The year 2017 has been a great year for the consumer internet industry. With the sharp increase in the number of online users due to Jio effect the overall industry benefited. The key sectors saw a good growth and a there was a significant shift observed in the business models of some sectors to ensure better consumer experience. Although the growth has been fair there is a still a significant opportunity for the sectors as majority of them have less than 10% online penetration.
Food-tech: Food-tech will be ruled by the players with high-quality captive delivery players
It is becoming increasingly clear that food tech is more and more of a logistics play, restaurant discovery is not a deep competitive advantage. There are clear trends in customer and seller satisfaction supported by the better delivery speed and compliance that vouch for the superiority of the captive delivery model in Indian market.
Self Fleet vs Partner fleet used by Online Food Aggregators
Since its establishment in 2015, Paree Sanitary Pads, a division of Soothe Healthcare, has been disrupting the feminine hygiene industry in India. Led by Sahil Dharia, Founder and CEO, Paree Sanitary Pads, the brand has experienced remarkable growth and made significant strides in menstrual health awareness and accessibility.
Recognizing the vast potential in the feminine hygiene industry, Sahil asserted, "When we started in 2015, there were only 12 percent females in India using sanitary pads, but now there are 20 percent females using sanitary pads. The feminine hygiene industry is a blue ocean for us, and with increasing awareness about menstrual health, there's tremendous growth potential."
Paree Sanitary Pads manufactures its products in a US FDA approved facility, the brand ensures the accessibility of high-quality menstrual products to women across the country. It conducts workshops, health sessions, and campaigns aimed at initiating conversations about menstrual health and emphasizing its importance for women's active participation in the national economy.
The journey of the brand commenced with Soothe Healthcare launching Paree Sanitary Pads with renowned badminton player Saina Nehwal as its brand ambassador, making history as the first Indian sanitary pad brand to be associated with a sportswoman. Currently, Paree Sanitary Pads boasts a robust distribution network comprising 4 lakh outlets, and its manufacturing facility has the capacity to produce 1 billion pads annually.
Reflecting on the brand's remarkable growth, Sahil emphasized, "From Rs 10 crore to becoming Rs 250 crore homegrown brand is thrilling, and we are ready to achieve the next big number soon." Paree Sanitary Pads consistently strives to raise awareness, educate, and empower young girls and women across the country, shaping them into empowered individuals of tomorrow.”
The brand adopts an omnichannel distribution model to ensure maximum reach. The brand is present across various channels, with 75 percent of the business originating from general trade, 15 percent from e-commerce platforms such as Amazon, Flipkart, Purple, Meesho, and the remaining 10 percent from CPC and Modern Trade partners.
Looking toward the future, Paree Sanitary Pads envisions becoming a Rs 500 crore brand in the next two years. The brand's core vision remains centered on improving the quality of lives within the communities it serves. "We have constantly been working to make Paree sanitary pads accessible to every female in the country," explained Sahil.
He also highlighted the significance of having the right people for the right roles, combining hustle with a strong fundamental grounding. With a customer-centric approach, Paree Sanitary Pads addresses the real issues faced by Indian women and remains dedicated to their evolving needs.
Embracing technology and artificial intelligence has been instrumental in enhancing operations at Paree Sanitary Pads. The brand leverages these advancements to improve efficiency and deliver superior experiences to its customers. Presenting itself wherever consumers are active, the brand has extended its presence digitally to reach its target audience effectively. By focusing on consumer demand, Paree Sanitary Pads has established a successful marketing approach that emphasizes adaptation rather than drastic change.
With an unwavering commitment to empowering women, initiating conversations about menstrual health, and providing accessible and high-quality sanitary pads, Paree Sanitary Pads continues to make a profound impact on the lives of women across India. As Sahil affirmed, "We don't feel the need to change, rather just adapt." Paree Sanitary Pads is poised to redefine the feminine hygiene industry and uplift countless lives in the process.
VAHDAM India, the country’s largest home-grown wellness brand, offers the finest Indian teas and spices under a sustainable-ethical brand, eliminating middlemen. Started in 2014 by Bala Sarda, VAHDAM is a vertically integrated brand that is disrupting the 200 year old global supply chain, sourcing directly from 150 farms across India with its manufacturing in 100,000 sq. ft. BRC Certified state-of-the-art facility in the National Capital Region of India.
VAHDAM India is a digitally native brand with over 90 percent of its revenue coming from online sales and 10 percent offline. It is present in over 6500 stores globally. The brand has been shipped to over 4 million consumers across 130 countries with the US, Canada and Europe as its key markets. It has delivered a CAGR of 151 percent since inception and is the largest home grown tea and wellness brand in revenue.
“We aim to expand the offline reach to complement our strong online presence. We plan to grow by focusing on 3 key growth triggers - going deeper in our current markets (USA, Canada, UK & Germany), expanding our omnichannel distribution, and strengthening our presence in new markets & diversifying into other relevant product categories,” stated Bala Sarda, Founder & CEO, VAHDAM India.
Key D2C Strategies
Supply Chain Efficiency: The brand prioritizes maintaining a lean and efficient supply chain to ensure that all customer orders are delivered intact and on time.
Adapting to Diverse Demographics: Its products cater to a diverse range of demographics, which necessitates a dynamic approach. The brand continuously evaluate market trends and consumer preferences to adapt its strategies accordingly. By staying attuned to the evolving needs of different customer segments, it strives to provide personalized experiences and relevant offerings.
Customer Engagement and Feedback: The brand actively engages in conversations with its customers to gauge their experiences and gather valuable feedback. This feedback loop allows it to understand its needs and preferences better. It considers these insights when making improvements to various aspects of its business, including product development, customer service, and overall customer experience.
Customer-centric Approach: The brand firmly believes in making its customers feel valued and appreciated. By actively listening to their needs, concerns, and suggestions, it can provide better solutions and ensure that their expectations are met or exceeded.
As the world moves towards a more digital age, online shopping has become a major contributor to the growth of retail industries worldwide. In addition, high-end shopping has also been a key factor in driving the retail industry's contribution to a nation's economy. The success of the retail industry has a significant impact on employment, consumer spending, and economic growth. In recent years, high-end and online shopping have emerged as the primary factors driving retail's contribution.
Online shopping has increased dramatically during the previous ten years, according to recent reports. The way people shop has undergone a dramatic transformation because of the rise of e-commerce behemoths such as Amazon. In fact, by 2023, it is predicted that e-commerce sales would soar to an astounding $6.5 trillion. Digital marketplaces such as Etsy and eBay, which give customers a wide choice of products at low rates, have expanded as a result of the boom in online shopping.
On the other hand, high-end shopping has long been related to expensive, luxurious products. The notion of high-end purchasing has changed throughout time, though. Luxury goods are no longer the only items available at high-end stores; there are also high-quality items that address specific requirements and tastes. This trend has resulted in the growth of high-end retailers such as Apple and Tesla, which offer premium products and services to a niche audience.
Online purchasing and high-end shopping have some similarities despite their distinctions. The demand for convenience and tailored experiences underpins both trends. High-end buying delivers a personalized experience that is tailored to the needs and interests of the individual consumer, while online shopping gives customers the ease of purchasing from anywhere at any time. These two tendencies have a major effect on the retail sector. The rise of innovative business models like drop-shipping and subscription services as a result of online retail has upended conventional retail models. On the other hand, high-end shopping has led to the expansion of luxury brands and speciality shops that provide distinctive goods and services.
As an industry expert and director of ExportersIndia.com, I believe that there have been more jobs created in the retail sector as a result of the expansion of online and luxury purchasing. The demand for positions such as digital marketers, data analysts, and logistics specialists has increased as e-commerce has grown. In a similar vein, the rise in high-end retail has given rise to positions like that of luxury brand ambassador and product specialist. One cannot emphasize enough on how these two developments affect a country's economy. Millions of people can find work, thanks to the expansion of the retail sector, which also considerably boosts a country's GDP. The expansion of associated industries like technology and logistics has also been facilitated by the increase of online and luxury shopping.
Concerns have been raised, meanwhile, regarding how these developments would affect conventional brick-and-mortar stores. Several physical establishments have closed as a result of the expansion of internet buying, and the growth of high-end shopping has caused the retail sector to consolidate. Traditional merchants now face a difficult climate as they struggle to thrive in an industry that is changing due to these trends. E-commerce platforms are posing an increasing threat to traditional merchants, and many are finding it difficult to adapt to shifting consumer demands. As a result, in order to improve the customer experience and compete with e-commerce platforms, merchants are investing in digital technology and omnichannel strategy.
In conclusion, the retail industry will continue to contribute significantly to a country's economy due to the expansion of the internet and luxury purchasing. While these changes create numerous chances for development and innovation, they also pose difficulties for conventional merchants. To remain competitive and prosper in the years to come, the retail sector must continue to adapt to the shifting business environment.
Image credit: <a href="https://www.freepik.com/free-vector/online-shopping-concept_14449322.htm#query=high%20end%20online%20shopping&position=4&from_view=search&track=ais">Image by pikisuperstar</a> on Freepik
Indian kitchens have remarkably evolved over the years, in line with advancements in technology, the emergence of new tools or appliances, and changing lifestyles. With time, cooking has turned less labor-intensive and more convenient- with transitions from chulha to gas stoves, pots to pressure cookers, and now smart cooking devices. The major turning points have always been a step towards making cooking a less arduous task for all.
Technology-based D2C brands have now picked up the baton of helping people prepare nutritious meals easily. By offering innovative appliances, healthy food options or groceries, and personalized meal planning, these companies are making every aspect of fixing a meal more efficient. By expanding the choices and possibilities in the kitchen, these businesses are equipping every Indian dealing with time constraints to eat better and not compromise on their health.
Smart Kitchen Devices
Smart kitchen devices are revolutionizing cooking at home by making the process significantly effortless. Through WiFi-enabled devices and artificial intelligence, these appliances are making cooking more enjoyable for individuals and families. In fact, rising demand from India, Japan, and South Korea will lead to the fastest growth in the Asia Pacific market for smart cooking assistants.
The presence of smart kitchen products is being increasingly felt in Indian kitchens. Smart water purifiers that auto-update and sync, dosa or chapati makers that prepare the dish for you, and AI-enabled smart cooking assistants with preset recipes and automated functions such as chopping, stirring, and sautéing are enabling food to be cooked with minimal effort. Young urban professionals are utilizing these smart devices to minimize their time spent in the kitchen, allowing them to focus more on other commitments. Driven by greater innovation and demand, the market for smart kitchen appliances in India is likely to grow from $0.50 billion in 2022 to $1.2 billion by 2030.
Personalized Nutritional Information
To help people make wise choices with their food, several D2C brands are now providing personalized nutritional information such as calorie intake, lists of ingredients, and the nutritional value of a packaged food item. Making this information readily accessible is crucial for those striving to eat healthily or have dietary restrictions. Apps such as MyFitnessPal, HealthifyMe, Fooducate, and My Diet Coach- Weight Loss track nutrition and provide users additional knowledge about what they are eating or should eat so they may customize their diets to achieve their fitness goals. The inclusion of these apps in day-to-day lives has led to more mindful cooking in Indian households.
Smart Cooking Assistants like the delishUp⤴️ also give you nutritional information about the food before cooking, so one can manage their portion and nutrition intake at the source.
Healthier Ingredients and Snacks
The kitchen is the heart of a home and it plays a major role in influencing food choices or meal planning, depending on the type of ingredients and equipment one has. With an increasing preference for organic and vegan meals, technology-based D2C brands are also focusing on offering healthy and sustainable ingredients for daily meals, such as organic produce, grass-fed meats, or artisanal cheese. Companies such as Licious, Meatigo, and Cowvathi are helping people to acquire an array of fresh ingredients to expand their cooking options with additional varieties and encourage experimenting with their food. Apart from providing customers with healthier options, it also promotes sustainability and reduces the environmental impact of their food choices.
According to a recent study, nearly 81 percent of Indians are choosing to substitute one meal of the day with a healthy snack. Preferring to have multiple small meals throughout the day, many seek nourishing snacking options to combine their desires for indulgence with the requirement for wholesome meals. With ‘superfoods’ gaining momentum, brands like Ritebite, Snackible, The Whole Truth Foods, and Tata Soulfull are offering healthier breakfast cereals and protein bars, providing an alternative to fried or sodium snacks. Consumption of protein bars and health supplements is also projected to increase owing to the rising health consciousness among consumers.
D2C players are transforming kitchens by making cooking at home easier through new-age appliances and making resources such as high-quality ingredients, recipes, or virtual classes readily available. As the current catalysts that are accelerating the age-old endeavor to make cooking less intimidating for everyone, this shift is changing the way people prepare food and eat, ultimately shaping the future of the Indian kitchen.
The beauty and personal care industry was already ballooning prior to the Covid-19 outbreak, and on a positive note, the multiple sectors under its larger umbrella witnessed major uplift as a direct consequence of the pandemic disruptions. The pandemic also caused a shift in cosmetic habits, with consumers at home taking a more sensible approach to their beauty routines, preferring to focus more on self-care and wellness. Multiple factors have fostered the development of this industry, including a shift towards chemical-free and environmentally friendly products, raising concerns about personal hygiene, which has led to considerable demand for wellness commodities, and the emergence of the direct-to-customer (D2C) model, which has resulted in agile and personalized solutions. More pertinently, D2C personal care and wellness startups powered by a digital-first model have empowered men and women to pamper themselves with their in-home professional care treatments at a reasonable cost, without having to go out.
The wellness and beauty industry is advancing at a rapid pace towards becoming a digitally seasoned industry. While the beauty sector has only recently begun expanding its digital footprints, the wellness industry has traveled a considerable distance. The rise of different technology-driven start-ups has augmented the process of digitization even further. D2C personal care startup’s digital approach relies on customer engagement, which involves extensive use of digital channels such as mobile applications and social networking sites to steadily connect with consumers. This enables brands to attract and retain customers in real-time and adapt to their demands and feedback. No doubt, social media platforms have evolved into a powerful medium for businesses to build and solidify their brand recognition.
Previously, in the name of offering an integrated service, all consumers were provided with a benchmark diet plan, workout regimen, beauty care, and so on. However, in order to build an individual relationship with the customer and to retain them for a longer period, the emphasis on personalization has grown tremendously. Customized beauty is an aspect of the wider customization trend that has impacted industries spanning from health and fitness to parlor and salon care. Millennials, in particular, are drifting away from one-size-fits-all solutions in favor of customized products and experiences. Top D2C industry players are now providing tailored goods and services centered on taste, liking, lifestyle, body type, and even genetics. Next-generation personalized care has the potential to benefit a wide range of wellness participants, particularly home salon brands that are assertively exploring new areas in order to differentiate themselves.
On-Demand At-Home Services
The personal care and wellness industry have always been at the forefront to implement a wide range of strategies to promote superior customer experience on the cusp of their hectic lifestyles. New-age D2C startups are also experimenting with various service models in order to provide greater convenience and achieve greater recognition. Growing consumerism, smartphone, and internet infiltration, and a steadily rising working-class population have set up ideal conditions for wellness businesses to streamline the on-demand at-home service framework. Many beauty companies, for example, offer a variety of services ranging from routine full body waxing to Cleanup, Manicure, Pedicure, Detan, Bleach, and Facial services. Some home salon brands offer a unique 7 a.m. to 7 p.m. service, allowing customers to take advantage of beauty services in the early mornings when most brick-and-mortar salons are unavailable.
Prior to the D2C revolution, there was no transparency in the personal care and wellness sector. A client’s visit to a beauty salon, for example, could easily cost them several thousand rupees. Many salon stores routinely charge absurdly high and deceptive prices for beauty treatments as customers are ignorant of the overheads. Beauticians use products that come in huge containers or bottles, making estimating the cost of materials used for a specific service almost impossible. To address the issue, many home salons and tech-enabled startups are now offering sealed mono doses of beauty products for one-time use, preventing refilling or cheating. Another key differentiator is the per-minute pricing model. Regardless of the service, the per-minute pricing model ensures that the client gets the service highlighted with the appropriate service timing. This allows customers to understand how much time the professional will spend on a service they pick and for which they are paying.
Personal and wellness care is no longer a desire, but rather a requirement for customers. Customers will undoubtedly have more stringent requirements for their beauty and wellness products and services in the future, implying that all D2C wellness industry players should be prepared to adapt to changes unfolding among customers and their rivals on the market.
With consumer lifestyles increasingly going digital, online channels dominate their preferences for media consumption as well as shopping. A Google/Ipsos study revealed that people are actively shopping for more than six categories online at any given time. Not only are consumers choosing online over offline when it comes to shopping, but the way they shop is also changing. Rather than being in shop mode only when they are on Amazon or Flipkart, they are now always shopping. A report by Meta found that over 60 percent of shoppers surveyed stated that they made purchases based on what they unexpectedly found when browsing online.
What this means is whether they are scrolling on Instagram, seeing videos on YouTube, or even searching on Google, brands need the ability to create moments of discovery of products that these consumers care to buy. Serendipitous discovery can make a huge difference in convincing consumers to go down a path to purchase. Unlike traditional advertising, this is more organic and extends their searching, seeing, and social moments into shopping moments. In addition to fostering product discovery, brands can help consumers with information to make it easier to complete purchases. For example, access to pricing/discounts, customer reviews, and cross-store price comparison ranked high in a Google/Kantar study on factors that influence Indian consumers when they buy online.
To facilitate such discovery by the right consumers, and translate that into actual demand for their products and services, brands will need to address three key elements:
Discovery Commerce collapses a complex multi-step journey (learn, research, compare choices and prices, and eventually purchase) into a single, seamless shopping experience for consumers. This also helps brands and retailers optimize their cost of customer acquisition, and build equity and lifetime value with shoppers.
One of the most fascinating and dynamic trends in the world of business over the last few decades has been India's startup movement. The country has developed into a hotbed for entrepreneurial activity, notably in industries like e-commerce, fintech, and healthcare among others. With over 100 unicorns now, increased consumerism of the growing middle class and access to technology have fueled India’s startup revolution. Direct-to-Consumer (D2C) model has emerged as one of the key trends, with many companies utilizing technology and data to forge close bonds with their consumers. The expansion of D2C is evidence of the nation's entrepreneurial drive.
High internet penetration, the rise of e-commerce, and digitization are the key factors that have made the role of the D2C quite significant in the stupendous growth of India's startups. D2C relieved India’s burgeoning startups, especially small business owners, of having to deal with the hassle of middlemen and cater directly to the customers. The business model is also instrumental in the rise of Indian women entrepreneurs, with many helming online D2C brands in personal care, jewelry, and sustainable clothing among others. Following their pathbreaking success and soaring valuations, D2C startups continue to increasingly draw the attention of venture capitalists as they look to invest in cutting-edge and digital-first businesses.
The recent Union Budget was also evidence of the government’s support for startups with the extension of the date of incorporation for income tax benefits to 2024. With a massive shift in consumer shopping to the online mode post the covid-19 pandemic, D2C will continue to play a key role in the growth of India’s startups as companies increasingly resort to it to cut costs and serve their customers more efficiently.
Reduced Operating Costs
The direct-to-consumer model has helped Indian entrepreneurs lower the cost of starting businesses and reach out to consumers easily. Digitisation has enabled many startups to build their businesses on digital platforms instead of physical ones, allowing them to flourish on a small amount of funding. Going the D2C way and steering clear of middlemen, distributors or wholesalers has also made startups earn higher margins and gain more control over every aspect of their operations. With the additional funds, companies have the incentive to prioritize enhancing customer experience and bolstering marketing which will help them engage with a larger section of their client base.
Access to Data
One of the major benefits of digitization includes access to a vast amount of data for startups to target the relevant demographic and interact with their consumers more effectively to ensure a personalized experience.D2C models enable firms to collect valuable consumer data as companies have complete control over every user on the platform. This helps them understand the needs, demands, and preferences of the market which allows the companies to improve their products, services, and outreach efforts. Having first-hand access to such data also gives them the advantage of testing new products and services before putting them up for sale. D2C has also empowered grassroots entrepreneurs to leverage digital platforms to showcase their offerings and expand their reach, holding immense potential for farmer entrepreneurs.
Customized Experience for Customers
Modern buyers have moved past acquiring generic items as they demand convenience, personalized products, and tailored experiences. To bank on this and cater to the shopping needs of the GenZ or millennials, direct-to-consumer startups are flooding and disrupting the retail industry with their unique and customized offerings. This has prompted the existing companies to also wade into D2C to interact with their clients directly. Leveraging the D2C model is advantageous for companies and clients alike since it enables a closer and more fruitful interaction. Building strong relationships with consumers gives organizations a competitive edge. While consumers have access to a wider variety of products to choose from, brands can attend to their specific needs and serve them better, differentiating themselves from their competitors. The less contrived nature of a D2C model and gender-neutral funding ecosystem has also empowered many women to kickstart their businesses and provide solutions for some of the problems such as the lack of cruelty-free personal care or parenting products. D2C allows for the collection of customer feedback in real-time which aids product development to better suit different groups of purchasers.
The D2C model has been highly successful in many parts of the world, with India holding tremendous potential for it as well. The model will continue to shape the developing future of the Indian startup environment. In the last two years, intense competition has also compelled many legacy companies to transform their businesses and adopt the D2C model. With higher margins, easier access to customers, expanding consumer access to goods and services, and generation of new jobs, direct-to-consumer companies are significantly contributing to the growth of the Indian economy. The increasing competition and innovation brought on by the rise of D2C companies are set to spur economic growth even more.
BlueTea is a company envisioned to bring back ancient Indian Ayurveda-based flower teas to the world by showcasing convenience to consumers. The company recently featured on Shark Tank India and garnered a Rs 7.5 million investment from Shark Aman Gupta, Co-Founder-CMO, boAt.
Incepted in 2018, BlueTea aims to revolutionize the notions of tea-consumption habits worldwide while making ground for its own specialty. Entailing 0 percent caffeine, it strives to garner a benchmark higher than Green Teas as BlueTea is herbal in its truest form.
BlueTea is made using flowers that do not contain caffeine in contrast with green teas which are made with tea leaves. It aims to demolish the notion of slimming which is pioneered by green teas but has rather only supplied a bitter taste and zero effective slimming results down the years.
On the show, the brand was reprimanded by Anupam Mittal, Founder, and CEO of Shaadi.com – People Group, however, the brand was able to secure a deal with Aman Gupta.
The founders originally made an ask of Rs 75 lakh for 1 percent equity of the company at the valuation of Rs 75 crore. Gupta offered Rs 15 lakh for 5 percent equity and 60 lakhs debt at 12 percent interest while pitchers countered, Rs 50 lakh for 2 percent equity and 25 lakhs debt at 12 percent interest. The brand was able to successfully finalize a deal with Aman at Rs 50 lakh for 3 percent equity and Rs 25 lakh debt at 12 percent interest.
“It was an enriching experience to be on Shark Tank India. We feel extremely delighted to have had the opportunity to be funded by Shark - Aman Gupta. We envision a bright future for BlueTea where we aim to revolutionize tea-consumption habits worldwide. BlueTea is envisioned to bring back the lost thousand years of glory - the ancient ayurvedic flower teas to your doorstep,” said Sunil Saha, Co-founder, BlueTea.
The brand enjoys a global expansion of supplying and distributing teas to about 12 countries including the USA, UK, Canada, Germany, Australia, and France.
Nitesh Singh, Co-founder, BlueTea added, “BlueTea is a tea brand which is providing convenience to the consumers as they enjoy flower teas; teas which are truly herbal in their essence. Shark Tank was a great opportunity for the brand and we will ensure to leverage the plethora of opportunities that it has opened for us. We are hopeful to make a 5X turnover in FY 2023 and there will be no stopping going forward.”
While the company started with an initial turnover of Rs 25 lakh in 2018 and closed with a massive turnover of Rs 10 crore in FY 2022. The company has grown by 50X in 3 years and further aims to achieve a turnover of Rs 25 crore this year with maximum sales coming from USA and India.
In 2022, direct-to-consumer brands showed how to recover successfully. The D2C sector in the Indian market has now left the disruption of the pandemic and supply chain behind
them. While there are concerns about growth and inflation all over the world. India will continue to grow. There will be tough times and every rupee spent in marketing will have to be accounted for but there is a lot of gold at the end of the 2023 tunnel.
Hyper-Personalization for the Win
The “One-size fits all” approach is long gone. Hyper personalization is the way of the future. The customer wants everything altered to their tastes, requirements, and visions. The D2C customer has a stronger opinion than ever before. Brands bringing a personal touch to their products and services will win the customers, until some other brands up the ante.
Boosting Brand-Customer Relationship
Fall in love with your customers, it will be one-sided but still worth it. Let them build an emotional connection with your products and services. An emotional connection will make the customer choose you over the competition every time. Brands will need to build meaningful relationships with customers in spite of knowing how fickle the D2C customer is. They will flirt with other brands but will expect the brand to be loyal.
Social Commerce or Performance-Based Marketing
The use of performance-based marketing, influencer marketing, and social media to target new audiences will keep increasing. While everyone will suffer from the bane of the high cost of customer acquisition the dependence on performance marketing will only go up. Influencer fatigue is being experienced, but until the brands go big enough to go into real mass media, Facebook and youtube will continue to rule. Brand-led advertising might reduce as everyone will be in the business of getting maximum bang for the buck.
The omnichannel strategy helps D2C brands in driving sales and create a cohesive customer experience. Cracking Offline will become critical to growth and survival. D2C brands will start chasing and creating a path to profitability. Strong unit economics will be non-negotiable.
