Why Retailers Are Betting Big on D2C Retail Strategy?

According to the Direct-to-Consumer Purchase Intent Index, over 80 percent of consumers worldwide are expected to buy something from a D2C brand over the next five years.
Why Retailers Are Betting Big on D2C Retail Strategy?

India is going digital, and the pandemic has accelerated this shift. The Covid-19 pandemic and the consequent lockdown have brought about a significant shift in the way consumers shop. Consumers are flocking online for almost all their needs - from groceries and essentials to clothing and accessories. Moreover, the kinds of goods purchased have also seen shifts, with a greater emphasis on home products, loungewear, nightwear, and craft/ hobby items that will come in useful during long periods at home. Brands have thus been compelled to develop an online presence even if they had none before, and are using a variety of channels to do so. This has led to a massive spurt in D2C brands.

According to the report titled ‘E-commerce Trends Report 2020’ by Unicommerce, over the past year, there has been a 65 percent increase in brands developing their own website in India, which led to an increase in self-shipped orders.

“Recent times, especially the past year, have seen a surge in digital adoption with the critical internet mass being achieved in India for online shopping as more and more people gravitate towards it. The economy is now enabling people to cater to niche segments of consumers economically and there is also a rise in digital entrepreneurs. With health and hygiene concerns soaring, a need for high-quality, packaged products has emerged. Brands are also realizing the need to approach consumers directly rather than going to marketplaces to build private labels. Moreover, payment infrastructure and integration with multiple payment options and the demand for niche products has led to the surge in the number of D2C brands,” shares Amit Monga, Co-founder ANS Commerce.

“In addition to high internet penetration and access to disposable income, India has one of the largest percentages of younger population who consume digital channels day in and day out. This is the reason why retailers are betting big on D2C retail strategy,” adds Aarti Gill, Co-Founder, OZiva.

“Another reason why reason the D2C model has been an attractive viable option for the brands is that they are selling and delivering merchandise directly to consumers letting off the hook the dependence on middlemen such as third-party sellers, wholesalers, and retail outlets for distribution, which was, in fact, the case under compulsion due to the need for strict social distancing in the earlier part of the pandemic outbreak,” Vishal Kaushik, Co-Founder & MD, Upakarma Ayurveda adds further. 

D2C – Why Retailers Are Betting Big on it?

Factors like a faster reach to consumers and no dependency on middlemen including third-party sellers, wholesalers, and retail outlets for distribution make Direct to Consumer more effective and a preferred retail strategy these days. 

“Brands get lost in a cluttered marketplace, D2C e-commerce store is a better way to tell the brand story. It definitely helps in brand recall and loyalty. The brand store will have an enhanced user experience, tailored buyer journeys, and intuitive interfaces. The biggest advantage is that the brand owns and controls this channel right from the pricing, promotions, buyer data, and user journey.  The advantage that a D2C brand has is the ability to collect customer feedback in real-time and feed it straight into the product development loop. This allows them to quickly adjust their product offerings or their distribution channels to suit different behavioral groups of customers online. This access to real-time customer sentiment also allows D2C brands to set up personal touch-points at different stages of the buying journey so that customers always have someone to talk to,” elaborates Mangesh Panditrao, Co-founder and CEO, Shoptimize.

“D2C also has a PAN India reach even at a smaller scale, thereby making it one of the most efficient and effective retail strategies,” adds Monga.

Leveraging Social Media to Drive Sales

With increased internet penetration and data packs’ getting cheaper, usage of social media is growing at 35 percent Y-o-Y and it has become one of the main channels to reach a vast audience. Brands thus started amping up their real-time personalization strategies depending on which channel the customer was using and at what time. 

“Brands have also adopted the strategy of organizing giveaways and contests on social media platforms to engage consumers customers along with influencer marketing route. Knowing your consumers and building a community is key to establishing a presence and driving sales,” says Monga.

“Apart from this, D2C customers are more evolved and hence look for more content around the product/ brand before making an informed choice. Consumers do thorough research and comparisons online before making a purchase. Hence, social media plays an important role in every D2C brand’s content plan. Social media platforms are highly popular among new-age consumers and hence planning campaigns for such an audience is a must-have in a brand’s marketing plan,” adds Gill.

How Bright is the Future of D2C?

The D2C segment is poised for exponential growth in the post-pandemic era. There has been an increase in retail penetration and digital acceleration along with increased convenience that customers have adapted to in online shopping will act as growth drivers for the D2C segment.  However, India still has ~4-5 percent retail penetration versus ~20-22 percent in the US, leaving for a lot of opportunity in India to grow. Moreover, there are also countless choices and personalized experiences that customers can opt for which in turn makes for higher customer loyalty, further boosting the D2C sector’s growth.

According to the Direct-to-Consumer Purchase Intent Index, over 80 percent of consumers worldwide are expected to buy something from a D2C brand over the next five years. Clearly, the D2C trend is here to stay and brands seeking to grow should capitalise on it. 

In fact, according to estimates by Avendus Capital, direct-to-consumer (D2C) brands could be looking at a $100 billion consumer opportunity in India by 2025.

 “Definitely, this segment is likely to grow with both older and new players entering the segment as it is cost effective approach with better sales opportunities for the brands. While consumers have also adapted to the change, brands need to be more dynamic and be more connected technologically,” concludes Kaushik.
 

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