a fifth of that onto your own books and you have added a financing line to a company that already burned Rs 4,330 crore of free cash flow. Add expiry on fruit and dairy, quality control across dozens of contract manufacturers, and the reputational cost of one bad own-label batch landing on the platform that carries your name. BigBasket took ten years to get to 36 per cent for these reasons, not because nobody thought of it earlier.

What would have to be true

Here is the arithmetic, and it is a model, not a disclosure. Of Zepto Rs 353 revenue per order, about Rs 26 is advertising, leaving Rs 328 of product revenue at roughly 13 per cent margin, or Rs 43. Add the ad rupee and gross profit is Rs 69 against Rs 82 of fulfilment. Closing that Rs 13 gap with margin rather than basket size means lifting product gross profit about 30 per cent. At a three times margin multiple, that needs own brand to be roughly 14 per cent of product revenue. If a quarter of ad income walks out with the shelf space, the requirement rises to about 22 per cent.

So my call is this. Fourteen per cent is reachable inside two years, because BigBasket already runs at 36. Twenty-two per cent while defending ad income is much harder, and it is the number to watch. If Zepto or Instamart disclose an own brand share of basket above 20 per cent with advertising revenue still growing, the economics are fixed. If own brand share rises while ad revenue flattens, they have simply moved the loss.

What to do about it

If you are an investor, ask for two numbers together and never one alone: own brand share of gross order value, and advertising revenue growth. A platform that gives you only the first is hiding the second. If you are an FMCG brand, treat rising private label share as your notice period. That is the same lesson as the commission squeeze in food delivery: the platform eventually competes with the supplier it distributes.

Read next: Part 1, the dark store profit and loss behind the Zepto IPO deferral, and why a record global venture year never reached India.

Sources

• Inc42, on private label margins at roughly three times branded resale, BigBasket own brand revenue and the Zepto Relish and Daily Good brands
• IBEF and Business Standard, on BigBasket private label share of turnover, the 40 per cent target and the Rs 500 crore commitment
• India Dispatch, on DMart store brand share and the role of private label in its model
• Storyboard18, on Blinkit, Zepto and Instamart advertising revenue near Rs 4,900 crore in 2026
• Inc42 and Business Standard, on the Swiggy board approving a 49.5 per cent foreign ownership cap and the Indian owned and controlled company route to an inventory-led Instamart
• Zepto DRHP FY26, via Entrackr and Forbes India, for revenue, procurement, advertising income and free cash flow

Figures marked as modelled are my own calculation on reported Zepto FY26 totals. All other figures are as reported by the sources named above at the time of writing.