Scope to Grow
D2C brands have a huge headroom to grow. With India’s major population being in the age group of 18-45 and eager to consume there is no time soon that the market will saturate. There may be some tough times in 2023 but the brands that survive and ride this will experience huge gains in the years that follow.
Spice story is a Mumbai-based Indian Chutney brand that offers a wide range of authentic and absolutely local chutneys in modern sauce form. These are curated from different parts of the country and are run by Globalvalue Food and condiments Pvt Ltd.
Incepted in 2019, the brand thus offers Chutneys made from recipes culled from traditional kitchens across the country, all with new twists in flavors. The founders Vibhor Rastogi, Soumyadeep Mukherjee, and Gayatri Gogate recently made an appearance on Shark Tank India Season 2.
The current season is headed by Anupam Mittal Founder-CEO of Shaadi.com – People Group; Aman Gupta, Co-Founder-CMO of boAt; Namita Thapar, Executive Director of Emcure Pharmaceuticals; Vineeta Singh, Co-Founder-CEO of SUGAR Cosmetics; Peyush Bansal, Founder-CEO of Lenskart.com and Amit Jain, Co-Founder-CEO of CarDekho Group and InsuranceDekho.com.
The team thus asked for Rs 70 lakh for 2 percent equity, further revealing its last month's sale to be Rs 57 lakh. Thapar offers Rs 70 lakh for 5 percent equity as she states she is willing to bet on the product, however, the team needs to work on the arising setbacks.
The Spice Story team finalize the deal taking up Namita’s original offer.
Soumyadeep Mukherjee , Founder, and CEO, Spice Story commented, “We have had a pretty restrained approach since we wanted to first determine our product market fit! Now that we have delivered consistent growth year on year in the same markets, we will expand our reach in the next 12 months, and look at growing 4X in the next 12 months.”
Spice Story has sold over a million bottles of its chutney and is available in 5 cities Mumbai, Delhi, Bangalore, Hyderabad, and Kolkata selling from about 300 Modern Trade Stores.
Online, spice story is active on all leading marketplaces in India and Amazon USA. It will be adding UAE and Europe to its online sales channels.
"Since we now established PMF for our chutneys, we will now introduce the newer category of products for our consumers as we build our distribution network," said Vibhor Rastogi, Co-founder, and head of NPD-QC.
Spice story is the only 'brand' that offers a range of Indian chutney variants from different parts of the country, additionally, these are served in easy squeezy bottles that a modern consumer is used to. The company aims to add 6000 general stores by the end of this fiscal and targets a presence in 12 cities by mid of next Fiscal year.
With numerous up-and-coming coffee brands taking over the market, it came as no surprise how VS Mani and Co, a Home-Grown Coffee brand from South India was able to woo the sharks in the ongoing season of Shark Tank India.
Amongst the Sharks, Anupam Mittal, Founder, and CEO of Shaadi.com who is already an angel investor of the brand decided to not be on set during the pitch. Last year in April, VS Mani raised $370,000 in an angel funding round, which included Mittal, True North co-Partner Haresh Chawla, BookMyShow founder, and CEO Ashish Hemrajani, DentsuMB Group CEO Sidharth Rao, JetSynthesys founder and CEO Rajan Navani, Telugu actor Rana Daggubati and Sattva Group’s family office.
Company founders GD Prasad, Rahul Bajaj, and Yashas Alur came to 'Shark Tank India' to raise Rs 60 lakh for 1.5 percent equity. However, when Namita Thapar, Executive Director, Emcure Pharmaceuticals offered them an offer of Rs 19 Lakh at 1 percent equity with Rs 41 Lakh debt at a 10 percent interest rate, they sealed the offer.
In his recent LinkedIn post, GD Prasad stated, “Our special thanks to Anupam Mittal, who saw a spark in VS Mani & Co. and got on board as an angel investor way before the Shark Tank India episode. Thank you, Namita Thapar, for placing your faith in us, and for loving filter coffee as much as we do, we hope to do you proud.”
He further added, “To all the other sharks (Peyush Bansal, Aman Gupta, and Amit Jain), thank you for your encouraging words, and the sharp insights that have given us food for thought. This list would be incomplete without a most heartfelt mention of all the investors who participated in our angel funding round and gave us the Launchpad to get to this point.”
Prasad added, that as a brand it has celebrated quite a few milestones since its inception in 2020, being on Shark Tank being a seminal moment. The brand thus intends to represent South India in all its varied glory.
2022 saw one of India's most talked about festive seasons in recent years. Last year’s sales number set newer records and an increase in demand from Tier II and III cities. Redseer claimed that during the one-month sales period in India, e-commerce retailers selling on Amazon and Flipkart generated sales worth Rs 76,000 crore, which is about twice as much as the pre-pandemic 2019. On the other hand, the Indian D2C industry continues to grow, buoyed by rising awareness and consumers’ willingness to experiment. Projected to grow by 21 percent, the D2C industry size in 2023 is all set to cross the $66 billion mark.
This data offers evidence of the evolution of the Indian e-commerce environment, and emerging trends have the ability to influence how the country's direct-to-consumer (D2C) market develops and increases its share in overall retail sales. If you are building a D2C brand, here are 5 trends that can help you formulate your strategy for a successful 2023.
According to reports that looked at sales over the Diwali season in India, Tier II and III cities are the main driving forces behind these purchases, accounting for 64 percent of all consumers who made transactions. During this phase, almost 125 million customers placed orders across platforms, helped by Tier II cities, and growth was driven by fashion in these markets. One of every five orders placed here was for ethnic wear like a Kurti or saree. Tier II and beyond cities growing appetite to shop online is a trend that’s here to stay and D2C brands should not miss this. It can help them increase both sales and customer base. Meesho’s recent sales saw nearly 60 percent of sales coming from Tier IV cities. Demand from ‘Bharat’ will only rise and D2C brands will play an important role in fulfilling this demand.
The beauty and personal care sector had a declining trend in 2022, with the market contracting by almost 11 percent year over year as a result of lower expenditure after the pandemic. However, online stores like Nykaa attracted at least 30 foreign brands to India, which currently accounts for 15-20 percent of its total income. At least 60 percent of sales were recorded from Tier II and III cities in the beauty and personal care market. In 2023, the BPC segment is expected to grow to $27 billion, D2C brands can plan ahead and benefit from this surge.
Last year has been healthy for the consumer durables sector despite rising inflation. The Consumer Electronics and Appliance Manufacturers Association reports that sales have increased in value and volume by over 30 percent in 2022. Sales of entry-level products, however, decreased by 10-15 percent, which is largely related to the customer's tendency to upgrade. However, the desire for durables that are simple to use, smart, intuitive, and sustainable has increased significantly and, in 2023, brands selling these goods stand to gain.
Shoppers love to bargain. Earlier, it was possible only when selling offline, but with the latest tools, you can let your shoppers bargain online too! Kari by Kriti uses this selling technique efficiently. Brands are also adopting gamification tools to increase engagement and sales. Tools like a discount spin wheel can be used to surprise users with an instant discount and further improve sales. A study that surveyed popular Shopify stores found that at least 66% of them use at least one engagement tool.
Despite the discussion about inflation, 2022’s festive season saw no decline in sales or consumer satisfaction for alcohol and beverage firms. In order to command premium pricing, brands like Radico Khaitan and Bira91 have been concentrating on acquiring their regular products as well as developing and inventing new product mixes. In order to attract customers and further influence the market, these brands actually introduced new products throughout this season. New and legacy brands that plan their new product launches well in advance and have a robust supply chain stand a greater chance to corner a larger market share in 2023.
With the pandemic and supply chain disruption behind them, e-commerce companies in 2022 demonstrated how the festive season was effective in reviving the direct-to-consumer sector in the Indian market and it is important for brands to use it as a blueprint for succeeding in 2023.
Jaipur Watch Company, India’s first micro-luxury watch brand, was started in 2013 by Gaurav Mehta. The brand sells its products through online marketplaces and its own website. The company doesn’t merely produce watches but also taps into the rich Indian heritage and history (a specific design uses last British India’s coin as its highlight) by reflecting the same on their designs. Corporate figures, prominent celebrities, and even the PM of India have bought their product.
Gaurav hails from Jaipur and has a hobby of collecting ancient coins and later founded a company that had Indian history attached to it. He introduced these watches as India’s luxury brand and less dependent on imported ones.
In his latest pitch at Shark Tank India, Gaurav presented his ask of Rs 50 lakhs for 2 percent equity, following his dream of establishing a space for an Indian luxury brand in the market.
The brand offers two categories of watches – Pret and Bespoke. The former one has a price range of Rs 20,000-50,000, whereas the latter has a price range of Rs 1.5-24 lakh.
The annual sales of the company for the financial year 2021-2022 were recorded at Rs 1.07 crore, with the Pret category garnering 80 percent of the total sales and the remaining 20 percent by Bespoke. Jaipur Watch Company’s operating revenues range is under Rs 1 crore for the financial year ending on 31 March 2020 and its EBITDA had increased by 74.59 percent. The gross margin of the business is listed at 75 percent and the net margin is at 25 percent.
Gaurav failed to secure the deal from the Sharks. However, all of them said that while the success of this excellent attempt will boost India’s reputation and international acclaim, with the introduction of sophisticated smart watches and their distribution, which have grown commercially, they should establish their own stores to advertise the fact that they are designers.
Speaking about his experience on Shark Tank, Gaurav Mehta, the Founder of Jaipur Watch Company said, “It was a metamorphic experience to be debuting my brand on a global show. I learned a very valuable lesson from the sharks that lay impetus on the importance of having retail outlets in an era when everything is virtual. We immediately took up the learning and opened two stores, in Delhi and Jaipur, right after the episode. I am very happy to share that Anupam Mittal has become our client and ordered two watches from us. He recently got a watch made for Mr. Amitabh Bachchan and gifted him on the sets of KBC. In addition to this Jaipur Watch Company’s website got over 50000+ visitors overnight and also gained 1000+ followers on Instagram.”
Angrakhaa, a retail clothing brand founded by Vishakha Bhaskkar and Asana Riamei has been operational since 2018. The brand offers women's apparel in all sizes and specializes in providing a breathable collection that not only is relaxing but sets a benchmark for quality and trend.
Angrakhaa has served more than 10,000+ orders and will be entering the Indian wedding market for both men and women and aims to become a global brand in the size-inclusive category.
The brand’s co-founders recently made an appearance on Shark Tank India Season 2 wherein they asked the sharks for Rs 40 lakh for 5 percent equity which makes the valuation of the company at Rs 8 crore.
The brand had a sales revenue of Rs 14 lakh in FY19-20, Rs 7 lakh in FY20-21, and had jumped to Rs 1.16 crore in FY21-22, all the sales being specifically from its own D2C website.
All sharks namely Anupam Mittal, Founder, and CEO of Shaadi.com – People Group; Aman Gupta, Co-Founder-CMO of boAt; Namita Thapar, Executive Director of Emcure Pharmaceuticals; Vineeta Singh, Co-Founder-CEO of SUGAR Cosmetics; Peyush Bansal, Founder-CEO of Lenskart.com and Amit Jain, Co-Founder-CEO of CarDekho Group and InsuranceDekho.com were impressed by the growth of the brand.
Bansal chose to opt out of the deal, similarly, Namita and Aman also opt out, finding the brand strategy to be confusing. Anupam points out the lack of a unique selling proposition while opting out.
However, Amit offers Angrakhaa a deal promising his expertise in digital marketing to aid their sales and offers Rs 40 lakh for 20 percent equity valuing the company at Rs 2 crore.
The co-founders countered for Rs 40 lakh for 15 percent equity which leads to the sharks mentioning how the business needs to be made investible and would require work and effort.
The brand co-founders shook on the deal taking the offer of Rs 40 lakh for 20 percent equity and thus valuing the company at Rs 2 crore.
Founded in 2021 by Yushika Jolly, Paradyes is a semi-permanent hair color brand. She introduced the brand by identifying a gap in the market. Banking on her family business of dyes and intermediates, she teamed up with professionals and began R&D to formulate hair colors in their lab.
On returning from London, Yushika set up a lab in Ankleshwar with the help of her brother, who had a background in chemical engineering. He also brought in R & D experts on board. Once things were in place, she began experimenting with formulations and colors.
The brand founder recently made an appearance on Shark Tank India Season 2, the sharks were impressed by the brand’s marketing, branding as well as packaging. Moreover, the brand’s USP of being made of herbal extracts, and being environment friendly worked in its favor.
The brand’s ask was Rs 65 lakh for 1 percent equity. The pitch was followed by a heated discussion. While Peyush Bansal (Lenskart) offered the same amount and equity asked, Vineeta Singh (SUGAR) and Anupam Mittal (Shaadi.com) offered Rs 65 lakh from 4 percent equity.
Aman Gupta (boAt) offered Rs 65 lakh for 5 percent.
However, the brand founder wanted Vineeta and Aman on board the counter offer being Rs 65 lakh for 3 percent equity. In the end, the pitchers' duo ended with Vineeta and Aman's offer of Rs 65 lakh for 2 percent equity.
Along with providing the most vibrant colors, the brand is in the early stages of practicing 100 percent sustainability within its brand and product.
"We believed the brands created by the sharks we chose had comparable target markets (TGs) and could help us with consumer insights. I believe it is important for keyboard warriors to realize and accept the notion that If the sharks can have their choices, so can entrepreneurs. We decided to stay silent during the shark fight because we knew that everyone wished the best for us," said Yushika in a recent LinkedIn post.
Moreover, the brand has further taken up steps to minimize wastage and be eco-friendly. The brands’ hair dyes come in glass jars with tin caps, and brushes made of 60 percent bamboo fiber.
House of Chikankari was founded by the mother-daughter duo Poonam and Aakriti Rawal in 2020 with the aim to create a deeper impact on India's craftsmen. The brand ensures that the talent and expertise of the country's artisans, its heritage, and its craftsmanship are accepted by all.
The brand recently made an appearance on Shark Tank India Season 2, wherein Co-Founder Aakriti Rawal said, “Most of the chikankari industry is unorganized which does not allow customers to get quality assurance and authenticity of handworks which thus encouraged us to come up with ‘House of Chikankari’.”
House of Chikankari is an e-commerce brand that offers authentic chikankari in a modern style and delivers it to numerous parts of the world. In 2 years of its journey, the brand has provided employment to over 5,000 women artisans serving over 15,000+ customers. The brand has over time witnessed over 5X growth.
“Our vision is to make Chikankari relevant for the modern audience while maintaining the authenticity of the craft,” said Rawal.
In FY20-21 the brand generated sales revenue of Rs 33 lakhs, in FY22-23 the brand jumped to Rs 3.3 crore, and in FY22-23 (till now) the brand has generated over Rs 7.4 crore, thus aims to touch Rs 15 crore by the end of FY22-23. Moreover, the brand has a net margin of 15 percent on its products and aims to make a 17 percent net profit on the projected revenue for FY22-23.
The co-founders asked for Rs 75 lakhs for 1 percent of its equity which valued the brand at Rs 75 crore. While Namita Thapar, Executive Director, Emcure Pharmaceuticals decided to not invest in the business, Aman Gupta, Co-founder, and CMO, boAt offered Rs 75 lakh for 5 percent equity which valued the company at Rs 15 crore.
On the other hand Anupam Mittal, Founder and CEO, People Group, and Vineeta Singh, Co-Founder SUGAR offered Rs 75 lakh for 6 percent equity together, this offer valued the brand at Rs 12.5 crore and Peyush Bansal, CEO, Lenskart provided the same offer as Gupta.
The co-founders decided to take up Gupta and Bansal’s joint offer of Rs 75 lakh for 3.75 percent equity which valued the company at Rs 20 crore.
Hoovu Fresh, a traditional flower delivery business that deals in fresh flowers and incense sticks on subscription recently raised Rs 10 million from Aman Gupta and Peyush Bansal in the latest season of Shark Tank India.
The platform intends to deliver fresh flowers by shortening the supply chain while leveraging technology. The Bengaluru-based startup backed by sister duo Yeshoda and Rhea Karuturi was incepted in 2019 and in 3 years has expanded to over 8 cities completing over 2 million orders while being associated with over 300 temples and 500 farmers. Furthermore, the brand is available via multiple delivery platforms such as BigBasket, Swiggy, and Zepto, among others.
The brand further states on its website, “We saw how the industry changed dramatically-from unorganized, fragmented markets to the setting up of the International Flower Auction Bangalore, the first exports of cut roses from Bangalore and the awe-inspiring Kenyan farm, which was the world’s largest rose farm.”
Rhea and Yashoda entered Shark Tank India and explained their business and asked for Rs 80 lakh for 1 percent equity. While Aman Gupta and Peyush Bansal offered Rs 1 crore for 2 percent equity at a Rs 50 Crores Valuation; Namita Thapar and Vineeta Singh offered Rs 50 lakh for 1 percent equity plus Rs 30 lakh debt at 12 percent interest rate at a Rs 50 Crore valuation. Thus, Rhea and Yashoda took up Aman and Peyush’s offer.
In December 2022, the brand raised Rs 6.45 crore in a pre-series A funding round led by Sauce.VC and joined by multiple angels such as Sangeet Agrawal (founder of Mokobara), Akshay Dujodwala (CSO at Mangalam Organics), Nikhil Bhandarkar (founder of Panthera Peak Capital), Mylktree Family Office, Cafe Coffee Day’s family office, etc.
In the past year, Hoovu has expanded its offerings to temples as well.
Team Hoovu Fresh is responsible for the decoration at the ISKCON temple in Bangalore among many other temples. Hoovu’s range of products includes assorted roses, assorted puja flowers, and green mixes which can be bought by customers either as individual boxes or by signing up for their monthly subscriptions.
They also have special packages for festivals, puja staples and others curated with exclusive flowers. Their assorted flowers plus greens package is very popular as it includes auspicious greens like gharke, bil patre, and tulsi which people use for their special pujas. Another customer favorite is their rose petal mola - made by hand-rolling rose petals into a garland.
Hoovu has operations in Bangalore, Hyderabad, and Mumbai. Flowers can be ordered via Big Basket, Zepto, Milk Basket, and other grocery apps. Hoovu Fresh also offers agarbatti’s made out of recycled temple flowers and other puja samagri that can be shopped on the brand’s website.
TeaFit a brand that produces zero-calorie healthy drinks made with natural herbs and ingredients, without sugar or a sweetener recently made an impression on the sharks when it made an appearance on Shark tank India Season 2.
Founded in 2021 by Jyoti Bharadwaj, a mompreneur from Mumbai, TeaFit offers instant mixes, along with green tea, black tea, and barley tea.
She initially asked for Rs 50 lakh for 3 percent valuing the company at Rs 16.67 crore, stating that the brand received a term sheet of Rs 1 crore that valued her startup at Rs 20 crore in convertible notes.
Co-Founder of SUGAR Cosmetics Vineeta Singh and Founder of Shaadi.com Anupam Mittal jointly gave the first offer of Rs 50 lakh for 25 percent equity, which valued the company at Rs 2 crore.
Lenskart’s co-founder Peyush Bansal then offered Rs 50 lakh for 20 percent equity, which further raised its value to Rs 2.5 crore and boAt co-founder Aman Gupta offered Rs 50 lakh for 10 percent equity that doubled the valuation to Rs 5 crore.
However, Bansal, Singh, and Mittal later stated that they would match Gupta’s offer.
Thus, Bharadwaj sought a collective investment of Rs 50 lakhs from all four judges for 8 percent equity, valuing the startup at Rs 6.25 crore, which was then accepted by the judges.
A fan of Shark Tank US and a mother of two, Bharadwaj gave a pitch providing minute details about the product which helped her get the offer.
In her LinkedIn post a few days before the show aired, Bharadwaj said, “I have watched every episode of every season of Shark Tank US many times over the years. I have replayed so many of the pitches in my mind - Scrub Daddy, Drink Poppi, Bantam Bagels, and many others. I am just so incredibly grateful to get a national platform to talk about TeaFit, why we do what we do, and our vision for the future.”
The brand will soon be available on Zepto for its customers.
Recode is a brand that sells makeup products and cosmetics and has a pan-India presence across more than 250 shops in India. The brand sells its products online through its website and mobile app. Moreover, in 2021 Recode started selling the products of other brands as well on their platform, having launched three franchisee stores in Faridabad, Delhi, and Raipur.
Recode Studios has always kept up with the momentum of a significant rise in revenue year-on-year in FY22. Supported by the two pillars of quality and affordability, the brand is carving its impact in the Indian beauty and cosmetic market.
The brand's yearly sales climbed from Rs 25 lakh in 2018 to Rs 2 crore in 2019 and 2020, which is 8X the growth. The brand registered an increase of 2.5 percent in 2021 with Rs 5 crore in sales; and a magnificent growth rate of 300 percent with Rs 15 crore by the end of 2022.
Recently, Recode made an appearance in Shark Tank India Season 2 recently, wherein it was unable to gain funding. While Peyush Bansal, CEO, Lenskart and Anupam Mittal, Founder and CEO, People Group weren’t convinced about the brand, Namita Thapar, Executive Director, Emcure Pharmaceuticals and Aman Gupta, Co-founder and CMO, boAt refused to invest in a company as it was coming in the way of their friendship with Vineeta Singh who also runs a cosmetics brand, Sugar.
Although the Shark Tank India judges have received criticism for being unfair, post the episode Recode has been doing good business.
The brand recently received funding from Velocity for growth capital needs, along with a brand campaign with Swara Bhaskar. Hammer Audio, the company which Aman Gupta offered to acquire in Shark Tank Season 1, got listed on Recode’s marketplace, website and app.
Moreover, the brand also launched a ‘Shark Tank Sale’ on its website offering up to 75 percent sales on its products gaining massive traction.
The brand has achieved sales of Rs 15 crore with a 6 percent net profit in FY22 and has forecasted sales of Rs 30 crore in FY23, out of which it has already clocked in Rs 11 crore.
Direct-to-Customer online casual sneakers brand Flatheads recently made an appearance on Shark Tank India Season 2 wherein, Founder Ganesh Balakrishnan made a pitch for his venture.
An IIT graduate Balakrishnan built 3 companies that have not been successful, Flatheads started in 2019 provides breathable shoes from a sustainable material and one pair ranges from Rs 1,000 to Rs 5,000.
Sharks Peeyush Bansal, Co-Founder, Lenskart, and Vineeta Singh, Co-Founder, Sugar Cosmetics offered Rs 75 lakh for 33.3 percent equity in the company, valuing the company at Rs 2.25 crore, however, Balakrishnan reportedly rejected the same.
Balakrishnan, in his recent LinkedIn post, stated, “Breaking down on national TV isn't exactly great for one's self-confidence. What I definitely didn't expect is the episode to be received the way it has been, and it is very heartening to see that people are applauding the entrepreneurial spirit - of all startup founders, with me as a proxy.”
While thanking the sharks, the show, and the platform, Balakrishnan added how Flathead’s India inventory is almost out of stock, proving that the brand is actually doing much better than it was seen on the show.
One of the sharks, Anupam Mittal further commented about the brand, “He (Ganesh) came pitching soles but left baring his soul. In the process, Ganesh taught us all the power of openness, honesty, and acceptance. I often say 'entrepreneurship is not a straight line' and when you look back, it’s the biggest failures that are the most rewarding because 'success builds ego and failure builds character’.”
He further added, “I know because I have been there, not once but twice, made it big and then lost it all. All the best Ganesh Balakrishnan, as we discussed yesterday, the entire country seems to be rooting for you.”
Since Flatheads has an almost sold-out inventory in India, the brand through its post has suggested that one can check out its collection in the US on Zappos and in UAE, on Infinite Kart.
However, in a recent LinkedIn post, Ganesh Balakrishnan further said, "After the Shark Tank India episode aired on Friday, there has been an unbelievable wave of compassion and support across the country. And along with that, we've received record traffic on our Flatheads website, all organic. I'm super excited to share that we've sold out our limited remaining quantity of shoes in 2 days flat, and for the first time ever, our CAC was Zero."
Mamaearth’s IPO valuation has become a topic of intense debate today. The proposed, super-premium initial public offering of Rs 2.900 crore has compelled industry insiders and think tanks to thrash out a multitude of factors to deduce its feasibility. At a time when the brand has been investing a lion’s share of its revenue (nearly 40 percent) on influencer marketing, the return on ad spend hasn’t inspired the trade much. The IPO valuation of $3 billion, as opposed to $1.2 billion in January last year, amounts to a staggering 1,000x jump in its profits, inviting intense scrutiny on social media platforms such as LinkedIn. The heat is such that even co-founder Ghazal Alagh’s and Varun Alagh’s defensive update denying the numbers doing the rounds, with a zing of Mamaearth’s vision, has done nothing to stifle the noise.
“Sharing below to throw some clarity on all the noise around valuations around our prospective IPO. In our DRHP as is the standard practice there is no mention of valuation. Valuation discovery is a process that will take place over time as we get into deeper conversations with the investor community. We have not quoted or subscribed to the valuation numbers which are getting mentioned in various posts on social media,” said Varun Alagh, Co-founder, Mamaearth in a LinkedIn post.
His statement was echoed by Ghazal Alagh, Co-founder, Mamaearth, who wrote, “We started Mamaearth with the purpose of providing toxin-free products for babies since we ourselves could not find the right products for our baby. God has been kind, luck favored us, consumers loved us and our team has put in crazy efforts to take it to a level where we are today with 6 amazing brands serving millions of Indian consumers.”
Chatter on ‘Unreal’ IPO
Numbers do the talking, and angel investor Devansh Lakhani, Director and Startup Fundraising Expert of Lakhani Financial Service has provided a blow-by-blow account of Mamaearth’s lukewarm profit run in a LinkedIn post.
