Why are Beauty Brands Betting Big on the D2C Route?
Why are Beauty Brands Betting Big on the D2C Route?

India’s $100 bn D2C addressable market is making the pie bigger than ever with a mighty chunk for brands striving to stay ahead

Fueled by over 700 million internet users, online shopping in India is at an all-time high, showing a 24 percent y-o-y growth and with more than 16 D2C brands in India having an annual turnover of more than $60 million! 

Evolution in technology and the onset of the pandemic have shifted commerce from brick-and-mortar to online. Consumers are now driving commerce. The majority of customers search online for almost all their needs and the narrative has shifted to customers taking complete control of their purchasing journey and decision-making. This presents companies with a chance to build seamless digital experiences across touch-points by adopting the direct-to-consumer route.

Most beauty brands have established their reputation on stories, and these stories fail when the brand itself doesn’t convey them. When a customer purchases something, they are not just looking for a product but they are expecting an overall personal experience with the brand. Undoubtedly, customers are more likely to trust a product if they purchase it directly from the brand. 

Why are Consumers Trusting Direct-to-Consumer Brands More?

30 percent of customers choose being sold directly by the brand maker as one of the top three reasons why they trusted an online purchase. This year, one-fifth of shoppers plan to purchase directly on brand websites. 

Reducing the mediator allows brands to generate a bigger margin while also having direct access to their consumers and data. The number of direct-to-consumer (D2C) beauty brands has increased dramatically in recent years. Because of this expansion, upcoming brands are no longer dependent on physical stores or middlemen to display their products or services to customers.

When lockdowns were imposed, supplies and actual store visits came to a standstill, hampering the sales. Despite the fact that the pandemic created a negative impact across all sectors in 2020, investments in D2C dropped by 69 percent through Q3. 

Brands are adopting the D2C route to leverage the substantial benefits apart from the obvious benefit of increased margins:

Increased Control Over Brand Messaging - Manufacturers have little control over their brand in the typical manufacturer-retailer relationship. While manufacturers have control over packaging and other marketing operations, once the product is handed over to retailers, they no longer have the ability to influence sales, create relationships with customers, or collect data. Manufacturers may spend a lot of money on advertising, but merchants are ultimately responsible for presenting the product to the consumer. By going D2C brands get a good hold of the messaging which further helps in gaining loyal customers.

Change In Consumer Purchasing Patterns - The pandemic fueled the e-commerce boom, with purchasers preferring to buy products, especially essentials and staples, online. D2C beauty brands operating in the digital mode have benefited greatly from the digital purchasing trend. Higher internet connection, lower data costs, and the digital payments boom are all factors driving the digital economy. The outbreak and lockdowns fueled the rising Direct to Consumer (D2C) trend, with more bands establishing their own websites. When compared to the same period last year, brand websites grew by 94 percent in Q4 2020, while marketplaces grew by 58 percent.

Brands can now design creative ways to gain market share or boost penetration levels in different consumer pools by monitoring purchases with data of product categories, value, and volume, as well as analyzing customer habits and reactions. Brands can leverage targeted marketing which ensures that the right consumer is getting the right ads. Direct-to-consumer marketing tactics allow you to seamlessly combine brand growth and brand awareness with higher income and sales. SEO, search PPC, and paid-media marketing are all excellent strategies to expand a company's online presence while generating revenue. 

Expanded Market Opportunities - D2C helps brands to reach consumers irrespective of geographical boundaries. Global exposure is no longer a far-fetched reality for home-grown brands. It is critical to constantly innovate the strategy responding to the fluctuating needs of consumers and efficiently scale to sustain in the competitive market conditions. Additionally, when it comes to selling, most retailers adhere to a fixed standard. They typically avoid selling new products that have no track record of becoming a ‘hot-selling’ item. Manufacturers are then limited to producing just what retailers desire. D2C allows brands to introduce new items on a smaller scale, test them with certain demographics, and collect feedback. Thus, D2C enables manufacturers to understand, improve, create and sell products according to their customer’s needs and demands.

Customer Retention and Brand Loyalty - Customers who can relate to the brand's values and stories have the most retention.  The strategy of direct-to-consumer brands is proactively pursuing, converting, and retaining customers. End-consumers communicate directly with their favorite brands in a virtual setting and make purchases based on their preferences in D2C. Thus, by ongoing involvement with customers via email, chat sessions, apps, and social media forums, brands can understand customer preferences, developing expectations, and product demand. D2C manufacturers have information that leads to delivering better service and support to their consumers. They may use their customer connections to build strong relationships and promote retention through tailored marketing campaigns. As a result, most D2C brands place a high value on customer feedback to provide maximum consumer happiness. 

From digital natives to first-time users, consumers today want smooth and personalized experiences, especially when shopping online. For several years, the D2C (direct-to-consumer) sector has been increasing at double-digit rates and will continue to grow, with huge companies developing digital-first arms as well. 

According to Avendus, a financial services firm, India has a whopping US$ 100 billion addressable D2C markets. D2C brands that aim to stay ahead of the curve will need to use consumer data insights to boost traffic, engagement, and conversions. Brands are directly tapping into their consumption moments by delivering the right product at the right time. Brands' direct-to-consumer initiatives are focused not just on increasing revenue but also on developing communities. After all, the customer is king! 

Stay on top – Get the daily news from Indian Retailer in your inbox
Also Worth Reading