“In FY23, H1 the company made a sale of Rs 684 crore with a marketing spend of Rs 272 crore. This gives them an ROI of 2.5 which isn’t that alluring. The company recorded a restated cumulative profit after tax (PAT) of Rs 3.67 crore in the first and second quarters of FY23, according to filings filed with SEBI. I doubt that investors would be interested in investing in a company that is worth 1,000 times its profit,” Lakhani stated.
Darshan Sheth from Reliance M&A called the valuations ‘atrocious’. In his scathing remark on LinkedIn, Sheth underscored how the company’s adjusted EBITDA for 1H FY23 ‘is only Rs 27 crore’. “Assuming a 5x growth in 2nd half FY23 (too aggressive), the consolidated EBITDA for the year is Rs 163 crore. The valuation being asked is $3 billion (Rs 24,000 crore). Thus EV/EBITDA is 148x!” he commented.
Now deemed to be a rumored offering, certain professionals have equated Mamaearth’s IPO figure with that of ‘value destroyers’ in the food aggregation and online payment platform verticals in India.
“The Western D2C Companies like Warby Parker, Casper, and Allbirds which had rapturous IPOs in 2021, saw crashing of their share prices by 70-90 percent and now trade at 1 times sales. Mamaearth, on the other hand, is bringing its IPO at 23 times sales! It is able to demand this valuation seemingly because it’s the first Indian D2C company to list on Indian bourse,” stated TusharKansal, Founder & CEO at Kansaltancy Ventures.
Option Value Also Vital for Correct Evaluation
Amidst all the critique, Sougata Basu, Founder, CashRich has urged the trade to give the founders “a fair chance to find the real valuation via the book-building process.” Arguing that there are several small-cap startups with initially low earnings which have performed well, he stated that the real valuation of the Gurugram-based unicorn brand should comprise DCF valuation and option value.
“The DCF valuation (based on revenue, profit, cash flow, etc.) alone will not be enough to understand the true valuation. The real option value will try to capture any major work that's underway which could result in exponential growth (not linear). If we don't understand the above concept, then by default, all startup investments will be avoided,” Basu opined.
Bringing the Dialog Back to Customer Connections
Make no mistake, as the other side of the searing debate on financial profitability and fair valuations harps strongly on the strong emotional connections that Mamaearth has made as a successful D2C brand. Some claim that a significant part of the IPO proceeds will be used on marketing spending, thus generating employment opportunities for Indian youth. Explaining how all hope is not yet lost on Mamaearth, serial entrepreneur Nishant Mittal, Founder, SpotHealth cited the example of Magicpin, which has managed to raise $100 million despite having very low brand recall, thanks to rewarding relationships with investors who trust the brand vision in the long run.
All said and done, Mamaearth seems to weather this particular storm quite effectively with their latest video commercial, #GoodnessResolution, greeting 2023. Originating as a baby-care label, emotions run high in the core messaging of the brand, which was evident in the commercial wherein we see a couple lamenting over a pot of plant lying on the road out of utter negligence. Soon, a schoolgirl spots it, turns it back up, and waters the plant. While many may argue how Mamaearth is pushing for its plantation drive in association with product sales, the brand might also imply big bets on past achievements, so that investors don’t hesitate to fuel their ambitious growth plan.
A brand must establish a relationship with its audience to stand out in today's crowded direct-to-customer (D2C) market. The most effective approach to do this is to initiate engagement. In the traditional sales industry, it is well known that concentration promotes trust and increases conversion rates. D2C brands need to offer more individualized and distinctive experiences to differentiate themselves from the competition and grow their consumer base. This depends on the efficient use of tools like AI, which can result in predictable customer experiences.
The development trajectory for D2C brands has been steadily rising since consumers continue to appreciate the security, comfort, and convenience that online shopping platforms offer. From being a niche and nice-to-have strategy, D2C marketing has grown into a powerful force driving the country's retail revolution.
Thanks to its tenacity, quick popularity, and increasing emphasis on delivering customer happiness, the D2C sector has emerged victorious in upending the retail and e-commerce status quo. D2C brands have embraced technical advancements to obtain a competitive edge.
Using AI to Enable Customer Acquisition and Retention
The development of AI has dramatically streamlined many areas of real-time digital consumer interaction. In-cart upsell refers to recommendations made using customer interactions and AI learning. As a result of the complete digitalization of operations, customers have become quicker to make purchasing decisions, and D2C businesses have concentrated on making clients feel welcomed on whatever platform where their products are displayed. Modern technology has also been included in D2C marketing, significantly reducing wait times and assisting in customer acquisition and retention through automated chat-based interactions.
Determine and Classify Potential Customers
A brand that wants to increase the number of its customers will choose several varied groups to focus its outreach. Segmentation based on demographics, interests, or behavior is a difficult task that requires a lot of time and resources. Integrating AI and ML, quickly detecting numerous categories across platforms, and compiling a quality list of prospects can accelerate this process. AI can use these characteristics to guide personalized dialogues with new and existing customers that are most likely to result in sales.
Respond and Engage with Repeat Customers
Most D2C businesses rely on customers' repeat business. AI can leverage insights from previous interactions and purchases to send return customers personalized messages at the right time. After reading information that has been personalized for them, the user ultimately develops a favorable opinion of a brand, which may boost and increase brand loyalty among current customers.
Brands are aggressively investing in digital solutions to address various business challenges throughout the operation cycle due to the growing competition in D2C. To increase sales, there is much focus on increasing brand recognition and offering a fantastic pre-purchase experience. However, businesses must remember that a trustworthy relationship between a brand and a customer is created when a buyer hits the buy button. To build a solid and prosperous business, the post-purchase experience is equally as crucial as the pre-purchase experience.
To generate repeat business, several post-purchase factors, including the ease of tracking purchases, on-time delivery, and customer service availability, are crucial in fostering consumer loyalty.
Data-driven logistics solutions are essential to the expansion of D2C businesses because they reduce errors, cut costs, and boost operational effectiveness - all of which are vital in providing the best post-purchase customer experience. D2C brands should concentrate on the pre-purchase expertise of the customer and emphasize the post-purchase experience, which includes easily tracking orders, making deliveries on schedule, and providing good customer service. As a result, brand reputation, customer loyalty, and retention rates may all rise.
Technology integration is necessary for D2C brands to prosper and streamline operations. Seeing the world through the customer's perspective and giving them the best overall user experience is crucial for retaining customers.
E-commerce retailers and D2C Brands recorded sales worth Rs 76,000 crore during the one-month festival sale event, which almost doubled the pre-covid pandemic sale of Rs 40,000 crore in 2019.
As per the ‘Looking Back at India’s Internet Economy in 2022’ report by Redseer Strategy Consultants, Tier II and Tier III cities drove festive sales, as a significant portion of the sales came from electronic products and mobile phones.
Furthermore, the report observed that India includes 780 million internet users, where an average Indian person spends around 7.3 hours per day on their smartphone, one of the highest in the world.
This includes time spent across online messaging, social media, YouTube streaming, over-the-top (OTT) content, and short-form video. According to the report, most online users come from Tier II cities and beyond, with a new trend in content consumption where the time spent on user-generated content is two times more that the platform-generated content.
The report also suggested that with an increasingly high flow of consumers from Tier II cities and more adopting short video commerce, India is likely to witness a massive surge in digital ad investments instead of driving sales.
The increase in digital consumption and increased digital penetration in Tier II cities are the primary growth drivers responsible for the spike in India’s digital advertising ecosystem.
Apart from these developments, the report looked at the startups and how 80 percent of unicorns and unicorns are profitable or soon-to-be profitable. Moreover, the number of such startups has also rapidly increased in the last four years.
Additionally, in the agriculture sector, agri-tech was reported as an over $400 billion industry which is expected to grow to over $500 billion by FY26.
Taking note of India’s business-to-business (B2B) e-commerce market, the country’s fragmented retail market of over 13 million general trade (GT) stores or the local kirana stores will continue to drive the retail for the next decade.
As per the report, the eB2B market stood at $5 billion in 2021 and could touch $100 billion in gross merchandise value (GMV) by 2030.
Menstrual health is still a taboo in today’s world. More so in India, where women’s health issues are barely acknowledged, let alone discussed, in public. This is a characteristic that cuts across all demographics. Keeping all these things in mind, HealthFab was started with the purpose of providing a comfortable and hassle-free solution to menstruating women. Thus, the brand conceptualized and developed GoPadFree as the flagship product which happens to be the first of its kind truly leak-proof period underwear in India that doesn't need anything extra to be worn along the same during periods.
Along the journey, HealthFab’s biggest challenge has been to break through that social barrier and talk to potential customers. For a long time, right from the planning stage, the insights behind the product were taken from women who were friends and family. This continues to be a major challenge as the brand works upon expanding its customer base.
“We were looking to create a solution that would make the lives of the working women in our families easier. This prompted us to make a reusable period panty. The product was a direct solution to the problem at home. The women in our families found it difficult to go to work during their periods, for want of a place to change and a method to dispose of the old pads. But we soon felt that it was not a problem restricted to our households but faced by women globally. So, we decided to test this product in our inner circle, including more friends and family members who fell in this demographic. After six months of testing and incorporating their feedback, we came up with the final product, the GoPadFree reusable standalone period panty. The product is the first and currently the only one of its kind in India. It was listed on Amazon in 2020 and has become quite successful since then,” asserted Kiriti Acharjee, Co-founder, HealthFab.
The brand has not only received an encouraging response from the customers but also investors. “We never faced rejections from investors for being an all-male start-up in the Femtech domain. Most of the investors were welcoming, willing to understand more about our product, and business model,” he added.
GoPadFree panties are made with patent-pending technology using super-quality cotton and additional layers of microfiber, leakproof breathable layers that absorb the flow and do not allow it to leak outside. The use of cotton ensures the product is super comfortable.
The panties are available in 3 absorbency variants namely Lite, Heavy, and Ultra. They are available in two color options - red and black and nine different sizes starting from 2XS to 4XL in both colors. The brand plans to add more styles to the period panties eventually transitioning from a functional brand to a lifestyle brand.
Retail and Marketing Strategy
HealthFab is a digital-first brand wherein the marketing efforts are more focused on digital and social media as that is where the brand finds its potential customers.
“Our customers keep reviewing our products and there are so many instances of customer delight, happening regularly. They often switch from sanitary pads, tampons, and menstrual cups to GoPadFree period panties and share their happiness in getting the comfort of wearing nothing extra during periods,” said Acharjee.
Growth and Expansion
The brand is currently growing at an average rate of 300 percent annually. The products are validated online by prominent e-commerce sellers, and it has also acquired its first 100K customers. Moving forward, it is focusing on offline retail expansion and is in discussion with the modern retail chains across India and has plans to onboard soon.
“Apart from this, the products are available via Amazon in UAE and Saudi Arabia and shipped globally from our website. We are further planning for online expansion in Europe and Australia by the next year,” Acharjee concluded.
Large consumer brands have historically used business scale to get efficiencies in manufacturing, distribution, and media. This has made it harder for new competition to come up unless they’re willing to dedicate large budgets for a large time period.
By catering to higher socio-economic households as customers, D2C brands with a premium price positioning have negated the impact of the cost of manufacturers through third-party co-manufacturers. But the key reason for success has been the availability of these consumers on digital platforms. This has allowed D2C brands to disrupt the market in distribution as well as media by using digital means.
With more than 60 percent of Indian consumers using the internet, 700+ million smartphone users, and almost 80 percent of all pin codes serviceable for delivery in India, distribution of D2C brands is going to continue to grow on e-commerce through their own platforms as well as online marketplaces.
At the same time, with the growth of social media, there is also a growth of brand ads and cluttered content that may not be trustworthy. In this context, consumers have started following specific influencers that they trust in order to get information about the latest trends, styles, products, and brands. Influencers are people who have built a community online around their content, and their followers truly trust them.
D2C brands should work with these influencers too -
Create Quality Content That Is Relatable - Millennials are bored and cynical of pushy advertising created by the company’s internal teams, and trust content generated by customers like themselves or trusted influencers who they know. In fact, content produced with lower production values, but is more real and relatable, works better especially as performance marketing content on social media.
Plix has been consistently using real user and micro influencer-generated content to highlight the goodness and effectiveness of their plant-based and delicious nutrition and wellness products. The relatability and believability of these content pieces get them higher than benchmarked customer engagement and conversion.
Gain Trust for the Brand - Influencers are as famous and well-known to their followers as celebrities. In many cases, influencers endorsing a product is more trustworthy too because they are regular people like their followers.
Customers are willing to believe a beauty influencer talking about cosmetic or personal care products from brands such as Loreal, The DermaCo, and Mcaffeine because they are seen as experts in that field, and have previously also shown their knowledge about such products, ingredients, and usage before.
Better Quality Traffic Into E-commerce Channels - Influencers manage to introduce the brand ethos, as well as explain the benefits and differentiators of the products through their content. This leads to high-intent customers clicking on the link on the content and reaching the D2C brand's website.
Influencer marketing is a powerful tool to get new D2C brands with low awareness to generate brand consideration and sales, both at the same time, with the high efficiency of RoAS. However, the basic insight behind using this tool effectively is – ‘People trust other people that are like them’ - at least more than they would trust brands or celebrities. Hence, to leverage influencers and their content best, be authentic in –
● Choice of Influencers: This should be relevant to your customers and category.
● Brief to Influencers: They work because their style of content works. Don’t try to change that with your brief in order to make a branded ad style of influencer content
● Chasing the Right Metrics: There’s no point in vanity metrics such as the number of followers, impressions, or in some cases even engagement. Look towards meaningful impact output metrics such as sales, traffic to the website, organic traffic or search volumes, organic mentions on social media, etc.
The biggest advantage for D2C brands has been their ability to use micro-targeting to reach out to different consumer personas with different types of content. Influencer marketing is a key part of this approach. Influencer marketing goes beyond simple awareness creation for the brand, and into actually generating consideration and purchase intent. Hence higher conversion and quality traffic into e-commerce channels.
Evolution in technology and the onset of the pandemic have shifted commerce from brick-and-mortar to online. As a result, consumers are now driving business. 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. Moreover, it allows companies to build seamless digital experiences across all touch points by adopting the direct-to-consumer route.
D2C companies cater to people's quest for simplicity. As much as consumers love to be spoilt with choice, D2C brands eliminate the hassle of researching, browsing, and culling from a plethora of options, making shopping effortlessly convenient for consumers.
What is D2C?
Direct-to-consumer (D2C) brands manufacture, market, and distribute their products without intermediaries, enabling themselves to reduce costs, directly interact with consumers, and ensure a seamless start-to-finish buyer experience.
A significant chunk of brands striving to stay ahead is driving the Indian $100 billion D2C addressable market to the next level. Online shopping in India is at an all-time high, fueled by over 700 million internet users, especially post-pandemic, portraying a 24 percent yearly growth.
As the pandemic gave an extra push leveraging to the digital world, online presence became the need of the hour. Whether an existing D2C firm or one planning to switch to a D2C model, building a robust online presence is paramount to succeed in today's increasingly hypercompetitive market.
Why is the D2C Model Gaining Traction Among Consumers and Beauty Brands?
More than 30 percent of consumers prefer to purchase products, especially beauty products, directly from the brand as it garners a touch of original and authentic products. Moreover, it assures the buyers that the products offered are manufactured initially and advertised by the makers, eliminating any possibility of duplicity or adulteration.
Reducing the mediator allows brands to generate a considerable margin while having direct access to their consumers and their related data. Consequently, the number of direct-to-consumer (D2C) beauty brands has increased dramatically in recent years.
Besides the increased margin, brands leverage substantial benefits while adopting the D2C model:
Enhanced Control Over Brand Messaging - In the typical manufacturer-retailer relationship, despite investing heavily in manufacturing and advertising, they could no longer influence sales, create relationships with customers, or collect data once the products are out with the retailer. The D2C model enables brands to get a good hold of the messaging, which further helps in gaining loyal customers.
Shift In Consumer Purchasing Patterns - With mobility restrictions, the pandemic fueled the e-commerce boom worldwide. In addition, higher internet connection, lower data costs, and the digital payments boom are all factors driving the digital economy. As a result, D2C beauty brands operating in the digital mode benefited greatly from the shift toward digital purchasing trends.
Brands can now design creative ways to capture market share or enhance penetration levels in different consumer pools by monitoring purchases with product categories, value, and volume data and analyzing customer habits and reactions. In addition, brands can leverage targeted marketing, ensuring that the right consumer is getting suitable 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.
Enhanced Market Opportunities - Global exposure is no longer a far-fetched reality for home-grown brands, as D2C aids brands in reaching potential consumers across geographical boundaries. Therefore, it is vital to constantly innovate the strategy responding to the fluctuating needs of end-users and efficiently scale to sustain in the competitive market conditions. D2C allows brands to introduce new products on a smaller scale, test them with specific demographics, and collect feedback. Thus, enabling manufacturers to understand, improve, create and sell consumer-centric products according to their needs and demands.
Customer Retention and Brand Loyalty - Stories that resonate with the beauty brand's values have the potential to relate with the customers well, increasing the possibility of customer retention. Therefore, the strategy of D2C brands is proactively centered around pursuing, converting, and retaining customers. Consumers prefer interacting with the brand maker on various virtual podiums and making preference-based purchases. Beauty brands interact with customers via email, chat sessions, apps, and social media forums, and brands can understand customer preferences, developing expectations, and product demand. As a result, D2C manufacturers have information that leads to delivering better service and support to their consumers. Through tailored marketing campaigns, they can use customer connections to build strong relationships and promote retention.
Let us further walk through the trending marketing strategies for cosmetic and beauty brands to turn existing products into engaging beauty brands the audience will know, like, trust and purchase:
Build up the Owner's Personal Brand - In the crowded beauty market, differentiating from competitors is essential to ensure that the consumers know and are aware of the brand. Building your personal brand is crucial to promote your beauty business. Beauty products are unique and intimate; personal experiences help drive connection and trust. Giving product context and the inspiration to create the brand and the behind scenes of the product's life cycle will differentiate you from your competitors and allows shoppers to relate to you.
Create Distinctive Brand Design and Messaging - Devoting time and effort to figuring out the brand story, the colors, the packaging, and the words used to describe the brand's unique features is essential to ensure that the product is branded and stands out. Being confident with the story and context tied to the unique brand and beauty product concerning the colors, logo, labeling, or packaging will save you from the dilemma of considering constant change if someone has an opinion.
Unique Package Design - Beauty products in different and unique packaging have the potential to draw attention and leave a mark behind immediately. Unusual package design works favorably to market a beauty product as it can be an objective point of differentiation for the brand and connect with the audience in a relatable way.
Drive Traffic to Your Cosmetic Business Website - The massive digital world has various components to help beauty brands drive digital traffic.
Use Paid Ads - Facebook, Google, Instagram, or Pinterest Ads - The quickest way to drive traffic is paid ads, which are beneficial to get subscribers onto the brand's mailing list or have a special promotion or launch scheduled.
Generate Organic Traffic:
Create a Content Strategy to Promote the Beauty Brand - To increase engagement, well-researched and strategically planned content should be prepared according to the target audience and delivered on the social podiums where they are primarily present. The brand must be sure of what it wants the audience to know and feel and a call to action once they have seen the video, picture, reel, pin, blog, or any content produced.
Create an Easily Searchable Website - A brand website is an essential part of the marketing strategy for beauty products. Creating a website, an exclusive online space, is easily accessible to people who can buy what you're selling. In addition, the website needs to be optimized using SEO or search engine optimization for e-commerce brands.
Create a Community of Beauty Enthusiasts - A community is people interested in the brand's products, which increases the possibility of product sales, user-generated content, and word-of-mouth marketing. In addition, the community people provide real-time feedback and often serve as brand advocates.
Collaborate with Beauty Businesses and Influencers - Marketing beauty products through collaborations with industry people is a quick way forward. Partnering with spas, salons, and make-up studios is an excellent source to expose beauty products to a warm audience.
Influencers collaborate with the brand to post about the products on social media if they send them PR packages. The catch is creating strategic relationships to help the beauty brand grow its business.
Use E-mail Marketing to Remain Visible - Many marketers swear by the importance of email marketing for any brand to stay visible on the digital platform and keep customer relationships warm and engaging. It is an effective way to communicate online with the targeted or existing audience.
Various direct-to-consumer brands are currently making a significant impact through e-commerce in managing customer expectations. Therefore, implementing some strategies and best practices will help businesses to scale further.
Intermediaries and resellers are being phased out! Direct-to-consumer (D2C) and retail channels are leading the change in retail. The pandemic compressed years of direct-to-consumer growth into a few months. D2C enables retailers to manage, and gain insights from their data, allowing them to tailor personalized propositions and loyalty programs.
The Challenges of D2C
D2C requires a considerable degree of communication between customer-facing apps and integrations which results in a large cloud data footprint. Customer data, including sensitive personal data and payment details, are cybersecurity liabilities for retailers. For D2C models, logistics companies can be perceived as the face of a company and may require additional brand and culture collaboration to maintain consistent levels of customer service.
Today's online and in-store customers expect a rich experience and personalized offers. The D2C model with its advantage of access to customer data can be used to segment and target existing and similar groups of potential buyers. The combined application of machine learning (ML) and artificial intelligence (AI) can help retailers derive insights from large sets of big data and drive campaigns that boost sales.
Qualitest group is directly aiding the transition to efficient business models – we helped reinvent the global logistics fulfillment systems of a large global brand. As part of the program, Qualitest helped digitize robotic order picking to label printing systems of 42 warehouse distribution centers. In another successful program, Qualitest helped one of the largest grocery companies in the US to validate the accuracy of their stock checking using drones.
Feedback Driven Response
A market that is moving at a fast pace needs regular, feedback-driven updates and rigorous testing. Faster deployments, channels for customer communication, and integrations to order fulfillment systems are backed by AI & ML based on quality engineering, security testing, and IoT testing. Content management systems(CMS) and product and inventory management systems (PIM) systems need additional focus in the retail space as these are the applications that drive marketing efforts and order fulfillment services.
Qualitest, with its sound quality engineering expertise across the entire value chain of the retail industry, is a trusted partner of global retailers and helps them respond to market changes with the right mix of intervention in business processes and technological change.
Direct-to-consumer (D2C) as a business model has gained much traction in the last few years. It has become a challenging player from a niche segment, redefining India's retail narrative. Apart from that, the endless benefits it offers directly to the consumers have also led to the popularity D2C has achieved over time. It has helped build direct relationships with consumers and scale operations. Apart from this, testing is the key! There isn't a one-size-fits-all solution here, so it's important to discover a method that suits you best whether it’s your content, branding, or product strategy.
Choosing the D2C business model is an excellent relief for any brand. Regardless of the size, area of operation, or industry, a D2C approach can make a difference in determining the success of any brand. For starters, you can save huge on the margins and sell products at much lower costs to the end consumer. Secondly, you'll have better control over manufacturing, supply, distribution, and fulfillment channels by selling directly to consumers. And most significantly, you can connect better with customers by delivering them a personalized omnichannel voyage.
While there are a lot of trends and innovative strategies that have the potential to affect the way the D2C market operates, I would like to mention a few which I believe are essential:
- Innovation has to be pervasive and a mindset or culture in an organization.
- With social media and influencer marketing, D2C companies are expanding their reach to compete with their traditional counterparts. They've enforced automation across verticals, including product development, marketing, sales, and logistics, using analytical tools to improve customer service. Innovation can help improve every function, whether revenue-generating or not.
- Innovation also comes from collaboration, autonomy, and design thinking. It is required to constantly streamline operations and unite with partners to ensure better and more efficient use of capital.
- Innovation through the use of modern technologies and data is vital for the brand's survival and expansion. The rise of e-commerce marketplaces and online shopping allowed brands to expand faster than ever.
- Innovation is at the core of it all. Brands must be driven by both content and design. Whether a challenge involves a product, communication, creativity, operations, or logistics, divergent thinking can be used to tackle it.
- D2C brands disrupt categories by creating new experiences, innovating products and services, and exploring new distribution channels.
- Innovation through outsourcing is a common practice in business today in lieu of which brands get fresh, new content that they can use for their own marketing campaigns. Partnering with third-party publications enables brands to explore new opportunities and innovate.
Brands still need to consider the D2C model risk of losing loyal customers whose behavior and expectations have changed. A Statista report suggests that 55 percent of buyers now prefer to shop directly with the brand compared to multi-brand retailers. Another 50 percent prefer to visit brand websites for comprehensive product information.
Digital-first D2C brands now have a more extensive and more accessible consumer base to tap into. In addition, the power of new-age technology, such as AI and other aids, can enhance the consumer experience while amplifying visibility.
D2C market players are extending their reach to Tier II and III cities after experiencing accomplishments in metropolitan cities. Therefore, businesses must unlock the potential of these cities. Like e-commerce, many believe D2C will eventually spread from metros to smaller towns and cities.
Wellbeing Nutrition, one of India’s leading plant-based nutrition companies is looking to raise $8-10 million in funding this quarter. The brand has received interest from some of the leading VC funds and a few strategic investors globally.
The brand will be using these funds to scale operations, build a senior global team and increase manufacturing capacity with new facilities in the USA and India, along with strengthening its R&D and research team while also building new categories
The brand has expanded multi-fold since the last Series A fundraising of $ 2.2 million from Fireside Ventures in July 2021. Without any additional capital, its expected ARR is Rs 150 crore, unlike all its peers. Wellbeing Nutrition has achieved a milestone of break-even in March this year and moved towards 5 percent profitability since.
The brand in the last year has been able to reach out to close to 30 million audiences in the country with a 400 percent growth in net revenue over the previous year. The brand has already established a leadership position in the Melts Oral Thin Strips category already catering to a million plus consumers. To add to this the brand is already in the final stages to close some partnerships in the sports category along the lines of the Disney collaboration which consisted of Marvel and Frozen melts for Kids.
Avnish Chhabria, Founder said, “Ever since our inception, we have moved closer towards achieving new milestones. It makes us proud to be a homegrown brand that’s put India on the global map and is present in over 5 countries with 50+ variants. We are looking forward to the new funding and plan to use the funds for our expansion globally.”
Previously, celebrities and wellness enthusiasts like Mira Kapoor, Rakul Preet Singh, and Dulquer Salmaan have also invested in Wellbeing Nutrition.
“We are looking forward to the funding to scale operations, building a senior global team, and increase manufacturing capacity with new facilities in the USA and India, along with strengthening our R&D and research team globally, while also building new categories,” he added.
In the last 1 year Wellbeing Nutrition has scaled operations to over 3000+ stores across India and expanded its presence globally in the Middle East and North Africa (MENA) region, the Netherlands, the UK, and the USA.
“Our major aim is to expand ourselves globally. We're present in India, the Middle East, North Africa (MENA), the Netherlands, the UK, and the USA. In the next 5 years, we aim to be recognized across the nooks and corners of India as well as the world,” he concluded.
The pandemic of 2020 has paved the way to establish India as an important landmark for various industries. Gradually growing into a hub for one of the emerging sectors - direct-to-consumer (D2C) companies have been significantly boosting to create a positive impact. The development of e-commerce and new AI-powered technologies have accelerated D2C business growth.
Pertaining to the idea, the fashion industry has grabbed the lead in this area along with several segments that are performing well in this space. The discretionary expenditure in the fashion segment is higher than in other D2C industries, but it also increases competitiveness in the D2C fashion market. According to a study, the D2C sector's development potential is strongest in the apparel industry.
By 2025, 77.6 percent of the online D2C fashion industry will be made up of the categories of clothing and footwear, which are the most important ones in the fashion sector. The rise of e-commerce, social media, and new technology has made this process immensely easier for businesses. In today’s era, people want more individualized goods and services, which has resulted in a substantial shift in consumer behavior since the pandemic.
Rise of D2C Fashion Brands
The new generation of Indian consumers now shops only at D2C fashion brands. Fashion brands can perform incredibly well by adopting the D2C model since it gives them complete access to consumer data, superior control over the customer experience, and the opportunity to foster and capitalize on brand loyalty. By investing in cutting-edge technologies like artificial intelligence and setting up a reliable supply chain, D2C fashion firms may effectively plan their long-term growth strategy.
With the D2C model, businesses have total freedom to use chatbots to engage with customers, respond to their questions, and connect with them. Through conversational commerce, a further application of chatbots, businesses are even using social media sites like WhatsApp, Facebook, e-mail, and Instagram to offer goods and services to clients directly. Consumers increasingly receive curated handwritten notes and personalized messaging that offer them a special perspective and a sense of connection to the business and the brand. To stand out in the growing market, several companies employ community-building tactics.
The Inclination of Consumers Towards D2C Businesses
Nowadays, consumers rely largely on internet fashion since it is more affordable, convenient, and provides immediate gratification. Compared to other industries, fashion has an edge in terms of logistics - shipping to thousands of pin codes across India, which is not necessarily the case for high-end watches, jewelry, electronics, and furniture. Due to social media exposure, customers are more aware of their needs and open to discovering new regional brands that operate on direct-to-consumer (D2C) channels. This has made it possible for D2C and fresh start-up brands to compete with established ones in the fashion industry. Above all, the simple exchange, refund, and return policies have provided online fashion shops with the best means of gaining the trust of their customers.
In the end, these elements are luring more investors to fund domestic fashion firms. They are also doing so since a lot of new start-ups are using their client base and social media presence to dominate the Indian markets. They surpass the Rs 100 crore revenue milestone before the established brands.
Expansion of Consumer Base
With fashion D2C brands intending to increase their presence in Tier II and Tier III cities after growing with good efficiency in Tier I cities, smaller towns have promise, and businesses should make use of this to investigate and expand their consumer base. Constantly working to adapt to new and developing trends in order to stay one step ahead of their rivals, personalization of items is on the rise.
In the last two years, D2C brands have undoubtedly been able to boost engagement and bring in more customers, but the next challenge will be to maintain them and earn their loyalty. The aforementioned elements point to the D2C fashion industry's enormous potential, which, if realized, will set the tone for the next ten years.
It is that time of the year when the festival season takes over the country. While customers throng to their favorite e-commerce websites and portals to shop to their heart’s content, the festive shopping season is also the perfect time for companies to accelerate their marketing objectives. Brands must optimize the Festive sales period to bolster customer acquisition and revenue generation.
It has been noticed that personal care brands are increasingly leveraging digital marketplaces to acquire new customers. This is primarily because marketplaces have access to existing customers who may have not shopped for a particular brand yet. Moreover, these brands can spend enormous amounts on marketing costs in an attempt to gain new customers on their platforms as well.
For D2C platforms, success stems from enhancing short bursts of sales, experimenting with newer offers, and making sure this is conducted post the festive time on Marketplaces to counter the reduction in daily revenue rates one sees post-sale months on these platforms.
With respect to the personal care industry as a market, it has been witnessed that logistics and marketing costs are usually high while the Average Selling Prices are less. This makes it imperative to curb the dependence on D2C particularly during Festive Sale season lest the Average Order values are increased.
In the last 10 years, E-commerce has witnessed a meteoric rise. The pandemic has inadvertently transformed the business dynamics across industries. This has led all brands, whether big or small, to shift towards online business models. However, it was only a matter of time before brands realized the negative aspects of having to seek customers in online marketplaces.
The period between the months of August and December is inarguably the optimum time for orchestrating your sales plans as the abundant festivals across the country attract plenty of customers. This makes it the perfect time for all local, homegrown brands to put their strategies to test and permeate the D2C space.
While the benefits of being active on e-commerce marketplaces are far too many to dismiss, a number of brands have registered stable growth in their D2C channels by attempting diverse customer acquisition approaches.
With several advantages that brands have witnessed through selling via D2C rather than e-commerce, brands can exercise absolute control over the business, simplify cost management, gain a clearer understanding of customer inclinations, and curtails marketing costs.
During the opening years, brands must focus on investing across marketing as acquisition costs are sky-high. Over a course of time, these costs tend to fall as the brand begins to carve organic visibility and achieve a decent percentage of sales month on month which usually occurs through customer retention.
The benefit of marketing through e-commerce portals is the extensive visibility that a brand achieves while contending with hundreds of brands across multiple price ranges. Having a website at your command enables you to target a captive audience and the opportunity to interact with them to greater effect as compared to any e-commerce platform. It is prudent for small emerging businesses to leverage e-commerce as an ‘advertising medium’ that can assay an essential part in the brand expansion.
With the country recovering from the pandemic, the retail industry has resumed its growth trajectory. According to a BCG-RAI report titled “Racing towards the next wave of retail in India”, the industry is likely to witness 10 percent annual growth to reach around $2 million by 2032. The huge market creates a vast opportunity for brands based on how they respond to the pent-up demand and needs of consumers.
The pandemic changed consumer behavior all over the world. Suddenly, convenience, health, safety, security, and hygiene become the major purchase drivers. With consumers taking the digital route, there is a huge opportunity for Direct-to-Consumer (D2C) brands to fulfill their needs effectively. These brands took a few months to adopt the technology tools, which they would have otherwise taken years.
What is Driving the D2C Adoption?
The trailing effects of the pandemic have augmented the shift toward digital platforms. These D2C brands give consumers an easier and more convenient personalized experience. However, the transition is not nascent. Some FMCG players have been utilizing the channel for years.
The D2C model comes with several benefits, such as brand values, convenience, ease of use, and a feeling of community. According to Google India’s report, there has been up to 80 percent growth in customers searching for a brand’s official store. The changing consumer behavior is one of the top reasons for brands to adopt the D2C model.
Over the next five years, the Indian retail market is primed to reach approximately 300 million to 350 million shoppers. To respond to the growing demand and changing consumer habits, companies need to evaluate their resources, analyze their business model and see the fitment that suits their requirement. There is a need to modify and adapt to the D2C model for long-term sustainability in this ever-changing dynamic environment.
D2C Brands Elevate the Customer Experience
Keeping the customer happy is key to the success of any business. After all, the customer is god. In the digital space, there are often challenges since the mode of communication is internet-based only. As a result, brands must pay attention to the customers’ journey and make it as convenient and seamless as possible.
The D2C business model looks appealing. However, it comes with its set of obstacles - customer experience being the toughest. It is crucial to not only focus on scalability and revenue and incorporate new capabilities to deliver a smooth customer journey.
Deeper Impact on Product Innovation
D2C players engage with the customers directly, which aids in personalization. Using customer feedback, brands must merchandise good products, analyze the right price points, and manage demand. In the absence of middlemen and third-party suppliers, these players utilize an innovative marketing strategy to enter the market directly. There are no barriers between the producer and the consumer, allowing businesses to control their reputation, marketing, and sales tactics.
Convert Visitors to Loyalists
The need to focus on customer acquisition has been repeated innumerable times now. Brands know the significance of marketing, ads, and campaigns, but how can they stand out from the crowd? While it is vital to acquire new customers, focusing on the old ones is also necessary.
Keep a personal relationship with the customers. Send them good wishes on special days or offer discounts and surprise gifts. The D2C model focuses on building a personal connection with customers using digital channels and tools.
Customized Financial Support and Options
Digital payment models are becoming hugely popular. Brands must make efforts to simplify transactions and provide multiple payment methods at checkout. Allow customers to use different cards, UPIs, and wallets.
One of the recent trends on the rise in the industry includes deferred payments, also known as ‘buy now, pay later.’ Smooth transactions can be a make or break for the customers.
Social Media Should be your Best Friend
Social media is an essential tool. Brands can get confused with the many choices available to them - Facebook, Twitter, Instagram, Pinterest, and many more. Instead of attempting to craft a strategy for all the platforms, marketers must focus on what their capability allows them to do.
Use these channels to identify your target audience and engage with them. Moreover, stay updated about new launches and products. Prepare a strategy with the right channel and the right content strategy. Influencer marketing has gained immense popularity, and social media is a great tool for marketing.
Data is your Biggest Asset
One of the prime advantages of digital channels is the availability of data. The need for guesswork is over. Engagement rate, reach, impressions and other statistics are easily available, allowing one to plan their strategy accordingly. A brand must use this data to its advantage.
Due to an abundance of data, some challenges can persist. Brands should filter this data to get a clear idea of their custom journey across different platforms.
The Bottom Line
There are countless D2C success stories in India, and this, coupled with the impact of the pandemic, has made investors show extensive support for useful, agile, and innovative D2C brands. With fewer barriers to entry, D2C start-ups can deliver higher margins while maintaining greater control. D2C brands have the advantage of ruling the entire value chain, from product creation to sale and delivery. A majority of these brands emerged digitally and innately knew how to communicate with the digital consumer, from their marketing to how transactions take place.
A direct-to-consumer brand is responsible for its customer service, and that’s the segment where both risk and potential lie. Purpose-driven brands that can build relevant, personalized, and connected experiences to fulfill the needs and wants of the new India will emerge as the winners, racing to the top.
DailyObjects is a functionality and design-driven brand that creates aspirational products for every day. The brand caters to a wide range of lifestyle categories including tech accessories such as smartphone cases, designer watchbands, AirPod cases, laptop sleeves, wireless solutions, tech briefcases, and organizers as well as lifestyle accessories such as desk accessories, backpacks, messenger bags, other lifestyle bags, wallets, travel accessories among others.
DailyObjects has been on steady growth and profitable path for the past four years. The company clocked 2X growth in the past year and is EBITDA positive for the last three years. For FY 22-23, the brand is on Rs 80 crore ARR with a gross margin of more than 50 percent while 65 percent of its sales come from our platforms. 40 percent of the brand sale comes from Tier-III and IV cities.
65 percent of sales come from our platform while the remaining 35 percent of sales come from other marketplaces.
“We not only plan to enter the global market but we will also be launching DailyObjects ’products at 100 Apple Premium stores in the next 3-4 months. Talking in figures, we intend to earn revenue of Rs 120-130 crore by next year, and our business target is to cross Rs250 crore gross sales target by the next two years. We wish to achieve the Rs 500 crore revenue mark by 2025,” Pankaj Garg, Co-Founder, and CEO, DailyObjects stated.
WOW Skin Science is a direct-to-consumer (D2C) brand focusing on the beauty and wellness market. The brand offers skin care, hair care, body care, and wellness products to consumers. The products are targeted at consumers in the age group of 15 to 50.
The brand leverages the digital platform to reach various markets across the country. It primarily continues to be sold through various e-commerce platforms. WOW Skin Science does have a presence in physical stores including large format beauty outlets, department stores, and health and wellness shops. The ratio is still over 70 percent digital and 30 percent physical.
One of the biggest successes of the brand has been the introduction of its paper tubes for face washes. This has helped it take a big step towards becoming a more sustainable brand. Also, the brand was able to expand its team and set up a special product innovation team that is constantly involved in working on new formulations and innovative SKUs.
“Going further, we plan to launch new products and new formats of skin and hair care solutions. Also, we are driving towards becoming a clean, green beauty brand. We will look at strengthening the same. Besides, we are also exploring international markets with our products,” Manish Chowdhary, Co-Founder, WOW Skin Science said.
Zouk, a 100 percent PETA-approved cruelty-free bags and accessories brand entered the billion-dollar-plus industry in 2016. It offers products in the category that was predominantly offline driven prior to the pandemic.
“With the twin effect of the shift to online and the country opening up, we are seeing a massive boost in online buying in our category,” stated Disha Singh, Founder, and CEO, Zouk.
While most players offer western looking products, majorly made of animal-based leather, Zouk offers products that are made in India and provide an Indian look and feel. The brand’s products are currently focused on the bags, accessories, and footwear category for women.
“Our customers love our products as they are made of traditional Indian handicraft fabric like Ikat portraying Indian heritage via printed motifs. With our mission to bring stylish and functional products, we aim to build a large global lifestyle brand that has deep roots in the Indian culture,” added Singh.
The brand currently serves 2 lakh+ customers across the country and has witnessed 16x growth in its business. The brand has raised Rs 11.75 crore in pre-series A led by Stellaris Venture Partners.
Zouk, currently available on its own D2C website and other e-commerce platforms such as Amazon, Flipkart, Ajio, and Myntra, aims to expand its current collection of products while adding newer segments.
“We will also be expanding into newer channels of distribution and geography. We are planning to expand in the USA, Canada, and Europe, as a few bespoke orders have already been closed for these geographies,” concluded Singh.
Amrutam is a preventive and therapeutic brand, offering both application-based and consumable products focusing on holistic healing and addressing the root cause. Its goal has always been to bring together a community of individuals who are as passionate about Ayurveda and natural living as the brand.
Currently, the brand has 100+ products listed on its website in different categories - hair, skin, and health. It started amrutam.global as a side project in 2019 to offer Ayurveda consultations to its customers who would often call it and ask it to connect them with its Ayurveda docs and although it has been running in stealth mode since then - it helped the brand understand the pain points of customers and how a large segment of audience from Tier-1 cities are shifting to ayurvedic consultations and making them as their first choice when dealing with lifestyle concerns.
The Step Forward
The brand has been working on and building a mobile app. “With this app, we plan to include Commerce, Community, Content & Consultations at play - where commerce remains the majority stakeholder like always,” Agnim Gupta, Principal: Tech & Growth, and Stuti Ashok Gupta, Principal: Brand & Vision, Amrutam said.
The app would offer features where - Ayurveda experts/ Yoga professionals listed on its platform would be able to offer consultations, produce content, build their own audience and engage with them on the platform itself.
The longest festive season in India, which begins from mid-September and stretches till mid-November, is currently underway. The brands are seeing a steep rise in positive sentiments in product adoption as the latent need to get together and celebrate what was significantly subdued due to the pandemic. Nearly 65 percent of households across the country plan to spend during the current festive season, according to a new survey by LocalCircles.
With pent-up demand and the opening up of travel and leisure, the phenomenon of revenge spending is expected to drive up demand this season. Direct-to-Consumer (D2C) brands are aggressively pursuing their own strategies to woo customers. In a bid to build up their pandemic-induced growth, D2C brands like IGP, Zouk, Solethreads, and The Tribe Concepts are ramping up their offerings, building their inventory as well as increasing tech capabilities and marketing functions.
Ramping Up Product Offerings
Keeping in mind that stylish casual wear is in vogue during these times, Solethreads is coming up with footwear designs that will amp up the style quotient of Millennials and GenZ. For this festive season, the brand is currently focusing on open footwear including flip-flops, slippers, and slides, and is aggressively working on launching other categories in the casual footwear segment soon. Its average current price point range is between Rs 700-800.
“Our experience and engagement strategies consist of one core philosophy of being 'design-led' as product design is the precursor to any kind of interaction that a customer will have with a product on any channel, whether it is just browsing a product, buying it, or even recommending it. We provide sustainable and recycled footwear and to promote upcycling and circular fashion, we have launched the 'reuse program' where consumers can replace their old flip flops for new ones,” Sumant Kakaria, CEO and Founder, Solethreads said.
Meanwhile, Zouk claims that during the festive season, consumers pick more India-inspired products. The brand’s most popular choices remain its Indian office bags and tote bags. Zouk will also see good movement in its slings and handbags, given people buy products as gifts or for casual outings. As travel has picked up, the brand is also seeing a good uptick in its backpacks also.
This festive season, Zouk has added office bellies along with a new collection of casual flats and sandals. Furthermore, with a request from its consumers to add a gift box option, the brand has added the same across all its products.
“Office bags, tote bags, and sling bags would be the personal favorite for the season. The average price range for the category would be between Rs 1,000-2,000. In footwear, we believe bellies, chappals, and casual flats are our bestsellers and the average price range would be between Rs 800-2,500,” Disha Singh, Founder and CEO, Zouk stated.
IGP, too, expands its offerings every festive season in gifting, fashion accessories, floral bouquets, sweets, cakes, etc. This festive season, it has also launched a new collection of gift products, all revamped to cater to the latest vogue.
“Our gifting products will come in customized packaging to add to the festivities. Gourmet sweets, festive fashion apparel, festive essentials, and accessories are always the most searched categories on our portal, and customers tend to spend lavishly on products under these categories, making them the bestsellers every festive season,” Tarun Joshi, Founder and CEO, IGP asserted.
Similarly, The Tribe Concepts already has festive gifting which contributes to a major portion of its festive sales. The brand has a lineup of much-requested minis and a new skincare line targeted at pigmentation. Apart from this, it has products that address issues head to toe - so it’s very flexible and easy for its buyers to make customizations of their own.
“Skincare continues to be our best seller category - come winter it is going to increase more as we are having new launches planned for skin care and hair care as a category has seen stable growth. Bring a gateway brand our average price point range from Rs 800-1,200,” Amritha Varshini Gaddam, Founder and CEO, The Tribe Concepts added.
Revamping Supply Chain Network
Solethreads is opening up new warehouses and regional fulfillment centers in Mumbai, Bangalore, Hyderabad, and Kolkata to cater to the high demand.
Similarly, Zouk has massively scaled its supply chain to build up inventory for the festive season. It has also set up a strong collaboration with Amazon and Myntra, to expand its reach beyond its own website. Both of these will ensure it can get its products in the hands of more Indian consumers.
“One of the key concerns from our customers has been that our products get sold out very fast. To counter it, we have enhanced our inventory so that we can ensure more consumers across India get to carry a Zouk bag or wear a Zouk footwear,” Singh explained.
IGP has a global footprint with customers spanning 100+ countries and the capability to deliver gifts to over 150+ countries and 1,000+ cities in India. It is currently expanding its delivery network through dark stores and is looking to automate wherever possible.
“We are in the process of expanding our dark stores' network to more than 120 new dark stores pan India that will further bolster our already impressive fulfillment infrastructure of existing 40 dark stores that 3 mother warehouses support,” Joshi said.
Integration of Technology
IGP has automated online procedures, warehouse, and operations management software, etc., to cater the best services to our customers this festive season, while The Tribe Concepts has strengthened all its Analytics divisions by dashboarding all the reports and implementing SAP for smoother on-ground operations.
Solethreads has proprietary formulations and technologies like Superfoam footbeds and Ecotread soles and it is working on a newer formulation to provide the next level of comfort. All its product launches are use case based and it has launched concepts like grass slippers, all-terrain anti-skid, yoga mat slippers, etc. this year which have already become its bestsellers.
“With more than 30 design and technology patents under our umbrella already, our constant endeavor is to keep innovating for our consumers,” Kakaria said.
Zouk believes in the power of live commerce and hence has planned a bunch of live sessions on its Instagram handle and has done a couple with Flipkart too. “These have already seen great engagement and that is a big way for us as an online brand to break the barrier and answer questions that online consumers always have,” Singh claimed.
During the festive season, The Tribe Concepts is looking forward to gaining more sales from its website. It plans to close the festive year on a high by clocking in at least Rs 5 crore worth of business on books.
Zouk claims that it has already started very strong on marketplaces like Amazon and Myntra, while its own website continues to be big and that wave will now continue from here till next March.
“In the past 2 years, a lot has changed, even Zouk as a brand. This has helped the brand grow over 16X from pre-pandemic. We now have over 2.5 lakh happy customers across every state in India. We expect this pace to continue and we will do more sales this year compared to last year,” Singh stated.
IGP believes that its superior design-to-delivery consumer experience, farm-to-table supply chain, and extensive same-day delivery network can cater to the rising demand for festive gifting from Tier-II and III cities.
“The pandemic did impact the overall sales last year. However, we are expecting an increment of approximately 100 percent in sales this festive season,” Joshi noted.
At present, IGP provides same-day delivery to almost 400+ cities in India and 24 to 72-hour delivery in over 1,000 cities. In addition to the mentioned figures, the brand plans to mark its presence exponentially in Tier-II and III cities nationwide. In the next two years, IGP aims to be the largest and most preferred destination for all special purchases.
“We also look forward to increasing our brand footprint in the commercially sound international markets of North America, the UK, and Australia,” Joshi said.
Zouk is present in 30+ multi-brand outlets on the offline side. The brand looks to expand this offline retail presence further in the coming quarters.
Solethreads is also going full throttle to increase its retail footprint in the Indian market. It eyes to establish its presence in 2000 MBOs until the end of this financial year.
“This is roughly 5X than our current retail footprint. Apart from these 2000 retail MBOs, we are also foraying into large format retail stores this fiscal year,” Kakaria informed.
The Tribe Concepts is also looking forward to expanding its online channels and offline stores by having exclusive stores for the brand. “We are looking more forward to expanding the business, targeting new audiences, and witnessing an increase in the conversions,” Gaddam concluded.
Pure Sense, a personal care brand that offers a range of Skincare, Mood Elevating Fragrances, and Bath & Body products, believes beauty is deeply rooted in well-being and its mission is to create delightful little luxuries for self-care.
Keeping this in mind, Pure Sense products are carefully crafted to look, feel and smell amazing, uplifting the user’s mood with every use. With holistic wellbeing at its core, the Pure Sense Skincare range is loaded with care ingredients derived from food sources, making it ‘food like skincare’. The current portfolio has ~70 SKUs.
“We believe, that in the current market there is a gap - where skincare is seen as something functional, as opposed to being an integral part of holistic wellbeing. With Pure Sense’s ‘food-like skincare, we are aiming to bridge that gap and transform the way people perceive skincare,” asserted the Spokesperson of the brand.
“Pure Sense products have no parabens, no sulfates, no carcinogens, are 100 percent cruelty-free, and promise to refrain from giving half-truths or false claims. The packaging is recyclable and Pure Sense is committed to planting a tree for every 20 products sold,” he further added.
Pure Sense is a digitally native brand and its primary strategy is to engage, understand and deliver consumers exactly where they are. Therefore, Pure Sense products are widely available online on key platforms like Amazon, Flipkart, Nykaa, Myntra, Swiggy, Blinkit, and its own website.
According to the spokesperson, “We have also expanded our presence in select neighborhood beauty stores across key metros in India.”
Offering Innovative Products
Keeping in line with Pure Sense’s ‘food like skincare’ proposition, the brand has launched the Pure Sense Pink Guava Face Scrub, with a unique pink guava pulp-like texture and fragrance.
“We have extended similar sensorial to the Pure Sense Natural Papaya Face Scrub and will continue to innovate in offering sensorially pleasing, unique textures with strong functional benefits,” he added.
With the lifestyle changes that the pandemic brought with it, the brand has witnessed an increase in consumers’ focus on holistic well-being. Today, people are actively focusing on self-care and investing both, time and money, in their well-being.
“And with wellbeing at its core Pure Sense has launched various pre-bundled gift boxes this festive season with ‘self-care’ as the central theme, at highly competitive prices. Customers can also customize and purchase Pure Sense hampers on-the-spot at select offline stores,” he stated.
“Going ahead, we are looking to proliferate in the skincare and fragrances categories in the next few quarters. We are also aiming to continue to be present on more channels online and rapidly expand our presence in offline stores,” he concluded.
Imagine a world where our beauty and personal care routine is directed and governed by synthetic products cleverly camouflaged as the need of the capitalistic hour. Imagine a scenario where our personal care is blindly surrendered to the hands of synthetic ingredients, and our very body and health readily succumb to the ever-expanding realm of noxious chemicals and obnoxious ignorance. Is it anywhere close to the pleasant life these products guarantee? Does it, in any way, reflect the beauty and personal care these fast-selling products brand themselves on?
To turn the negating answer into an assertive reality, Ashish Kampani launched Earth Essence. With the advent of synthetic chemicals infusing our body, the purity that our 100 percent pure and natural products offer is the need of the hour.
“Our products vouch for a more harmless personal care, a totally reliable beauty routine, and a purer shift to cosmetics. Earth Essence is the solace you need to get away from the destructive world of synthetics to unison with nature,” he asserted.
“The idea behind introducing the brand is to be the brand that will free the planet and the consumer of harmful toxins cleverly camouflaged in personal care products and give the consumer an honestly natural and organic alternative,” he further added.
The brand is betting big on hair and skincare as the category is the most common category which we use in our daily routine, regardless of age, sex, or demographics we all indulge in some or the other form under this category.
“The fact that we are here to clean up the act of personal care industry by using innovation and nature to create clean, green, and pure organic products gives us the conviction that we can pull this off, most of the brands are Green Washing the consumers and blatantly pedaling lies and false claims, whereas, we are here to deliver on our promises without any greenwashing or lies or false claims,” he explained.
“We are not here just to sell our products to the consumers, we are here to gain their trust,” he further added.
The last few years have changed the way brands retail and market most of their products. It is the digital era driven by social media and online stores, hence, Earth Essence’s retail strategy is in lieu of the latest trend by exploring social media to showcase and market its products to the world.
“To begin with, we will put our products online with our own store and various marketplaces making use of influencers and exploring the network of social media. And as of now, we want our focus to strengthen on our online channel and create a seamless, hassle-free, and quick experience for all our visitors and consumers,” he explained.
Technology: The Soul of Brand
Technology is an integral and consistent part of a brand’s system as it has been using it right from its research and development stages to formulating, production, packaging, and now even distributing and selling.
“Apart from this, innovation is the soul of our existence. Our efforts and hard work have helped us innovate one of the cleanest, greenest, and safest brands which are 100 percent pure and natural, Vegan, free from all synthetic and harmful chemicals, and free of all colors and fragrances,” he asserted.
The brand is bootstrapped to date, but it intends to raise the first round of funding soon which will be deployed mainly for inventory, advertising and marketing, market penetration, and working capital.
“Going ahead, we plan to grow from D2C channel to other various forms of retailing and marketing channels, mainly in modern trade, and increase our distribution network pan India,” he asserted.
“We also see ourselves at the pinnacle of innovating the best products in our space while continuing to be the cleanest, greenest, and safest brand which delivers what it promises, raising the bar in whatever we do with utmost passion and dedication. We also hope to have the same footprint in various countries across Europe, Middle East, Africa, North, and South America,” he concluded.
A number of interesting, new direct-to-customer firms have entered the furniture industry in recent years. These brands are able to compete with market leaders by rewriting the conventional retail structure and selling directly to customers rather than through third-party retailers who take a share of earnings and pass along additional expenses to customers.
Direct-to-customer furniture businesses may better tailor their future product upgrades and new offerings to what customers need and want by interacting with customers directly and learning more about their requirements, desires, likes, and dislikes.
Additionally, the population’s living standards and lifestyle are changing due to the expansion of metropolises and the housing industry, which is driving up the demand for new furniture and home solutions.
Here are 5 D2C Brands that are Transforming the Furniture Industry
1. Pepperfry - Pepperfry, headquartered in Mumbai, Maharashtra offers appliances for the dining room, kitchen, bath, and housing. Pepperfry’s studio footprint currently covers 100+ cities with 195+ studios across India. In Northern India alone, Pepperfry has close to 90,000 sq. ft. of retail space with some of its largest studios and six distribution centers. Various cutting-edge technologies, including serverless architecture, machine learning, augmented reality, and virtual reality, are now being used by Pepperfry.
2. Sleepyhead - Bengaluru-based Sleepyhead is a D2C lifestyle home decor company created for Gen Z and young Indians who are digital natives. Sleepyhead, which defied all expectations for the category when it was introduced in 2017, is now one of the fastest-growing D2C mattress brands in India. With its carefully crafted items, the home lifestyle brand Sleepyhead today strives to make daily life enjoyable and fabulous. The company meets the unmet needs of the modern Indian consumer by making exceptional designs affordable without sacrificing quality or customer service.
3. Furlenco - Incorporated in 2012 by Ajith Karimpana, Furlenco is an Indian online marketplace for renting furniture. Furlenco provides furnishings on a monthly leasing subscription basis for the complete home.
The D2C brand struggled to attract new clients as the supply chain collapsed during the lockdown. But its rental-based business strategy continued to generate profits. Currently, Furlenco offers its customers the freedom of choice to select any furniture they want, access it in any way possible, and modification by returning or selling it back.
4. Duraster - Jodhpur-based Duraster is known for offering heirloom-caliber solid wood pieces. The furniture that it offers is redefining contemporary even though it is made of natural wood including Sheesham, acacia, and mango wood. The brand takes great satisfaction in the work of its artists and craftsmen, who produce the finest antique-quality solid wood furniture using vintage tools and conventional techniques. By opening three experience stores in Mumbai, Pune, and Bengaluru by the end of 2022, Duraster plans to give its clients an omnichannel experience.
5. InvisibleBed- InvisibleBed, a Bengaluru-based company founded by Prashanth Havinahal, saw potential in this transformation design category and launched its D2C platform in 2013. The company currently offers wall-mounted desks, sit/stand tables, full-size beds that fold into sofa sets, and other foldable furniture.
Direct-To-Consumer (D2C) brands are businesses that straightforwardly reach the end customer through a combination of their own online and offline channels, with the majority of them also having a presence on big e-commerce marketplaces such as Amazon and Flipkart. Several D2C brands have sprung up in India in recent years, disrupting both conventional and online retailers. New-age digital companies are discovering novel ways to meet customer needs that large larger players have overlooked.
There has almost certainly never been a better time in India to launch a direct-to-consumer (D2C) feminine hygiene care brand. Customers are steadily exploring a slew of new products, boosting the development prospects of feminine health care, thanks to the availability of low-cost smartphones, the proliferation of the internet, and, most importantly, menstrual hygiene awareness.
In India, menstruation is shrouded in secrecy compounded by shame and cultural taboos, resulting in an estimated 23 percent of girls dropping out of school when they begin menstruating. In such a situation, the availability, accessibility, acceptability, and affordability of feminine hygiene products are even more critical within or near every household, health or educational institution, public institution and place, and workplace.
Many women entrepreneurs are taking up the gigantic task by redefine the traditional way of menstruating by assisting women in making an eco-friendly switch after recognizing the limitations of conventional plastic pads. They are offering an array of 100 percent safe biodegradable hygiene products from anti-microbial reusable cloth pads, natural cotton sanitary pads, 100 percent organic period wear wash, menstrual cup and wash, anti-bacterial soothing intimate care wipes, and organic cotton pantyliners.
Aside from being safe for the skin, D2C feminine hygiene products are well positioned to tell an engaging story across all three key aspects of customization, customer feedback, and supporting a clear cause – all of which are important factors in building trust. These brands are predominantly digital-first; however, many have ventured into the offline space and are attempting to establish an omnichannel presence. D2C models are increasingly outperforming traditional marketplaces since they enable the direct relationship between clients and brands, allowing for product improvement, innovation, and enhanced customer experiences.
Here is how D2C gave a boost to the feminine hygiene care brands:
Personalized and Subscription Deals - Since each period is distinctive to a woman, D2C brands can clearly recognize each customer’s interest and create specific deals to drive purchasing decisions with a data-driven strategy. Brands can make recommendations and tailor deals based on previous purchases, preferences, shopping behavior, and demographics. The D2C subscription service model also delivers shoppers with a more convenient, personalized, and cost-effective way to buy what they need on a regular basis. Not only does the service empower women, but it also makes the hygiene ritual more manageable and effective.
Customization of the Products - Product customization is essential for meeting diverse customer requirements and assisting a large customer base in a meaningful and more personalized manner. D2C enables feminine hygiene care brands to design their products to meet the needs of specific groups of women. Customization allows brands to have multiple versions, shapes, and sizes of the same product. Customization, therefore, is a strong business practice since it makes customers satisfied, and satisfied customers are regular customers.
Real-time Support - To create awareness regarding menstruation and support informed customers’ choices many female hygiene brands have pivoted all their efforts to D2C. This not only helps in building a credible brand but also enables feminine hygiene care brands to create a support system of medical experts who can better guide the end customer. Before making a purchase, most customers prefer to have a comprehensive knowledge of the product. As a result, real-time conversations with experts to answer their questions are certain to make a big difference for a brand.
More Opportunities to Innovate - When it comes to selling, most retailers adhere to a set standard. They frequently avoid selling new female products that have no record of success in being a ‘hot-selling’ product. D2C, on the other hand, enables businesses to roll out new products on a smaller scale, evaluate with specific populations, and collect feedback. Feminine hygiene care brands can comprehend what their customers desire, produce what sells, and strengthen what is in demand.
Lead Generation - Direct interaction with clients during every phase of the purchasing process, including after sales, enables the gathering of their email addresses, location, profiles on social media buying interests, and more. Understanding about consumer purchasing habits enables businesses to improve existing products and, in some cases, develop new products. Also, by collecting details and contact information from prospects while taking them through a conversational journey, D2C brands can get a higher chance of improving lead generation and follow-ups.
Increased Control Over Brand Messaging - Conventionally brands have little authority over their offerings in the traditional manufacturer-retailer relationship. While brands have control over packaging as well as other advertising strategies, as soon as the item is carried over to retailers, they don’t have the power to influence sales, build relationships with consumers, or collect data. Brands may spend a considerable amount of money on marketing, but retailers are inevitably responsible for presenting the product to the buyer.D2C enables feminine hygiene care brands to develop a voice that resonates with menstruating women in order to build a product/space for women by women.
D2C has been on the rise for some time and is quickly transitioning from a fad to a widely used business model. The pandemic of 2020 further shifted the market in favor of direct-to-consumer (D2C), encouraging more individuals than ever to shop online and satisfy their desire for a deeper sense of connection with their favorite businesses.
Brands can easily enter the market by selling directly to consumers (D2C) without the help of a middleman. By taking this path, brands can speak with and learn from their customers directly.
Startups and businesses alike are using the D2C paradigm today to:
Manufacturers and CPG (Consumer Packaged Goods) brands are increasingly using the Direct-to-Consumer (D2C) strategy to bypass middlemen and join the market directly.
What is Direct-to-Consumer (D2C)?
Manufacturers and CPG companies can sell directly to consumers using the low-barrier-to-entry D2C eCommerce model. The Direct-to-Consumer business strategy, which “cuts out” the retail middleman and sells directly to the end-user, has been shown to completely disrupt the conventional approach.
Yes, by definition, direct-to-consumer businesses do not involve third-party retail companies in their business models. But that doesn't mean the retail side of the equation doesn't exist. In other words, going D2C means that the manufacturer is responsible for all retail-related aspects of the business in addition to original manufacturing and fulfillment.
Perhaps you are pondering:
'When they could just as easily continue selling their goods to retailers wholesale, why would a manufacturer take on this additional responsibility?' This question has two aspects, both of which revolve around how the requirements, expectations, and behaviors of the modern client are changing.
First off, when investigating a range of goods or brands, or when making a purchase from a particular brand, customers of today want to be able to go straight to the source. For instance, Astound Commerce discovered that 55 percent of buyers prefer to make purchases in the same manner as they conduct their research—directly on the manufacturer’s website.
While the barriers to entry for a startup D2C brand are relatively low, keep in mind that you are competing against big players like Amazon and Walmart, which have already established massive customer bases. This is why you must have a strategy in place to help you become a recognized brand and disrupt the status quo. To make a name for yourself in your industry, you must stand out from the moment you launch your D2C brand.
What Does it Take for D2C Success?
Here are some things to consider if you want to go down the D2C route:
Choose an Everyday Item and Make it Accessible - Know why you should enter the market before you even decide to build a direct-to-consumer brand. Along with being affordable, concentrate your product and branding messages on addressing frequent consumer pain areas.
Build a Subscription-based Business Model - Many popular direct-to-consumer (D2C) businesses provide a subscription plan that allows clients to unsubscribe at any time. Customers can save time, money, and effort by using the subscription model. Additionally, it aids in increasing customer retention.
Offer Easy, No-fee Returns - A free returns policy assures your customers that your brand is trustworthy and gives them the confidence to buy from you. Many well-known e-commerce companies, such as Amazon and Flipkart, use this strategy. If people are unfamiliar with your brand, free and easy returns will entice them to buy something from you. Make sure you offer excellent customer service when exchanging or returning products.
Influencer Marketing - While not everyone is a star entrepreneur — though it would be nice — you can certainly use celebrity influencers to help promote your product. Working with influencers will expand your customer base. Influencers typically have a large audience to whom they can spread the word about your product. People will consider purchasing your product if they give it positive reviews. You may not have a large budget for influencers if you are just starting out. In this case, you ought to work with micro-influencers from your niche. Connect with people who have a reputable number of followers to raise brand awareness.
Use Infographics and Memes - Memes have gained fame, and many individuals use Instagram solely to skim through them. Increase your following by using memes to communicate your brand's mission or your products. Users tag one another in memes, thus if your memes are good, the reach of your brand will naturally increase.
What makes your products superior? What advantages do you present? Why should they only purchase from you? We strongly advise using infographics to respond to these queries.
Encourage Your Customers to Spread the Word - Would your customers or other users create content for your brand? Creating content would only benefit your brand, not your customers. Customers must be incentivized. You can hold different contests, give shout-outs to your customers, and award prizes to them.
You may devise several strategies to reward your customers in the same way.
Provide Testimonials - You can ask your customers to talk about the brand. Instead of just you speaking, give other users opportunities. People tend to believe what other users have to say about a brand. So, if a large number of people on social media and your website speak positively about your brand, your company's goodwill will grow. People will have more faith in your brand, and your sales conversions will rise as a result.
Give Memorable Customers Experience - A good customer relationship is essential for any business. Connect with your target audience and learn about their needs. After understanding, it is critical to fulfill them in a unique way. You must treat them well from beginning to end, in addition to providing a high-quality product. Your after-sales support should be outstanding.
Make sure your team returns every call; if any are missed, they should call the person again. Respond to all emails within 24 hours and be courteous while answering any questions. If you have made a mistake, admit it and offer an explanation of what went wrong. You’ll stay in the race for a while if people associate your brand with good recollections.
What Lies Ahead?
D2C, in our opinion, is here to stay. It makes first-party connections possible that otherwise wouldn't have been possible. Additionally, it improves consumer profiling and micro-segmentation, which aid in tailoring the experiences of customers.
A D2C maturity curve will exist. By category, different success factors will apply. And distribution will either be multi-channel or exclusively available online. Additionally, when D2C brands grow and develop, many of them choose the other path and join offline retail in order to increase their visibility, experience, and reach. Investments in talent and channels, including digitizing in-store experiences, are necessary for this omnichannel push.
Whatever the outcome, the times need you to re-evaluate how to connect with customers and control the arena of consumer relationships. D2C has the potential to be your most powerful weapon.
A Direct-to-Customer (D2C) business model is a recent development, which is often confused with conventional supply chains. In a conventional supply chain, a manufacturer creates and sells products to a wholesaler, who then sells them to a retailer. The point of contact between the company and the customer is the retailer. The pandemic has, however, resulted in a pronounced rise in the number of brands that offer their products and services to customers.
As the direct-to-consumer (D2C) retail market grows, so does the competition. According to Statista, D2C e-commerce sales are projected to reach almost $175 billion by 2023, and more brands are vying for a piece of the action.
What Does Direct-to-Consumer (D2C) Mean?
Currently, the best opportunity for innovative brands to establish direct relationships with their customers is through direct-to-consumer (D2C) e-commerce. D2C refers to the practice of selling goods directly to customers through a business' online store, eschewing third-party wholesalers or retailers. Building D2C e-commerce capabilities enable businesses to communicate directly with customers, which supports brand strategy and innovation based on current customer insights. With the aid of these insights, a business can directly address customer needs, increasing lifetime value and brand loyalty.
D2C can be used as a long-term defensive strategy in a competitive environment, but it can also lead to an immediate increase in market share because it reduces the company's reliance on e-giants like Amazon and gives it a chance to expand its share of the expanding online market.
With varying degrees of success, many businesses are attempting to develop D2C businesses. Leaders in this field have succeeded in integrating direct-to-consumer sales into not only their main growth platform but also their core operations. Given the significant portion of sales that come from traditional, indirect sales, others are finding it challenging to shift their priorities to D2C, even though they have experienced some growth in this new channel.
Building a D2C business may be easier for some, as companies differ in terms of their history in direct selling as well as the attractiveness of their brand and category for direct sales. However, companies of all kinds and sizes have been able to make use of D2C e-commerce by scaling their capabilities, or by accessing capabilities such as marketplaces, ready-to-use platforms, and software as a service (SaaS) that facilitate access to the online channel.
Let's examine why D2C is viewed as the retail model of the future and why an increasing number of D2C businesses are seeking brand partnerships.
The Numerous Benefits of D2C
D2C brands have many benefits for both customers and brands. The ease of shopping online from the comfort of one's home, even for expensive items like mattresses and jewelry, is one of these advantages. You can be sure that you'll always order clothes that fit, tasty food, and makeup that matches your skin tone by saving your preferences with a D2C brand. Additionally, D2C brands can save money by shipping directly to customers and eschewing physical retail locations, and they can pass those savings along to customers by providing free next-day shipping, for instance. Additionally, they can provide customers with more practical customer service options like easy returns and shipping updates.
Brands can see the power of D2C because even the major retailer, Nike, ended its partnership with Amazon to concentrate on its D2C strategy. Direct-to-consumer does not involve any wholesale or retail partners. D2Cs make decisions regarding their markets, product pricing, values, and marketing strategies. Due to the D2C brand's total control, they are not required to compete on retail store shelves with comparable brands or products. Owning the customer relationship also improves the D2C brand's ability to customize its offerings.
Scaling Through Brand Partnerships
Even though D2C has many benefits, traveling alone in a retail setting has some drawbacks. D2C companies have a wide range of responsibilities, including manufacturing, marketing, shipping, and customer service. A high-quality brand finds it even harder to stand out due to the proliferation of D2C brands. Companies must come up with creative and compelling strategies to boost their brand without overstretching their resources. This is one of the explanations for why more and more direct-to-consumer businesses are searching for brand alliances with other businesses.
In a successful brand partnership, both parties promote one another to their respective audiences and assets. It's a win-win circumstance that boosts brand strength and perception.
Listed below are a few strategies that can act as the basis for fruitful brand alliances.
Customer Experience - When customers identify emotionally with a brand, their lifetime value multiplies by four. Offering a compelling brand experience, which is possible through brand partnerships, is one efficient way to strengthen the relationship between the customer and the brand.
Market Positioning - In many niches, consumer brand competition is fierce. However, a strong competitive advantage can be gained by D2C brands—and even well-known enterprise companies—through the right alliance.
Blending Online and In-store Retail Presence - D2C brands are distinguished by the fact that they launch entirely online, forgoing a physical location in favor of online sales. One drawback is that the customer can't touch or try the product before buying, which helps keep overhead costs low. Many D2Cs seek brand partnerships with established retailers as a result.
Delivery and Fulfilment - How to give customers a positive post-purchase experience is a major challenge for D2C brands. Logistics problems and inadequate third-party services that fall short of their brand promise frequently cause delays during the fulfillment and delivery stage. By locating brand partnerships with suitable delivery companies, D2Cs can create innovative and effective strategies to match the distribution stage with the brand's values and image.
As there are brands, there are as many different kinds of brand partnerships. The identities, target audiences, and niche markets of the two participating brands all play a role in determining the type of brand partnership activity that will be most successful.
Unicommerce, India’s integrated SaaS platform for post-purchase experience management, and Wazir Advisors have launched the first edition of "India’s Retail and E-commerce Trends Report” covering FY22.
The report assesses the growth of India’s retail and e-commerce industry in FY22 and how consumer buying patterns have changed in the last two years. According to Wazir Advisors, India’s retail sector was estimated worth $836 bn in FY 2022, with an 81.5 percent contribution from traditional retail followed by Organised brick and mortar at 12 percent and online sales channels at 6.5 percent.
Wazir Advisors added that despite the impact of the pandemic on overall retail in FY 2021, the online retail market in India is expected to grow at 32 percent over the next few years with the potential to reach $225 billion. The D2C segment emerges as the key propeller of this growth; reflecting a robust CAGR of near 45 percent levels with the potential to reach $70 Billion over the next few years
E-commerce order volumes on rise driven by smaller cities:
According to Unicommerce data, the overall e-commerce order volume continues to rise with 69.4 percent YoY growth in FY 2022, while in FY21, the order volume reported 49.4 percent YoY growth.
In the last two years, the strong e-commerce growth of India is driven by consumers from Tier-II and-III cities. The young aspirational consumers from these markets are shopping across segments and changing India’s e-commerce landscape. The shoppers from Tier-II and-III cities accounted for over 61.3 percent of the overall market share in FY 2022, increasing from 53.8 percent in FY 2021. The order volume from Tier-II and-III cities grew at almost double the pace of Tier-I cities with 92.2 percent and 85.2 percent YoY growth in FY 2022. In contrast, Tier-I cities indicate a comparatively slower order volume growth rate of 47.2 percent.
Beauty & personal care grows fastest; FMCG, Health & Pharma segments accelerated in FY22:
Given the significant e-commerce growth over the last two years, various segments have become prominent with promising growth potential and consistent YoY growth. While Beauty & Personal care reported the maximum order volume growth of over 143 percent in FY 22, the FMCG & Agriculture and Health & Pharmaceuticals have also grown significantly over the last two years, with 61.7 percent and 62.4 percent order volume growth respectively. Fashion & Accessories and Electronics & Home appliances have been the biggest categories and they have reported an order volume growth of 59.7 percent and 34.7 percent respectively in FY 2022.
D2C brands post faster growth on websites at 80.4 percent; marketplace growth at a healthy 59.6 percent:
The report further draws out how D2C and digital-first brands continue to rise with consistent order growth of brand websites. Over the last two years, many digital-first brands have emerged and they are dressing the industry gap to offer new products at attractive price points catering to young online buyers. This has helped Brand websites report a strong YoY order volume growth of 80.4 percent in FY 22 while Marketplaces witnessed a 59.6 percent YoY growth. Beauty & Personal care products segments continue to lead here as well with 132.8 YoY growth on the brand website and 169.1 percent growth on marketplaces.
The other segments that have reported strong growth on the brand website are Health & Pharmaceutical with 84.8 percent YoY growth and 67.7 percent YoY growth for FMCG in FY 22. The rising phenomena of D2C has helped the fashion segment to continue its growth despite being the most mature segment. Fashion & Accessories have witnessed 89.5 percent YoY growth on brand websites in FY 2022, as opposed to a marketplace growth of 52.2 percent.
Return orders start to decline; a small but useful drop helps reduce costs for e-commerce
Every e-commerce business has to manage the complex process of returns and it constitutes a major part of operations costs. With rising order volume, online selling companies have invested in technology platforms and process enhancements to reduce return orders. Return orders are on a consistent YoY decline, as return orders for FY 2022 constitute 14.8 percent of the overall order volume, as compared to 16.10 percent in the previous year. While this may seem like a marginal dip, it significantly boosts the overall bottom line. Increasing focus on technology deployment for COD orders positively impacts e-commerce. Returns on COD orders show a decline from 22.1 percent in FY 2021 to 18.8 percent in FY 2022. While returns of prepaid orders remain constant YoY at 10.4 percent of the overall order volume.
On the occasion of the report unveiling, Kapil Makhija, CEO, Unicommerce said, “Over the last 2 years, India’s retail industry has seen a remarkable evolution with wider technology adoption, readiness to try new platforms, and changing mindsets of brands. We launched our report with a vision to showcase a holistic picture of how consumers shopped over the last two years. This will enable brands to reflect on their business and make better decisions. We believe in the power of data and our technology platform allows retail brands to analyze their business performance and plan future strategies accordingly.”
Speaking on the launch of the report Pakhi Saxena, Practice Head, retail, and consumer packaged goods, Wazir Advisors stated, “We have seen the retail industry bounce back from a severe impact of the pandemic in FY21. The overall retail sales are back at Pre-COVID levels with strong growth in the e-commerce industry. It will be interesting to see how the retail industry adapts to the rising e-commerce shoppers of Tier-II and-III cities and how it will impact traditional and organized retail.”
Recent global research by IBM/ National Retail Federation indicated that one in ten consumers categorize ‘brand’ as a major factor in their purchasing decisions. These consumers typically have a higher average income and are well traveled, aspirational, well read, and fairly sophisticated. So, they are willing to pay a premium for assortments that fit their lifestyle. The highest concentration of them globally was found to be in India (along with the Middle East and Latin America).
The forces shaping the Indian consumer are 4A’s: Affluence, Awareness, Attitude, and Access impact behavior. This means that the upwardly mobile Indian consumer seeks quality, choice, and product mix similar to their global counterpart. Awareness and Access have traditionally been a bottleneck in experiencing international brands. However, with the exponential adoption of digital channels, both awareness and access has been growing. And global brand offerings that take culture and local tastes into consideration clearly have an advantage.
This is true for branded international quality kitchenware category.
The Kitchen as the New ‘Theatre’ Setting and Rise of Cooking at Home
In the past two years, families have been gathering around the table, and experimentation in the kitchen has also been high. Consumers consciously attempt to create a mood and vibe in their kitchen and dining spaces-re-create the restaurant environment right at home - especially when it comes to desserts, baking, and drinks. This will be a big driver for stylized designs and premium finishes in tableware and experimentations with newer patterns, prints, and colors. Kitchen products that are high on style, yet efficient, high performance, and incredibly functional for everyday use will remain the top picks for the consumer. More food prep tools will be preferred as they offer ease of use and cut down on routine tasks.
The Evolution of the Conscious Consumer
Even with the ebbing of the COVID-19 scare, cooking and eating healthy is a key trend that is here to stay with consumers who have become more conscious of the ingredients and foods they consume. There is also a willingness to prioritize health over other benefits such as convenience. They look at food and thereby their kitchen ecosystem to nourish their bodies while being a foundation to their sustainable lifestyles. There is an emphasis on being green in essence, sustainable and responsible.
This mindful eating has led to the need for high-quality, nutritious food ingredients along with sustainable tableware, gentle on the environment. Denby tableware is a great example of products that are eco-friendly. Consumers are looking for sustainable options not just in food and dining but also in kitchen storage. Kilner’s sustainable storage lines are expected to cater to just that.
A Tech-Vantage Playing Out in Kitchens
The new-age kitchens will certainly see a larger presence of IoT. There is going to be a larger preference for appliances that are high-tech for the urban consumer. With busy schedules and multiple commitments, consumers would love to have the option to control the oven temperature while out on a walk or be able to use an app to see the inside of the refrigerator while on a grocery run.
With consumer shopping behavior rapidly shifting to online channels and increasing competition within categories, marketers are deploying a mix of marketing tools to attract new consumers, and demographics and provide a seamless user experience on their platforms.
Customer-Centric Content Marketing
In addition to cooking picking up, the pandemic has also driven people to become more health-conscious and this inclination to adapt to a healthier way of living has also led to critical lifestyle changes. And hence as part of our content strategy, our focus is on edu-awareness equipping consumers with relevant knowledge to understand the science and ergonomics behind the purchase of cookware. For example, Stainless Steel cookware and serve ware are widely used in Indian kitchens. However, not many consumers may be aware that all stainless steel is of food-grade quality.
Pre-Purchase and Post-Purchase Experience
Finally, to keep customers happy, customer service needs to be unparalleled. Having dedicated and trained customer service teams and product advisors is a good idea. Addressing customer feedback and complaints and handling, and solving their problems goes a long way in turning a one-time customer into a loyal one.
D2C brands are trying to provide an individualized experience by creating a story and understanding the essential needs of customers. The key to becoming successful and building a strong customer base in the D2C brand is by creating trust and meeting customer expectations.
A joint study between Affle’s MAAS and Sensor Tower has reported the growth of daily active users in the Indian market and reported, “India’s e-commerce is booming, and it is expected to grow by 84 percent by 2024”.
Last year, the e-commerce industry has seen an increase in sales, especially the D2C brands. This industry has also faced a harsh reality that is an increase in returns and D2C brands have faced difficulty in managing their operations.
Mehmet Altug, Associate business Professor, George Mason University mentioned, “As online sales increase, the return rate has also increased significantly, and I don’t think it’s a secondary problem anymore.”
Return to Origin (RTO)
RTO happens when the product is not delivered and shipped back to the seller’s pick-up address. The convenience of online shopping has allowed customers to purchase multiple sizes or colors to ensure the right fit and return the product at their convenience, which is making sellers' rides difficult. Looking at the scenario, reverse logistics is also a part of the business plan now as brands have to ensure that the ‘customer should like it enough to not to return it.
At once, brands may bear the loss of order processing but it’s hard to entertain the loss when it comes to inventory. As when the product is locked for days, breaks its cash flow despite of physical existence. It’s been observed that the probability of return is higher in the case of online shopping, which is one of the big challenges for the seller. The reason for return could be multiple like incomplete or fake address, non-genuine buyer, refusal to accept, spelling error, missing information, COD payment is not ready, unreachable customer, or not available at the address provided, issues of trust in the brand or product quality, or payment method, brands need to understand their customers and find out ‘why orders are turning into RTOs’.
The reality is it impacts the revenue and the profit directly because the undelivered package is neither good for the buyer, nor the seller and even holds back customer satisfaction too. Brands not only bear the shipment charges for forward and reverse shipping, but also face many other issues like warehouse space, costs of repackaging, locked inventory, and cost of handling recalled inventory.
Return to Origin (RTO) is an extra expenditure and one of the big challenges to businesses, as they have to bear additional costs which include order processing, and logistic fees too. In the case of the D2C brand, businesses facilitate the option of cash on delivery for multiple reasons as a customer believes it as a safe option, which consecutively increases the possibility of the return either by refusing the order or denying the payment.
One of the studies on demonetization shared, “The average rate of returns' for all e-commerce purchases was 20 percent. However, when looking only at COD purchases, this rate doubled to 40 percent. When you consider the various estimates of India's e-commerce, COD being anywhere from 50–80 percent, the massive scale of the problem becomes apparent.”
D2C brands should verify their COD orders by either investing in Interactive Voice Response or automated Non-Delivery Report. Such investments ensure the probability of reducing the risk to return by giving a verification call to the registered mobile number and by taking follow-ups with customers for re-attempt of delivery.
NRF found that “returns can create opportunities for fraud, too. For every $100 in returned merchandise accepted, retailers lose $10.30 to fraud.”
Many D2C brands have already started converting their COD to prepay by sending regular notifications by SMS or Whatsapp and enticing them with some last-minute savings by offering discounts or options to save on delivery charges.
COD undoubtedly is one of the major factors that is making an e-commerce business successful but also bringing subsequent losses too. Brands need to analyze the customer history, verify contact details and addresses, notify the customer about the product status, enable prepay options, put a minimum order value for COD, and others. Brands should analyze the loss by identifying the category with high demand and high return and prepare themselves with the solutions to the same.
Steve Prebble, CEO, of Appriss Retail mentioned, “Retail is dealing with an influx of returned items. Now is the time to stop thinking of returns as a cost of doing business and begin to view them as a time to truly engage with your consumers.”
Retailers are even trying to adapt the best possible solution like open box pricing or convincing customers to either keep the product for free or donate the product to eliminate shipping charges. Store retailers see this option as an opportunity of bringing customers back in-store and build rapport to gain their loyalty. Retailers must note that a polite return process also helps in gaining credibility as well positive perception of a brand.
Baby apparel is one of the fastest-growing segments in India.
According to Statista, the kidswear market accounted for 20 percent of the total apparel market in the year 2018 and is predicted to reach approximately Rs 1.7 trillion by 2028.
This expansion has attracted several new entrants, while pushing existing players to diversify their portfolios and reimagine their supply chains - from introducing sustainable categories and gender-neutral apparel, to setting up e-commerce portals and social selling platforms.
The pandemic has also served as a major inflection point for kids’ apparel manufacturers, who are seeking more efficient, cost-effective, and environmentally friendly ways to reach their target audiences.
Amidst this all, consumers are becoming more discerning and digitally literate, and technology is becoming more cutting-edge.
In light of the aforementioned factors, a new kind of business model has begun to emerge and thrive. One that has brands producing, packing, distributing, and shipping their products.
Roll Over B2B, It’s time for D2C!
Don’t be confused by all the jargon… D2C is an abbreviation of direct-to-consumer.
It describes a business model wherein a company produces a product in its own facility and distributes it within its own channels (e-commerce platform, social media, and retail store).
According to a KPMG report, there are more than 800 D2C brands in the country, with the industry projected to reach $100 billion by 2025!
The D2C model provides the perfect medium for brands to engage with their customers directly and for customers to shop online seamlessly.
But what does this mean for kiddie clothing brands in particular?
For one, it means having better control over a brand’s marketing and sales functions. It’s imperative to be able to consistently communicate product features and benefits in a manner that will resonate. This holds especially true for organic kids’ apparel brands that must be transparent about aspects like raw materials used and processes deployed.
It also means exercising a higher degree of creative liberty and personalization within the product range, due to the availability of targeted customer data. Insights from parents help sustainable kids’ clothing brands better understand customer expectations so that they can come up with new ways to provide convenience, comfort, and style.
A leaner supply chain also means higher profit margins for both businesses and the planet. By doing away with the middlemen, brands can optimize resources whilst reducing wastage. This means more money to plow back into the running of a sustainable model.
How is the D2C Market Evolving?
The research will tell us that one of the biggest challenges for any D2C company is the shift of responsibility in distribution. Without large resellers to support/manage the brand, one must work even harder to ensure it stands out.
This is where having a strong digital presence really matters!
What new-age kids' clothing brands have managed to do well, is provide an easily navigable and enjoyable online experience for parents. This is a very important consideration given that digitization has transformed the way consumers shop.
Simple (and visually appealing) website layouts, convenient and scrollable product listings, click-worthy descriptions and images, smart payment gateways, and much more.
But beyond just laying the right foundation that will ensure the business is sustainable and scalable, the D2C ecosystem can achieve further success by nurturing long-term relationships with customers.
By tapping into social media and influencer marketing, brands can build loyalty and advocacy. Most importantly, pave the path for customer communities.
The new generation of consumers want to be known, heard, and engaged with rich content rather than just being made to ‘shop now’ and ‘add to cart’. Currently, customer experience such as ease of shopping, convenient deliveries, easy returns, customization, and control while shopping is hygiene factors. They no longer take a brand’s claim at face value – they have enough resources at their disposal to research and get exactly what they want. They expect more from the brands they love – a personal connection and a human touch along with the ability to understand and address their needs. It’s imperative, therefore, for brands to establish a one-to-one connection with the consumers and this is where the D2C format plays a key role.
D2C platforms eliminate the barrier between the brand and the consumer, thus ensuring transparent and swift communication. This enables brands to learn from their customers which forms the base of the broad framework that most successful D2C brands draw inspiration from.
Successful D2C brands deliver on customer centricity by combining first-party data insights to offer an enhanced personalized and hassle-free shopping experience to their customers. This helps them deliver high repeats and LTV (Life Time Value) and low CAC (customer acquisition cost) - the two most important factors to survive in the current cluttered market where a new potential startup blooms every day to take away your customers. Winning on these two parameters requires customer obsession and with the advent of technology, this has been made possible, thus benefitting true ‘consumer-first’ brands. D2C enables the delivery of relevant, personalized, and connected consumer-centric experiences which help in winning the new generation of shoppers.
The D2C format gives brand eyes and ears on consumer behavior as they get complete visibility of the different stages of the shopper’s buying journey online. There are various tools available to integrate the data from online and offline engagement and create a 360-degree view of current customer profiles – their needs and behaviors. Based on this analysis, brands can easily identify triggers and barriers for their consumers and create solutions to facilitate better buying decisions leading to a win-win for both brand and consumers. Such insights gained through analysis of millions of these customer journeys help brands design the right customer cohorts and hyper-personalized communication tailored to each customer’s needs and want. This further sharpens the brand’s ability to reach out to potential lookalike audiences through the right segmentation and sharp targeting leading to improved media spending. If done right, this could lead to an increased conversion rate by 10-15 percent, add to cart by 5-8 percent, click-through rates by 20-25 percent, and media spending by 20-25 percent.
Product trial, which is now a crucial weapon in the D2C armory, is one such outcome of D2C customer engagement and extensive data analysis. Product trials before full roll-out limit any last-minute shockers and improve chances of product success. If executed correctly, this is a game-changer as it provides the most accurate and instant customer feedback at a minimal cost. Such a direct connection with consumers also reduces the product development cycle and gives the brand an edge over its competitors. If the customer has a feeling that he/she is being heard, even if something goes wrong, the customer will continue to have a positive attitude towards the brand. But how do you pave the way for this? The answer lies in effective communication.
Transparent communication is the cornerstone of any brand’s success and D2C platforms facilitate the two-way conversation, making the customer feel valued. This instills the belief that the relationship between the brand and the consumer goes beyond mere transactional realms and creates fiercely loyal customers. These interventions through the D2C format act as an additional sweetener for the average consumer and turns him/her from a consumer to a brand loyalist and subsequently to a brand advocate.
With this context, it’s only fair to say that D2C shouldn’t be thought of just as another channel but as a foundation on which other channels thrive as the insights gained from D2C platforms can be used to design sales and brand activations which eventually give higher conversion and enhance the customer experience across channels. The D2C brands know exactly who their customers are and what they are looking for without being dependent on information from walled gardens such as other online and offline marketplaces as D2C brands have complete control over the end-to-end buying journey of their customers.
With the evolution of the digital ecosystem, it won’t be wrong to say that D2C will take the lead as a primary source for consumer acquisition and retention through content and community engagement with commerce-enabled to facilitate transactions contrary to the current system where brands focus only on commerce while community and content happen in silos on social media. So, D2C should not be seen as a channel but as a mindset to retain the customers by understanding them better and building strong relationships that bring recurring business to the company and give it a reason to exist. D2C has certainly transformed the landscape from managing customers’ dissonance to driving customers’ delight.
The food and beverages industry accounts for ~3 percent of India’s GDP and is the single largest employer in the country, with more than 7.3 million workforces. The nationwide lockdown set this industry on a downward spiral with some predictions suggesting that nearly a quarter of all restaurants may shut down by the end of 2020.
To offset these challenges and regain profitability, the industry has been adapting and innovating since the lockdown was lifted. New service offerings and COVID hygiene protocols are emerging in the sector to gain customer confidence and lift revenues.
However, direct-to-consumer (D2C) brands in the health food space have managed to raise just about $100 million, despite most companies claiming that the sub-segments will grow significantly in the post-pandemic period.
For D2C brands, onboarding new customers through aggressive marketing is the easy part, but the factor that enables D2C brands to survive in the long term is whether they can retain their customers.
Customer experience is fast becoming a top priority for businesses, and rightfully so, statistics prove that 86 percent of buyers are willing to pay more for a great customer experience. According to a Gartner study, in 2022, 81 percent of companies will be competing mostly or completely on customer experience.
Focusing on customer satisfaction and customer retention is the way to increase the lifetime value of your customers. Here are a few effective ways how this can be achieved and maintained.
Offer a Referral Program - Referral programs are a great way to increase customer lifetime value. Referred customers have 16 percent higher lifetime value and 18 percent less churn. Furthermore, 81 percent of consumers trust recommendations from people they know, and 55 percent of people share their new purchases on social networks.
Put Them First – Hear Your Customers - Whether the majority of your customers are happy or not, you’ll notice your business performance. But to measure their satisfaction more accurately, always collect the necessary data.
Optimize Your Customer Service - Better customer service leads to a better customer experience which, as a result, increases customer retention and improves customer lifetime value. Make sure your business is active on multiple social media channels, as 66 percent of customers use at least 3 different communication channels to contact support. Clients usually expect a fast response to their questions, requests, and complaints, so ideally, you should provide 24/7 live chat support.
Create Content to Keep Customers Engaged - Content marketing is here to stay, and it definitely helps your customers feel closer and more engaged with your brand – especially if you do it right. When customers develop a relationship with your brand they will not only be loyal to you for longer but also help promote your brand through their social media platforms or word-of-mouth.
Leveraging Tech To Improve Customer Experience
Technology continues to provide new possibilities for how businesses can communicate and engage with their customers. Here are a few ways how retailers can leverage tech to improve and pre and post-purchase experience of consumers:-
Digital Payments - With the availability of multi-dimensional features on smartphones, enabling users to make payments through mobile phones has become critical. As zero-touch retail and contactless shopping become important to the consumer experience in light of COVID-19, retailers will accelerate the rollout of digital payments. Checkout queues will be shortened at the advent of the 'scan and go' options.
Customer Delivery Experience - It’s clear that a great delivery experience has multiple factors in play: being on time, keeping packages safe, and having friendly drivers are just some that may immediately spring to mind.
Create an Online Community for your Customers – Here are a few benefits of creating communities for brands :
Omnichannel Customer Support - Omnichannel focuses on delivering a consistent, personalized experience for shoppers across all channels and devices. This is to say that all of your channels work in parallel around the customer, to create a completely seamless customer experience. This approach accounts for each platform and device a customer will use to interact with the company.
With the low ticket price, the F&B brands can keep up with the ever-increasing cost of customer acquisition. Here are a few ways:-
A/B Test Your Campaigns: Looking at the CAC formula, gaining more conversions can decrease customer acquisition spending. There’s no better way to improve your online marketing efforts than the simple A/B test.
You can test landing pages, web copy, Google Ads, and just about anything your team can come up with. Change things like headlines, color schemes, calls to action (CTAs), and more to see what works best and optimize your marketing efforts. Make sure you’re using Google Analytics or a similar tool to help you.
Retarget Website Visitors: Many customers will browse a website and then abandon it before making a purchase. Retarget these site lurkers with ad platforms like Google and Facebook. It’s quite simple: with retargeted marketing, these lukewarm customers will encounter your ads while visiting other websites. To get the best results, you can segment potential customers based on what pages or products they visited on your website.
Encourage Customer Reviews: Your online business is likely already using AI and analytics tools to better understand its target audience. But, while technology has brought us a long way, who better to ask for feedback than your existing customers? They know, better than anyone, why they chose your product or service.
You should use welcome emails, website surveys, post-purchase communications, and so on to glean as much insight into customer behavior as possible. This way, you’ll be able to see which parts of your customer acquisition strategy are working and which of them aren’t.
Almost overnight, the pandemic changed consumer behavior globally. Suddenly, safety, security, health, hygiene, and convenience emerged as major purchase drivers. Likewise, companies, especially D2C (direct-to-consumer) brands, adopted technology tools within months, which would otherwise have taken years.
The nationwide lockdown in March 2020 led to changes in consumer behavior. Despite no shortage of goods, with almost 1.3 billion people confined within their homes, consumers began purchasing products impulsively. Ready-to-eat foods, groceries, toiletries, sanitizers, medications, and face masks more quickly vanished from shelves. Consequently, within days there was a shortage of essential commodities across stores.
Disruptions and Changes
Meanwhile, more than two years down the line, Coronavirus continues to remain a threat in various geographies to some extent or the other. As a result, prolonged disruptions in business have triggered profound changes in consumer buying habits, forcing companies to respond in diverse ways to the evolving situation. While most companies deployed digital, hybrid, or omnichannel means to keep BCPs (business continuity plans) running, some realized the importance of the D2C model.
Though hopes abound that the pandemic will soon become an endemic disease and, like the seasonal flu, only be part of ongoing annual threats, as new variants and waves keep emerging, consumers and companies cannot fully let their guard down.
In such a scenario, companies have had to reimagine how to keep their supply chains humming while evaluating which business model will be most feasible in the new normal. For many entities, although the crisis has posed challenges, they have capitalized on the situation by creating opportunities.
Such companies have customized their marketing strategies as per the changing consumer dynamics and the trend toward impulse buying. D2C brands dealing with personal care products, which recorded an uptick in sales, were one of the big beneficiaries of a heightened health and hygiene focus.
While sales of some goods are expected to plateau once the pandemic wanes worldwide, some of the behavioral changes will remain over the long run. This includes the greater comfort levels while shopping online, which consumers were earlier wary of. Another significant change is the shift towards impulse buying, which has increased prominence in the post-pandemic phase. Typically, impulse buying behavior among consumers is an unplanned purchase of any product or service. This buying behavior is spontaneous, occurring when a consumer is overcome by a sudden, powerful, and/ or persistent urge to purchase an item immediately.
Impulse Buying and Supply Chain Distortions
When the pandemic peaked in the second wave, impulse buying led to shortages of essential items as extreme fear drove consumers to stock up on products they felt would soon run out of stock. While stocks may have lasted in normal circumstances, the sudden surge in impulse buying and stockpiling of items at home ended up accelerating the feared outcome, triggering distortions in the availability of most items.
For companies and policymakers, it meant a greater focus on adjusting inventory levels and trying to drive higher efficiency in supply chain management processes. Simultaneously, companies and the authorities kept communicating with customers that there was no need to panic as sufficient stocks were available and current shortages were largely due to stockpiling and temporary disruptions in the supply chain. Despite these reassurances, most customers played safe by buying additional goods. In essence, the hoarding of goods created an artificial scarcity in many instances.
Here, one must differentiate between impulse buying in normal circumstances and a crisis. In the former, impulse purchases are mainly driven by deep discounts, special sales, and engaging marketing campaigns. During disruptive situations, however, consumers are keen on fulfilling the need for buying food, medicines, and other essential items because they are unsure about the intensity and longevity of the event. Additionally, the possibility of product shortages, fear of crowded stores, and shopping in inconvenient locations have all affected consumers’ shopping patterns.
In the case of FMCG and D2C brands, events of the past two years encouraged companies to increase the production of goods, particularly essential commodities, to manage the sudden surge in demand. But this was easier said than done, considering the stringent social distancing and other allied restrictions. Supply chain disruptions have also forced companies to diversify sourcing models that were overly dependent on China.
Today, it’s clear the traditional brick-and-mortar model won’t help in keeping BCPs going during periods of disruption. Like D2C brands, legacy companies also need to adopt hybrid or omnichannel models so they can keep catering to their target audiences even in challenging circumstances.
More than 800 D2C startups are operating in India, with over 100 million users. These figures do sound exciting. However, what is D2C? It stands for the ‘Direct to Consumer’ approach, receiving wide acceptance by retail-based businesses; across the board. In this model, the manufacturers or producers sell their products directly to consumers without involving middlemen like dealers, retailers, or brick-and-mortar stores. Most D2C companies use the internet to conduct their transactions.
This model is not new. It has always been there, especially in the fashion and lifestyle segments. However, the virus outbreak turned the attention of businesses from various industries towards this approach. Compared to the year before the pandemic, the number of companies registering as D2C organizations noted a significant 88 percent hike. Today, startups working on this model book whooping profits like Rs 100 crore in a much shorter span than those working in the traditional setup.
Does this mean all D2C-based companies will earn remarkable profits? Not quite. If you are looking at a direct-to-consumer approach, you must have a solid technological foundation. Here are some ways showcasing how tech-based solutions are critical for a D2C ecosystem-
Helps Your Platform Reach its Full Potential - Simply developing a website for your brand is not enough. It must be aesthetically appealing, user-friendly, and glitch-free. While providing payment options - do not restrict to mere card payments; but also include other electronic payment options like UPI, net banking, and bank transfers. Use disruptive solutions like artificial intelligence to build chatboxes that help resolve first-hand customer queries most quickly and efficiently. Finally, consumers lose interest if the website redirects them to several pages for one purchase. Ensure this does not happen with your brand and keep the transaction loops shorter.
Inventory and Order Management for Impeccable Deliveries - For all businesses operating online - inventory and order management become crucial tasks. Companies having multiple sales channels must focus on these aspects to avoid duplication and confusion. D2C players should invest in top-notch inventory management systems. These software solutions entail a centralized database that carries real-time inventory information from different warehouses. They drive home with 100 percent visibility concerning products entering and leaving the storage units. Further, they even help track the order movement until the last-mile delivery.
Cutting-edge order management solutions automate processes like order allocations after considering several criteria such as location, stock availability, demand channel, and delivery preference. These tech-based systems are critical in reducing order-related errors, consequently improving consumer experience and brand image.
Enables Hassle-Free Supply Chain Operations - If you are running your brand online, supply chain management becomes imperative. Failure at this end can be damaging for your business. Choose a management software that promotes easy receiving and placement of inventories. At the same time, facilitates the picking and shipping of orders. Many new software solutions even track the end-to-end movement of goods. Why is it crucial to invest in a robust warehouse management system? It will improve your overall brand experience, lower labor costs, boost inventory accuracy, drive operational flexibility, and curb errors during picking and shipping goods.
Improves Return Management - It is not always a guarantee that a buyer will keep the product. Many times, in a D2C model, consumers order a commodity, and later change their minds. Return is an inevitable part of selling. According to experts, the smoother your return process, the more likely is the customer to make another purchase. What you need to focus on is how to make this aspect of your business effortless? Technology, again, comes to your rescue in this situation. Tech-based solutions help reduce the time frame to close the entire transaction loop and analyze the reason behind the return in a much more detailed manner.
Builds Strong Customer Relationships - D2C is not just about directly selling to buyers by removing the middlemen. Under its gambit comes another priority - developing and maintaining strong relations with the target audience. Now, numerous tech-based solutions will help you achieve this goal. Begin with a predictive and analytical tool to understand the needs, wants, and expectations of your customers. Once you know, what your consumers want, you will be better able to address their demands. Further, make use of technology to keep your target base engaged. Consumer engagement is critical for retention and developing brand loyalty. Use social media marketing to spread awareness, build a community feeling and attract potential customers.
It is safe to say that the direct-to-customer model has streamlined data and access to consumer purchase patterns. This business model is here to stay and will only grow with time. Back your D2C business with the thoughtful implementation of technology; to keep your company flourishing and thriving!
As we incorporated a global pandemic into our lives, dramatically shifting global shopping trends and consumer behaviors, a cluster of brands, even a few legacy ones have adopted innovation to gain rapid momentum, removing middlemen and catering directly to consumers. Yes, we are talking about direct-to-consumer or D2C brands.
Think Mamaearth, Wow Skin Science, SUGAR Cosmetics, BoAt, Licious, and Lenskart. The initiation of evangelical technology and the grand success of online selling have been empowering brands to go solo. Consumer pain points like seller malpractices, logistical challenges, and payment fraud are just some of the leading reasons why users are flocking to D2C stores.
Certainly, when we talk of the e-commerce space, there’s no marketplace that stands taller than Amazon, and every e-commerce company, irrespective of size, business vertical, or geography must factor the e-commerce behemoth into its expansion plans. These companies have figured out how to use Amazon for at least fractional distribution of their products or have carved out niches away from Amazon‘s marketplace.
Digitally naïve novices are ordering groceries, getting their appliances fixed, shopping for linen, and all at the click of a button-pushing the former misconception of ‘touching’ a product before purchasing into the archives of history.
These are stories that are shaping India’s burgeoning direct-to-consumer revolution.
According to recent industry experts, online retail sales will obtain $6.39 trillion, with e-commerce taking up 21.8 percent of overall retail earnings. In India alone, the e-commerce market is being projected to touch the $100 billion mark by 2025. The capability for D2C brands to begin their global journey has amplified because of the intensification of India’s digital infrastructure.
Consumers are gaining conviction on brands, they are willing to conduct trial and error and the D2C network is witnessing a mammoth intensification in shoppers from tier III and tier IV cities, earlier undetected in the Indian online shopping context.
Crucial Indicators To Bear In Mind While Entering International Countries
Moving swiftly to new markets is a move most brands wish to make in an attempt to capture market share, but when it comes to launching new products in new markets with disruptive innovation, speed-to-market does not essentially interpret the market readiness of the business value proposition.
While expansion into international territories looks seamless, brands need to consider two sets of crucial elements while planning their strategy. margin, localization of products, and logistics are one set. The second is that of language, integration, and compliance.
Here’s where localization of products, logistics, language, integration, and compliance play a very crucial role in determining the mind-share for new products.
Additionally, international business expansion jeopardizes your supply chain. Managing a supply chain that bridges borders is a big challenge. There are particulars around imports, exports, shipping, and operational logistics that are touched by international laws, trade deals, and other multifaceted legislation.
For example, when we ship goods from Europe to North America, we have to deal with logistical nuances, along with cost and time –add to this the added risk of environmental factors.
READ MORE: Why Women are Leading the D2C Revolution
Brands also need to keep country-wise taxes and compliances in mind. Operating across borders signifies we have to deal with more than one set of business regulations. There are taxes, fees, and trade tariffs that we need to be cognizant of.
For example, Ashwagandha, an ancient medicinal herb from India is not allowed to be sold in the Middle East. There are ethical compliances and a long list of licenses and documents that need to be furnished and even then, the process to start selling an OTC drug in the Middle East is a struggle.
Language and cultural barriers are also roadblocks to entry. Yes, for consumers, it is viable to course product descriptions through Google Translate –but how can a D2C brand depend on Google Translate to represent its brand value and proposition in a new business milieu? Irrational right?
Where Is The Global D2C Sector Headed?
So, what I am trying to say is that although tons of D2C brands have done phenomenally well on international terrains, and challenges galore. How you tackle these challenges is what will make or break your business offering.
Bearing in mind the pace at which the D2C sector is developing, there is a lot of innovation that the sector demands. Personalization of products and services will become more state-of-the-art and business elements such as green packaging, green products, and bio-degradable products will take precedence.
Legacy brands are facing stiff competition with D2C brands owning a market share in retail and not just online. Brands are looking at products and team expansion, strengthening R&D infrastructure, brand building, and scaling tech as the key developmental goals.
Also, traditional retailers are being expected to keep intensifying their D2C offerings which could significantly translate to more investments and M&Is in the sector. Thanks to India’s massive online spending capacity strengthening the nation’s expanding internet infrastructure, India is primed to watch its online spending nurture from $39 billion at present to $200 billion over the next 5 years.
D2C gives brands a long-standing upper hand by placing customer-centric innovation at the very heart of how their companies operate. Adopting a D2C strategy will ensure brands keep control of their customer data that can be, and in fact should be, tactfully used to map and augment customer experiences.
Amazon, Walmart, or Target’s supremacy in the traditional retail playground is not going to fade away anytime soon. But, there is plenty of evidence to suggest that new brands are making breakthroughs in innovation in catering to customers and are set to give these goliaths tough competition.
In recent years, the D2C ecosystem has seen tremendous growth with more than 800 brands now following this retail approach in India. The D2C method is far from novel, but the onset of digitalization gave it momentum, offering a convenient platform for entrepreneurs to directly reach a wider base of consumers and vice versa. However, it was the pandemic that leveraged it further, accelerating its growth with an ever-widening base of consumers. With more brands now taking the direct route to reach out to consumers, the D2C market in India was valued at US$ 44.6 billion in 2021 and is expected to reach US$ 100 billion by 2025. In terms of funding, D2C brands have raised US$ 2.04 billion in the 2014-21 period.
While the pandemic was the push that accelerated the growth of the D2C industry, it was also the change in consumer preferences and sentiments that has led to its rapid expansion. The modern consumer is product savvy and willing to support local businesses, especially for a product that promises tangible value addition or supports their value system. Another marked characteristic behind India’s D2C story is the rise of woman power, both as an entrepreneur and as a consumer. Along with an increase in their purchasing power, it is also women entrepreneurs who are changing the story and leading the D2C revolution.
Rise of Women Entrepreneurs
One of the remarkable aspects of the D2C ecosystem is the emergence of the female entrepreneur as the driving force. Instamojo, a digital solutions provider for D2C businesses, recently revealed that women accounted for 40 percent of their clientele with increasing traction among women above 50 years of age. The company also reported more than 500,000 queries by women who were interested in setting up shop on the e-commerce platform.
The digital D2C ecosystem can be attributed to the wave of change brought by women entrepreneurs. Today, many of the leading D2C platforms, such as Nykaa and MamaEarth (beauty brand), are led by women. Digital platforms offered these entrepreneurs a medium to directly connect with consumers without going through any intermediaries. Many smaller businesses were, thus, able to circumvent any gender-based hurdles as manufacturers or business owners.
For women entrepreneurs in the digital space, funding was also comparatively easier than their brick-and-mortar retail counterparts, since the new-age digital funding ecosystem is relatively gender-neutral. The central government recognized the growing potential of women entrepreneurs in bringing social change. Therefore, in 2018, Niti Aayog launched a Women Entrepreneurship Platform (WEP) in association with SIDBI to support women-founded businesses through various initiatives, including funding.
The Female Economy
With more women joining the workforce, there is also a corresponding rise in their spending power. Even without economic parity, women exert a huge impact on purchasing decisions with one estimate pegging their influence at 85 percent of all products and services. They account for almost 50 percent of all online shopping and have the definitive say in more than half of household purchases. Social media is one of the best indicators of this social dynamics with women influencers accounting for a whopping 84 percent of sponsored posts in 2019.
Women entrepreneurs have a unique insight into this growing demographic and are best placed to tap into their ambitions as well as pain points. Many of the leading women-led D2C startups have exploited this market by offering solutions that were missing or addressed their unique concerns, be it beauty products at one platform, parenting advice, or consumer goods that promised a better quality of life.
The rise of women entrepreneurs echoes the social shift where a greater emphasis on diversity is changing gender dynamics in the market and the workforce. It is an encouraging sign that indicates their move towards economic parity and social mobility. In addition, it also portends a positive trend for the future as the success of women-led independent homegrown brands encourages more women to take up the reins of their own future.
India, which is one of the largest markets in the world, is projected to surpass $1.7 trillion by 2025. A major trend that is observable is the e-tail market leading the shift to organized retail in the next five years. The trend is said to be similar to China, where e-tail constitutes more than two-thirds of the organized retail share which is 45 percent of the total market.
In fact, the Covid-19 pandemic has further accelerated online adoption amidst the temporary closure of physical retail stores and the growing wariness for public places. On this backdrop, online spending in India is expected to grow at a CAGR of 35 percent + from $ 39 billion today to $200 billion over the next 5 years, supported by internet and payment infrastructure developments, according to a report by Financial Services Firm Avendus Capital.
“Indian D2C brands operate in a brand starved ‘neo-consumerist’ population and have the benefit of learning from the mistakes of global counterparts. Today, India is witnessing the rise of D2C brands across categories and is estimated to become a $ 100 billion addressable market by 2025,” said Pankaj Naik, Karan Sharma, Co-heads of Digital and Technology Investment Banking, Avendus Capital
Moreover, the space has seen increased funding activity in recent times. D2C brands such as Lenskart, Licious, Zivame, Boat, Wow Skin Science, Healthkart, Mamaearth, MyGlamm, Sugar, Incnut, Country Delight, Atomberg, Lifelong, among others, are occupying niches, and creating aspirational brands and extraordinary value in their respective sectors. Going ahead, the sector is going to see the entry of many such brands that are also getting reasonable funding.
D2C brands are characterized by their agile DNA, innovative marketing, efficient operational processes and effective use of technology. With access to customer data, D2C brands leverage consumption insights, work on a feedback-led model and rapidly develop products to ensure that the evolving customer needs are addressed.
READ MORE: Funding Galore in the D2C Sector
Consumer searches for a brand’s official online store have seen a growth up to 80 percent as consumers in the new normal are on the lookout for the authenticity factor since many are giving a skip to the touch-and-feel element of shopping. This further means that the growth of brands that cater directly to consumers referred to as D2C brands has been more remarkable vis-à-vis the brands that rely solely on major e-commerce marketplaces.
This boom in the D2C space has not gone unnoticed, for many D2C startups which recently raised major funding from the market. Here we are enlisting a few of those D2C startups that recently grabbed headlines for their funding news:-
The latest to join the list is Join Ventures, which owns as well as operates a number of D2C digital-first brands across different segments like home, fashion, food, etc. The company has raised Series A funding of nearly $10 million from Rajiv Dadlani Group, DSG Consumer Partners, Venture Catalysts, and 9Unicorns. As per the company, the proceeds of the funding would be utilized for expanding dark stores network, enhancing technology as well as logistics and scaling. The brand already has a presence across 25 locations across India and Singapore.
A lifestyle D2C brand that is driven completely by design, DailyObjects, recently raised $2 million in funding from Root Ventures, which is a collective of entrepreneurs. DailyObjects is a contemporary home-grown brand that constantly adapts to the modern needs of consumers, especially millennials. The brand offers a wide range of products such as phone cases, remote cases, drinkware, bags, wallets, and a host of other lifestyle accessories. The company was founded in 2012 and has since then introduced the widest variety of accessories. The design-obsessed brand says that it would use the funding to build a stronger design team along with a flawless customer experience.
The Indian baby and mother care brand, which has registered a promising growth in the D2C space over the past two years, recently raised funding from diversified conglomerate ITC Ltd. The brand founded in 2016 has grown significantly in the premium Ayurvedic personal care segment and is currently eyeing to enter the 100 crore club in FY 23. If reports are to be believed, the company might soon be going for another round of funds this year. Apart from comprising Ayurvedic herbs and natural ingredients, Mother Sparsh product range focuses on healing properties.
GIVA, which is a Bengaluru-based jewelry startup, is another name in the D2C space that has of late been making a lot of right noise. The company recently raised $10 million in a Series A round from A91 Partners and Sixth Sense Venture, among others. Founded nearly three years ago, the brand’s product portfolio includes 18K gold, rose gold, silver as well as oxidized silver jewelry, often decorated with colored stones such as pearl, zircon, etc. The brand has confirmed that it would use the funding to expand its digital presence and develop better products.
E-commerce is one of the most challenging industries to operate in when it comes to customer satisfaction and to walk on the footprints every D2C brand looks up to Amazon, Flipkart-like big market players for the same.
Resolving this major industry problem, Shipway has launched its order lookup page that will solve loads of customer queries without interacting with the customer support team, and at the same time, it is a promising approach towards delivering a world-class customer experience for D2C e-commerce brands.
Whenever a customer purchase from a D2C website, some of their questions never change, such as:
Timely follow-ups, interaction less resolution, customer-centric service, are few things Shipway has resolved in their order lookup page to provide a good customer service experience.
“The implementation of Order Lookup Page has reduced 30-40 percent of the customer support tickets” is what Parth Mashrani has to say about Shipway’s order lookup page, the co-founder of a true D2C brand Capes India, since they’ve started using it.
High time to realize the post-purchase gap.
Every D2C merchant adores Amazon, Flipkart-like marketplaces, and wants to build their brand like these, but why?
For the level and quality of services, especially post-purchase services they provide to their customers. The major reason why people trust them, even if the product quality doesn't work for them, is for a reason they know their problem will be timely resolved and will receive a refund if required.
The confidence customers lack in D2C brands, put them in hesitation to purchase.
This lack of confidence in customers is born with a lack of quality experience they faced - the post-purchase gap that we are talking about.
Majorly these 4 sections of services are what is required to be improved as a post-purchase experience for D2C e-commerce brands:-
● Delivery Experience - One of the most frustrating experiences for buyers is receiving the late order. Delivery speed, delivery options, delivery cost, delivery transparency are exactly what contribute to a positive delivery experience.
● Transparent Communication - Real-time updates about location and shipping status notifications have always been important to online shoppers and thereby contend to make a shift in their shopping behavior.
● Re-attempt Request - Always keeping the customers in the loop when it comes to order's real-time update. In case of non-availability to receive the order, notify them with a chance and option to re-attempt the delivery.
● Return Request - Taking return requests and their updates over the phone call or email via customer support team, involves a lot of hassle and uncertainty for the customer.
You will be amazed to know that 60-65 percent of e-commerce customers don't feel like repeating purchases if they had a bad delivery experience and also don't want to return if no direct and timely resolution is provided.
How is Shipway bridging the gap through an Order Lookup Page?
A good post-purchase experience doesn't only make a brand experience more memorable for customers but can also increase the customer retention rate.
According to 86 percent online shoppers, post purchase experience is fundamental to their decision to buy again.
Shipway has created an ‘All-in-one’ service page as order lookup which includes -
1. Order Status
2. Proof-of-Delivery (POD)
3. Non-delivery Follow-up
4. Cross Sell Opportunities
5. Order Details and Invoice Downloads
Noticing what D2C business' customers need and thorough study of customer behavior for repeat purchasing, Shipway introduced this buyer-centric page for D2C e-commerce brands and called it an ‘Order Lookup Page’.
A platform that is offering an experience that can go beyond branded tracking pages and enhance your customers' post-purchase experience with your brand.
Unlike a regular branded order tracking page, the order lookup page leverages the brand to showcase more information to customers and increase their loyalty, LTV, and retention.
Upgrading an order tracking page to an order lookup page will definitely give an edge to D2C e-commerce brands, as unknowingly they are transferring 70 percent of their customer traffic to 3PL sites by sharing the direct order tracking link or tracking number of their shipping partner.
Losing this percentage of customer traffic, when you can bring it to your ecommerce website and encourage them to repeat purchase!
Ever thought to hold this traffic to your own website? When order status emails have such amazing open rates then why share all that traffic when you can keep that to yours?
Shipway has few numbers to share for such a defined tracking page.
- Existing clients are more likely (60-70 percent) to buy your product or service than new clients (5-20 percent), at lower costs (6-7 times less).
- Overall 10-20 percent cost saving annually.
- Your business gains brand advocates and a dedicated brand community.
Make shopping experience extravaganza
The post-purchase experience gap, discussed in the beginning, if filled properly can boost the repeat purchase on any D2C website, just by adding a multi-feature customized branded order tracking page or an order lookup page. It alone can create the best opportunities for the D2C e-commerce brand to impress the end-customers and increase sales percentage.
Creating an excellent blend of personalization and marketing on a single page is more likely to improve the post-purchase experience for the customers.
To sum up the advantages of the order lookup page, the increased transparency in communication can lead to:
- Reduction in Customer Inquiries
- Reduced Customers' Anxiety, and Negative Experience
- Increased Customer Loyalty
- Spread of Positive Word-of-Mouth
- Improved Brand Reputation
With e-commerce adoption rates at an all-time high, consumers have moved to a digital-first shopping mindset. These savvy buyers demand better from the legacy brands, often choosing ones that are more conscious towards the communities and planet. They’re also willing to share their preferences and pay a premium for exclusivity, experience, and personalized engagement. These trends are reshaping the commerce landscape and giving a unique advantage to digital-native brands.
D2C definitely is experiencing the zeitgeist moment as all the dots seem to be connecting for unprecedented growth. HUL, ITC, and Marico have set up their digital stores, over 30 percent of Lakme’s Q2FY22 revenue came from its D2C brands such as Baby Dove, Simple, and Love Beauty And Planet. But the craze is only beginning to get started. On one hand, where millennials are becoming more aspirational, content-driven consumer base, Gen Z is obsessed with the community and hell-bent on taking stances. At this point, brands following the old playbook ‘paying a lot of attention to the paid facets rather than evolving with a close-to-consumer strategy’, will be missing out on efficient, long-term growth.
D2C is the Most Strategic Growth Channel for Brands and They Are Going All In
Brands have started to realize that the D2C channel is a moat they need to bet on in order to grow organically, better control their customer experiences while avoiding the marketplace and retailer bullying. Over the past year, there has been a 65 percent increase in Indian brands developing their own websites, leading to more self-shipped orders. At the same time, brand websites witnessed 88 percent order volume growth compared to 32 percent for e-commerce marketplaces. Since brands have started to spend even more on ads to increase traffic to their website, the D2C channel is becoming more expensive to maintain and grow over time. As more new brands enter a low-barrier market, further pressuring the spend levels on auction-based advertising platforms, CAC (customer acquisition cost) has gone through the roof for D2C.
Is it viable to scale a brand using this ‘Build with Shopify and Sell with Facebook' technique? The economics of performance marketing can quickly become unsustainable, especially when their performance is subject to the algorithms of the primary ad partners (Google, Facebook, and other social platforms) that can change on a dime. With Apple’s iOS14.5 updates, browser privacy changes, and Google’s phasing out of third-party cookies, many brands will struggle for profitability and growth. The easy golden days of growing a business on performance marketing seem to be over.
READ MORE: 10 Ways to Build a Successful D2C Brand
D2C brands’ ability to create unique products and connect with a powerful story can only insulate them from Amazon and retailers when they begin to invest in authentic ways for consumers to engage with them. Otherwise, there is no motivation for consumers to choose a brand’s website over the Prime-like convenience of the marketplaces. Brands are trying to solve a content and experience problem with a commerce-only solution.
What’s the New Playbook Then?
Convergence of Content, Community, and Commerce
Brands need a new playbook, one that is designed to help them effectively attract, engage, delight, and retain customers across all channels. A playbook with a core moat of 3Cs - Content, Community, and Commerce. Once brands attract customers with great content, retain them with engaged communities, commerce growth happens as a by-product. Instead of appearing like yet another e-commerce site, you make content and community the core of your brand story. And you make it 10X easier for Google to rank your site, so your future customers can find you –– without spending an arm and a leg on ad spend.
Currently, brands offer a siloed and disjointed consumer experience around content, social communities, and commerce. For consumers who expect to be able to research products to help them make a decision (content), engage with other consumers to validate their decision (community), and purchase their chosen product (commerce), browsing your website, is a rather confusing and often frustrating experience.
This is even more frustrating for the brand to effectively stitch data together and manage performance. As a result, brands are often handicapped in consumer service, getting stuck in creation and maintenance cycles, operating with a fragmented view of their customers, and data siloed across the locations. This eventually lead to brands falling behind on the innovative efforts they should be investing their time in to stay ahead of the competition.
Now imagine if you could display relevant community questions and answers next to the browsing product category, add user-generated and specially created content on your product detail pages, including educational videos, customer reviews, and more. This is easier said than done, right? The separation of content, community, and commerce is a technology restriction, driven by the complexity of back-end systems and brands end up struggling to find ways to syndicate content, community, and commerce in a seamless manner whilst avoiding the integration nightmares.
Technology Continues to be an Achilles Heel for Brands
Brands Need a Modern, Agile, and Full-Stack Tech…Purpose-Built for Them
Commerce tech platforms used by retailers and CPG companies were built over a decade ago using legacy architecture standards. Cheaper DIY platforms mostly used by SMB entrepreneurs are cookie-cutter, restrictive, and serve a limited purpose during the early stage of brands. Both these tech options are not suited to meet the scale needs of digitally-native brands. In absence of any purpose-built solutions, brands have been either settling with these ill-fitted platform options or opting to custom build their tech platforms in-house or with partners.
The global D2C market is projected to be $1.1 trillion by 2025, with US and India contributing $266 billion and $100 billion respectively. The D2C market is ripe for disruption and brands that adapt quickly to differentiate and grow with 3Cs are sure to create ripples in the post-pandemic world.
The D2C sector has been one of the most happening sectors for the year 2021. From the sector seeing its first unicorn, Licious, to several brands like boAt, Mamaearth, Wakefit, Country Delight crossing Rs 100 crore of revenue in a short span of time, the developments in the D2C sector are no small deal.
In fact, as per a report, the D2C sector in India will be worth $100 billion by 2025. Currently, it is worth $44.6 billion at the end of the fiscal year 2021 compared to $33.1 billion in 2020. In 2019, the D2C sector had a total valuation of $26.8 billion compared to $20.8 billion in 2018. This suggests how the industry has experienced growth over the years.
In a D2C (Direct-to-consumer) line of business, products are sold directly to customers, bypassing any third-party retailers, wholesalers, or any other middlemen. This allows the brand to build a direct relationship with a consumer, provide additional benefits, gain direct consumer feedback, and so on.
Despite the boom, the D2C sector needs to win over certain challenges that will enable the sector to run in an efficient way for a long period of time. With over 500 D2C brands and about 40 becoming unicorns, the level of competition has increased. This has put increased pressure on the supply chain, particularly the last mile aspect of it, and on manufacturing and human resources. The industry thus is eyeing better measures for the sector from Budget 2022 to continue the growth momentum.
Shilpa Khanna Thakkar, CEO, Chicnutrix said, “The make in India or Be India Buy Indian should be the key focus. India has emerged as a land of opportunities where we are constantly witnessing a lot of start-ups flourishing. Quite a few successful start-ups have been spearheaded by women. There is still a gap of financial support and literacy that becomes an obstacle. Efforts need to be taken to support and mentor these entrepreneurs. Investing in home-grown start-ups and brands will make them more independent. Also, consumption of Indian products will boost the economy and make the grass greener. Investors and government bodies should allocate funding that supports sustainable businesses. With health and wellness taking center stage, there should be a relaxation of taxes on essential wellness products. Encouragement to use wellness and nutrition products will boost the demand which is another factor leading to the growth of start-ups.”
Anika Parashar, Founder, and CEO, The Woman Company stated, “The Union Budget should emphasize Women's wellness - especially menstrual hygiene. We already have tax exemption on sanitary pads, however, this could be extended to manufacturing and production. Further, decreasing import duties for raw materials could bridge the gap between supply and demand as well as encourage more Indian manufacturers to start manufacturing biodegradable pads in the country. There should be policy-level incentivization for Made In India products, start-ups helmed by women, and ventures that focus on sustainability and solving women's issues. The Government should promote the use of biodegradable menstrual products to bring down waste produced by plastic products – a figure which currently stands at a staggering 12.3 billion annually. We also expect the government to improve digital infrastructure in Tier II, III cities, and rural regions so that the next group of consumers can enter the D2C ecosystem.”
READ MORE: D2C Business Model: Is it a Profitable Bet?
Ruchika Bhagat, MD, Neeraj Bhagat & Co. said, “The Union Budget 2022-23 is likely to be shelved on February 1, 2022, by Union Finance Minister Nirmala Sitharaman, and I am hopeful that the upcoming Budget will give the economy a much-needed boost. We are hoping that more money will be spent on capital expenditure and healthcare projects to help India become more integrated into the global supply chain. Sectors such as urban infrastructure, housing construction, and manufacturing could receive further impetus in the budget. Defense, renewable energy, and infrastructure projects are expected to receive more funding. The budget is expected to include incentives for the localization of Defence products and the renewable energy industry, as well as budgetary support or legislative initiatives to encourage the adoption of clean energy.”
Harry Sehrawat, Co-Founder, Sanfe said, “The Union budget should emphasize women being more open about menstrual hygiene and issues as digital media takes the world by storm. With soaring environmental issues, many consumers are looking at eco-friendly alternatives to lessen the potential damage to the environmental climate. We hope that the government will begin their support towards the encouragement of using biodegradable products which will be highly conducive to the reduction of plastic waste in our country. Apart from the exemption of taxes on sanitary pads, changes implemented for import duties would be very beneficial to the expansion and speedy production of these biodegradable products which are possibly the way of the future and will definitely help the menstruating population of the rural regions as well as the economically backward sections of our country.”
Vijayraghavan Venugopal, Co-Founder, Fast&Up said, “The funds issued by the government in last year’s Union Budget saw increased spending on healthcare by 137 percent with allocation to the healthcare sector at Rs 2.23 lakh crore through the PM Atmanirbhar Swasth Bharat Yojana. This year too, we expect a substantial increase in this percentage for the healthcare sector as this will have an overall impact on the economy. We look forward to reduced GST on homegrown healthcare products and companies by keeping a low GST bracket on immunity-boosting products. There should be economic incentives in the form of endowment funds and providing tax relief. Overall, we hope that the spending on the healthcare sector goes up to more than 2.5-3 percent of the GDP.”
Sahil Dharia, Founder & Chief Executive, Soothe Healthcare said, “To promote Make in India, the government should encourage more investment in the non-Tech companies. Right now, capital is increasingly being deployed towards Tech companies majorly Fintech. Government investments via e.g SIDBI serve the purpose of crowding capital into a sector that is already getting more than sufficient attention. Indian entrepreneurs need this support to shift the materials supply chain from China and sell products not only via the internet economy but also offline for easy access to a large population residing in the hinterland of Bharat.”
Consumer goods maker Hindustan Unilever shared that a significant part of direct-to-consumer brands' growth is driven by existing shoppers shifting to online channels instead of incremental growth.
"If you look at the total FMCG industry, direct-to-consumers (D2C) is still a very small part of the total mix," said Sanjiv Mehta, Chairman, HUL. "A large part of the growth that is coming to many of the e-commerce players are not consumer growth; they are channel shift growth."
D2C brands refer to businesses that have most of their revenue or customer acquisition from direct-to-consumer online channels or those started with an online-first distribution before going omnichannel.
The maker of Dove and Rin said it has an annual business of Rs. 50,000 crore, and if it grows by 10 percent, an additional Rs. 5,000 crore will be significantly higher than dozens of D2C brands put together.
"You may find some time that certain trends are captured by some company before us and so be it. Not all the trends would be captured first always by us and we could be second and still be better,” Mehta further said.
Nearly 590 new D2C companies have entered the Indian market in the past three years, and they have raised Rs 6,700 crore altogether, according to Tracxn, a market intelligence provider of private company data.
With consumers' shopping behavior tilting towards online platforms post Covid-19 outbreak, experts said that D2C brands have already built reasonable heft in the sub-category by playing the role of category creators and disruptors. This is against a preconceived notion of such companies having the limited potential to scale.
"D2C companies are now looking at adjacencies, geographical expansion and omnichannel to achieve scale," a recent report by financial services firm Ambit. "Most D2C companies are guiding for 6-8 times revenue growth over the next 3-5 years, signifying share gains largely from incumbent players."
Several mainstream companies have acquired online-first brands in the past three years. For instance, Colgate Palmolive bought a stake in Bombay Shaving Company, Emami purchased a majority stake in The Man Company, and Parle Products invested in health food company ASAP Bars. Unilever Ventures has a minority stake in personal care brands Phy, while Marico has acquired a stake in Just Herbs and Beardo.
Setting benchmarks and new records seems to be how GreenHonchos gets things done. This appears clearly in the demeanor of the Founder & Director - Navin Joshua who talks about the unprecedented growth of India’s dynamic and leading e-commerce growth consulting firm, GreenHonchos.
“In just over a year, during the time pandemic hit, we helped brands scale up, providing new and exciting opportunities to step into the world of omnichannel commerce. Talking about our growth, we went from a team of 40 people to well over 200 now, and we are growing each day,” states Joshua.
Recently they have also been felicitated with the Great Place to Work® Certification, recognized world-over by employees and employers as the ‘Gold Standard’ in identifying and recognizing Great Workplace Cultures.
How Did It All Come Together?
The story of GreenHonchos began in 2010 when Navin Joshua and Sumit Agarwal moved on from their respective roles as Executive Directors at vCustomer where they were helping brands like HP, Cisco, Netgear, Target, Bluestem Brands, etc scale. After moving on from vCustomer, they started a D2C shoe brand called Fausto, featuring more than 2,000 styles across multiple categories.
The beginning of Fausto marked both of them gaining traction in the D2C business in India. This was when the D2C industry was in its nascent stage of inception. While Fausto was growing leaps and bound, they witnessed the Indian e-retail businesses struggle with the issues of scalability, tech capabilities, and ensuring a delightful customer experience.
To solve this, they embarked on a journey to extend their expertise and experience to other D2C businesses to help them scale. This led to the inception of GreenHonchos as an integrated one-stop-shop, offering full-stack agency services which could solve all key challenges faced by D2C brands in India. Over the years, they have perfected the integration of digital and technology to help brands scale profitably, this has led to the development of a fool-proof and multi-stage Rs 100 crore transformational success mantra. They distinguish themselves from the rest through their industry future preparedness, knowledge, tech, and AI capabilities to take on the growing demands of Indian D2C customers across all industry verticals.
While solving tech problems and trying to mitigate the shortcomings of mainstream legacy e-commerce platforms with a monolithic architecture, Prakash Kumar, CTO, GreenHonchos started to streamline the e-commerce software. What they had started out doing resulted in an agile, headless, and serverless e-commerce platform which is now known as KartmaX.
KartmaX is an enterprise-grade e-commerce platform that solves two key challenges that D2C brands face while using other mainstream platforms, one, the unique challenges of the Indian e-commerce industry, and two, the issues of scalability through its service-oriented architecture.
What Does GreenHonchos Do?
Being a Full-Stack D2C enabler, GreenHonchos provides 360-degree services including -
● E-retail Consulting - Handholding brands from the first few orders to 1,000+ orders a day, empowering their omnichannel D2C growth story.
● Growth Marketing - Leveraging AdTech and MarTech platforms to the brand's advantage and drive higher ROAS on their ad spend.
● E-commerce Technology - Onboarding brands on a scalable, agile, and high-performing tech platform to grow more efficiently and profitably.
● Marketplace Management - Accelerating the growth of brands by leveraging all the leading e-commerce marketplaces like Amazon, Flipkart, Myntra, and more.
● Digital Branding - A multi-platform team of digital branding experts establishing the top-of-the-mind presence for brands, leading to a distinct brand persona, higher customer engagement, and recall.
● Analytics & Insights - Using AI and ML to access hundreds of data points to provide coherent analytics, helping in optimizing business performance and staying on top of the decision-making process for maintaining a competitive edge in the industry.
GreenHonchos has been helping retail brands to reach online for close to a decade now. In only seven years, GreenHonchos has already onboarded over 100 enterprise-grade D2C brands. All this has happened mostly through existing clients and industry leaders recommending GreenHonchos and partners endorsing the brand as a leading D2C enabler.
They have witnessed a 300 percent increase in month-on-month growth on the client acquisition front. GreenHonchos’ unmatched strength in performance marketing, social commerce, marketplace management, and tech solutions has resulted in achieving 40 percent revenue growth for brands. With the passion of making e-retail grow, GreenHonchos has also contributed towards the following:
● Rs 10,000 million GMV annually
● 2.35+ million annual transactions
● 30 orders executed every 1 minute in 2021
● 40 million+ monthly user engagement
● 8.6 million+ worth claims successfully raised at marketplaces
What’s the Way Forward for GreenHonchos?
The D2C industry in India has reached $100 billion+ in valuation and over 350 million Indians are projected to shop online in the next five years. Through all this, GreenHonchos has set its mind to scale up to more than 300 brands by the end of 2022, and by the end of 2024, they are looking to power 2 percent of India's D2C e-commerce transactions via their headless commerce tech solution - KartmaX.
It was a necessity that brought more customers online post the outbreak of Covid-19, for the lockdowns while halting the supply chain also appeared to break the traditional brand-consumer relationship. This challenge faced by the brands was, however, turned into an opportunity by then existing players in the Indian D2C space and by a slew of newer D2C brands that leveraged the right technologies to reach out to and engage their customers in consistent communication. Currently, with technological advancements like Metaverse expected to change our world, it is essential to take stock of what technologies would impact the most crucial aspect of any business, i.e. customer engagement.
Some things always go hand-in-hand - like a door and its key, like augmented and virtual reality. While both might be two different technologies per se, they complement each other and ensure surprising results when joining the forces. When we refer to Augmented Reality, it essentially means an interactive experience of a real-world environment, wherein objects, in reality, are enhanced through computer-enabled perceptual information across different sensory modalities like auditory, visual, and somatosensory. Virtual Reality, whereas, is a computer-generated environment with unreal objects, scenes, etc that appear to be real.
Now let’s look at the aforementioned details in the form of customer engagement for D2C brands. By ensuring a right mix of both forms of technology, these brands that have no intermediary channel to reach out to customers can afford to invest in the creation of virtual avatars of their products. There are further instances of customers getting a near-perfect idea of apparels or garments fittings and style of spectacles on one’s face, enabled by the right mix of technologies.
Thereafter is the significant role of Artificial Intelligence that could majorly impact and enhance the brand-customer engagement. One of the key contributions of AI is in the form of AI-powered chatbots, which is practically a 24x7 hotline between customers and brands. The chatbots have as a matter of fact evolved drastically with the advancements of AI and ML. For instance, we now have virtual assistants and conversational AI answer chatbots that deliver relevant information even if there’s a typo in customer query or even if it is written in a different manner. These bots understand the context rather than just specific words, thus providing the right resolution of any issue or query.
Coming back to Metaverse, often touted by many as the new Internet, it is basically an online virtual world that incorporates different technologies such as virtual reality, augmented reality, 3D holographic avatars. These technologies combined offer a hyper-real alternative world for the customers as well as brands to not merely engage but enhance their engagements. Now whatever we name it as per our whims – virtual malls or live shopping – the prospects of it look absolutely promising and would definitely drastically change the relationship D2C brands share with their customers.
While talking about technology, one can also not ignore immensely popular products or platforms like social media or instant messaging apps. These channels must be used to reach out to a specific target audience, by choosing the right channels and placing the right content. With influencer marketing becoming the new buzzword, the D2C brands can also make use of live streaming platforms along with social media, wherein the influencers on behalf of the brand would interact directly with customers and also showcase products if conducive. For example, a hair lep or a healing cream can be used by the influencers during live sessions to showcase their effect.
Another significant element of establishing communication with customers on these platforms is ensuring omnichannel engagement. Different customers can try to reach out through different channels like WhatsApp, Facebook, emails, etc, but by integrating a digital omnichannel customer engagement platform, the brands can interact in real-time with their direct customers, thereby transforming a website or social media page into business centers. Furthermore, there are an in-built knowledge base and case management for faster resolution of customer queries.
The Direct-to-Consumer (D2C) segment is disrupting how brands engage, interact with and market to customers. With the proliferation of digital modalities and declining profit margin in brick-and-mortar retail, Direct-to-Consumer is emerging as the preferred business model for manufacturers and retailers worldwide. The model encourages greater profit margins for manufacturers and also helps them to deliver better value to customers by creating authentic and very often, customized customer experiences.
As new-age D2C brands and start-ups redefine the rules of branding and marketing, let's look at some of the trends that are shaping the consumers and brand relationships.
Purpose Driven Brands: Consumers today no longer buy what a brand offers but they are also driven by WHY they offer them; they are intrigued by the stories behind the brands and what problem they are solving. They want to know what brands stand for. When a consumer chooses to interact with or invest in a brand, they do so with brands they connect and resonate with. Therefore, more than what, defining the 'why' has become increasingly important for a brand. It is imperative today to define brands ethos, what it stands for, and the core philosophy. We can see brands today seamlessly blending their core philosophy with their brand positioning and sales pitch. Consumers want to invest in brands that not only solve their functional needs and desires but also resonate with their worldview, their sense of intention, purpose, and lifestyle.
Omnichannel Strategy: D2C brands are redefining consumers' journeys by engaging and interacting with them via multiple touchpoints across multiple channels from apps, websites, mobile, social media to brick-and-mortar stores simultaneously. Brands can now track the onsite and cross-channel behavior and use this data to cross-sell products across their inventory. Unlike traditional retail, in D2C models, customers today are interacting with brands on multiple platforms, channels, and touchpoints. An omnichannel strategy allows brands to track users' behavior across multiple platforms and channels and understand their demographics, pages browsed, time spent on each page, product categories viewed, etc. to better understand a customer's purchase behaviors and intent. This data can be used to provide relevant product recommendations to customers to cross-sell and upsell, thus increasing the Average Order Value (AOV) per customer.
Personalized Customer Experience: 91 percent of consumers are more likely to shop with brands that provide them with relevant information, recommendations, and offers. The key factor driving the growth in the D2C space is the customization which connects products and customers in unique ways. Consumers today not only buy products but an entire experience. Personalization not only helps brands to offer a better customer experience but also enables them access to products, information, and offers tailored to their preference. Since each user's journey is different, the homepage, products shown to them, recommendations, and relevant offers for them are uniquely tailored to their preferences.
Social Commerce: The reason social commerce is gaining traction among consumers and brands is that it connects them on a common platform, allowing them to engage in meaningful ways and giving consumers the thrill of discoverability and the choice to shop seamlessly. The powerful way brands are converting loyal followers to paying customers is via social proof; through influencers marketing, reviews and testimonials. To make shopping seamless with fewer clicks, brands are making quick pay the core of the mobile-first shopping experience.
The Sustainability Revolution: As the world becomes conscious of an environment at risk, commerce is poised to move towards eco-friendly manufacturing, products, packaging, and adopting conscious consumerism in their marketing and even brand philosophies. This generation of consumers too, are becoming more aware of environmental concerns and adopting more sustainable lifestyles by supporting and opting for organic, sustainable brands and making evolved, aware choices about what they purchase, from where, and why. Conversations are increasing around making sustainability a priority by both brands and consumers which is highlighting a strong shift in consumer buying patterns and indicating that this change is here to stay and grow.
For any new business, retaining a consumer base and making consistent revenue is always a challenge. This has particularly been true in the last two years when the companies were struggling with logistics, low demand, etc.
New Delhi-based, The Woman's Company is one such company that successfully stood out during this period. The D2C brand in the women’s hygiene category has been able to increase its sales by approximately 40 percent month on month.
“We have also got 50 percent, repeat customers. We have grown incredibly in terms of market share and revenue across the board, including our own website and other e-commerce platforms where we are present such as Amazon, Flipkart, Nykaa, Zivame to name a few. We are just getting started,” says Anika Parashar, Founder, and CEO, The Women’s Company.
Among various reasons why the brand has been successful is its unique selling points (USP) as all of the company’s products are ‘made in India’ that are also organic, bio-degradable, and environment friendly.
Also, the company claims its products and offerings cater to women of all age groups across their entire life cycle.
Parashar added, “We have decades of experience in the health and wellness space and have faced women's health issues ourselves. Our prior experience in women's issues and healthcare helps us to understand issues faced by women better and offer better offerings.”
Its typical customers are in the age group of 18-45 years old across India and about 60 percent come from Tier-I cities.
These products are available on the company’s website and on various online marketplaces. 70 percent of its revenue comes from its website and the other 30 percent collectively from multiple marketplaces.
Moreover, the company is vocal about women’s issues on different platforms.
“Thus, there is a significant difference between what we offer and what other market participants offer,” Parashar said.
The founder shared the inspiration for the company came when she was looking for products for her daughter which were also comfortable and healthy. She realized there was a gap in the market for organic, biodegradable products for women that are free of harsh chemicals and are gentle on their bodies.
And, with her experience of more than two decades in the health and wellness sector helped in building India’s first and only comprehensive holistic health chain Mamma Mia - A Mom’s World, among others, the starting of the firm was a logical step.
Role Of Investors
The company has recently raised $1.4 million in the pre-Series-A round. It plans to infuse funding to improve its product offerings of organic, biodegradable intimate products for women catering to their health and hygiene whilst also preserving the environment, the company stated.
“We are very proud to have secured three investors for this round who genuinely care about women-owned businesses and sustainability. They have opened doors for us in several other markets, the most notable of which is the United States, as well as with major global retailers and distributors, and thus the opportunities that we have at this early level are promising,” Parashar further stated.
As far as logistics are concerned, the company, which now delivers pan-India, has invested in both third-party warehouse partners as well as multiple third-party delivery partners to ensure they get efficient coverage all across India. In the last couple of months, it has penetrated deeper into the Indian market in Tier II, III cities.
Having tasted success among the Uber consumers, the company now plans to further extend its presence in the Indian markets in Tier-I, II, III cities. Supported by its on-ground team, the company is expanding its presence in the North American region, for which, the role of active operational investors is going to be in forging relationships and opening relevant doors.
“We want to see The Woman’s Company being a part of every woman’s shelf, bag, or bedside table and being an integral part of their life globally. Also, our vision is to be the leading player in the women's hygiene industry with a global presence and to reach over 100 million women across the globe,” Parashar concluded.
The Indian retail market is huge and the offering for the supply side is affordable but inspiring. The huge opportunity in India is how you serve the pent-up demand and needs of consumers. With consumers coming online, it creates a huge opportunity for D2C brands to fulfill their needs effectively.
“D2C is a core area of focus for us because at the end of the day we are seeing transactional conversions getting easier day by day. As consumers, Indians are suspicious by nature, so when they see that a product is coming directly from a website, it makes shopping easier for them,” adds Varun Khanna, Co-founder, Fast&Up.
Apart from this, personalization is another factor that is helping the D2C brands to connect with the consumers.
“We feel that consumer feedback helps us in merchandising good products for them, analyzing the right price points, and managing the demand. We also cater to personalize products which we cannot offer inside the stores. This is the main reason for us to reach them directly. In the future, most of the brands will move to D2C because that’s the space that lets you understand your consumers well and serve them better,” says Rupesh Jain, Founder & CEO, Candere explaining it further, whose 95 percent of business comes through online.
“I went for D2C because we found that my consumers were looking for personalized and customized skincare products. And a less amount of investment is required in D2C to penetrate into the market. We were looking for a certain kind of TG typically we call them Skintellecutal consumers. In order to educate these consumers, we took the route of transparency and honesty. We made them aware of the importance and functionality of ingredients. We also told them about our suppliers from where we source certain ingredients that created the experience of credibility in the consumer's mind. The crux is that personalization is what drives consumers to visit the website of an online D2C brand,” adds Harini Sivakumar, Founder & CEO, Earth Rhythm resonating the same thoughts.
The nature of an entrepreneur is as you scale you’ll have different challenges. The first stage is where you analyze your market strategy, selection, etc. As you crack customer acquisition space it is not one-stop to all solutions. You constantly have to find the audience to market the challenges to overcome.
“With digital being a necessary surplus, what keeps me up late at night is a constant stiff and utter competition of talent,” states Rahul Anand, Founder, Hopscotch.
“We are a manufacturing company as well, so when we started the first thing we wanted to own is the product. Since we are into problem-solving skincare, there is no doubt that we need to focus more on our research and development, and products. From sourcing to manufacturing to testing the products, everything was managed in-house for us. Customer acquisition is getting expensive day by day but customer retention is more expensive for us. We can cut the clutter through good customer service and loyalty programs. I believe challenges are different for every brand and it changes at every stage, for me, the biggest challenge right now is that my factory is overloaded and I’m trying to figure out how to scale my production,” adds Sivakumar.
Betting Big on Technology
Technology is the spine of not only transactions but understanding consumers as well. In D2C, customers are not able to touch and experience the product and through technology, D2C brands are making that happen. Technology helps you identify the right target audience for you.
“Design is our first touchpoint. The second is we got feedback from our customers that they want to touch and then buy, so for that, we rolled out a virtual try-on website. Suddenly, our product line of necklaces went up 4x for the normal orders. We are the only brand in digital where you can find your ring size by just keeping your ring on the phone and virtually you’ll get to know the exact size. We are just trying to solve a problem that people are facing in the offline and online world through technology. We have also made partial payment for our consumers where they can book the jewelry by paying 10 percent or 20 percent and then remaining payment in the next 6 months. If the gold rate goes up they will get the same rate they have booked on and if it goes down then they can also get the rate at which gold would be. This is what we call the Double Gold Rate Protection Plan. One more thing which we have done creatively at Candere is that we have divided our entire customer segment into three parts which are pre-purchase, post-purchase, and post-delivery. We have seen 25 percent of our sale comes in the post-purchase funnel,” explains Jain.
“A lot of ramping up for most of us has happened digitally. We have been leveraging Instagram, Facebook, and Whatsapp from the beginning of time. Competition cannot eradicate the deep passion that a mom has for her child and moms love taking photos when their children dress up, therefore, we built a Special Moment website, and any given day we get 100 user-generated pieces of content. We are using social as a way to engage with our consumers,” adds Anand.
D2C Brands Going Omnichannel
In India when you start as a D2C brand you achieve a certain scale because 95 percent of India still shops offline. If you have to scale from 1 to 100 then offline is way forward along with other components.
“We started as D2C but in order to reach a certain scale in a category like ours where there are more than 10 lakh outlets within Delhi, I think it is important to be present in different offline channels so that customers see you,” explains Rohit Taneja, Director-Consumer Insights, Bombay Shaving Company.
”We started with exhibitions purely offline to understand what people like. After one year, we thought to operate via Mumbai and to sell to 25,000 pin codes online. That’s how we move to what I like to call online D2C. The idea was that when anyone buys they say I bought a Zouk bag. For us, online was a way to tell our story as well. After a certain scale, since offline driving a lot of consumption, every brand has to go there. If I make 10,000 bags and send them to Chandigarh or Indore and it doesn’t sell then I have to bear the loss. This is where online gives me flexibility. Making a brand proposition online is a little bit easier than offline,” adds Pradeep Krishnakumar, Co-founder & COO, Zouk.
How Bright is the Future?
The brands which are able to build the right customer experience with the right product and deliver it repeatedly will be the ones who will succeed in the D2C segment.
“These are times when each brand is going to flourish. The market is going to be US$ 100 billion dollars in the next 5 years, only brands who understand the consumer better are going to survive and get that pie,” asserts Taneja.
“D2C has a long way to go. Two things that will matter the most for D2C are growth and innovations. As much as D2C is growing, technology is also evolving rapidly, for example, we launched an AI on our website that scans consumers’ faces so that we can provide real-time suggestions on the concern of their skin. Innovation will cut the clutter and take the brands to another level,” adds Sivakumar.
The D2C sector is one of the most happening sectors for the year 2021. From the sector seeing its first unicorn, Licious, to several brands like boAt, Mamaearth, Wakefit, Country Delight crossing Rs 100 crore of revenue in a short span of time, the developments in the D2C sector are no small deal.
However, the big question is what is causing this growth in the sector. How the market scenario is going to change following the developments? How the competition is going to be affected?
Pandemic-push to the wide-scale adoption is one of the major reasons that cannot be denied. (According to IBM, e-commerce adoption has been accelerated by 5 years because of the pandemic) Consequently, the large-scale e-commerce adoption that followed further helped the D2C sector and to build a wider loyal consumer base.
As per a Deloitte survey, "Consumers now are expecting more than packages on their doorsteps: almost two-thirds of them (consumers) say they feel they have relationships with the brands they buy from, and three-quarters expect a brand not only to satisfy their requests but to know why they bought what they did."
Again, as per a recent study by Harvard Business School, "Going for a 5 percent increase in D2C customer retention will be able to boost brand's profits at least by 25 percent. The D2C brands, who are aware of these mandatories, have been clocking a decent growth."
Current Areas of Focus
In fact, many D2C brands have clocked 100 percent growth, and even a few have touched the 500 percent mark. Given the scale of the growth, brands are focusing on
i) capturing wider markets
ii) increasing product portfolio
iii) solving the logistical challenges.
Personal care brand Zlade's MoM revenue grew 300 percent compared to 2020 levels, and it has been focusing on sorting its supply chain. “We started the year with major challenges in front of us, mostly related to the supply chain. Our products were sold out towards the end of 2020 as e-commerce took off. We had a higher demand due to people still grooming themselves in their own homes. We had a difficult time replenishing our stocks as global supply chains were disrupted and sea freight rates were through the roof, and they still are,” said Suraj Chaudhari, Co-founder, and CEO, Zlade.
However, a few brands like Licious have solved the supply-chain issues as is evident from its yearly results. In addition to its billion-dollar valuation, the company has a revenue run-rate of about Rs 1,000 crore and is aiming to touch Rs 2,500 crore by the end of this financial year.
Licious spokesperson said, “Over the last six years, we have pioneered business solutions to some of the biggest problems in the industry – from supply chain management to demand forecast. Licious, which operates on a farm-to-fork business model, has complete control over the supply chain end-to-end. We use technology solutions to trace the whole inventory, from the time it is sourced from the suppliers till the time it reaches the customer.”
Clearly, this suggests that integrating technologies to up the supply chain efficiencies and for other processes have good long terms payoffs.
Most of the D2C brands are working to reinvest in their business by extending their product portfolio either backed by the growth they have clocked, funds raised, or to experiment into newer sub-categories.
The D2C brand for household products, Beco claims to register an overwhelming 500 percent growth (in just one year). The company plans to further scale its business by expanding the touchpoints.
“We were also successful in garnering funding which will be utilized to expand our distribution and customer touchpoints across different cities,” asserted Anuj Ruia, Co-founder, Beco.
“Going forward, we plan on expanding our categories and subcategories with more and more products formulated to help our consumers give problem-oriented solutions," added Aakash Anand, Founder & CEO, Bella Vita Organic.
Bella Vita Organic had raised $10 million this year.
Another big challenge that the D2C brands faced is marketing, owing to the increased competition among these brands for the same number of eyeballs in the online space.
AdYogi, a marketing platform specifically designed for Direct-to-Consumer e-commerce brands that acquire customers online and thereby increase revenue, has helped at least 50 brands attain success. The company shared various inputs like what D2C brands have been eyeing.
“In the post-and-during Covid era, D2C brands have started focusing on scaling brand stores along with marketplaces. More and more brands today are looking to scale brand websites on the back of platforms like Facebook and Google ads,” said Anshuk K Aggarwal, Co-Founder, AdYogi.
This is where companies like Adyogi steps in with its direct association with Facebook and Google. Additionally, online selling today is no longer limited to Enterprize brands alone. More and more new-age startups have also sprung up, which has further accelerated the D2C market growth.
Most Popular Segments
The most popular segment in the D2C is personal care (clocking about 94 percent increase in order volume growth). Plum, Skincraft, Bella Vita, Mama Earth, The Men's Lab among many others have been making a lot of buzz in the sector across all platforms. The interesting fact is that these brands have grown despite many upheavals in the last two years.
“Despite all odds, we have grown consistently. Our revenue for FY21 stood somewhere around Rs 75 lakh to 1 crore and the growth rate has been 250 percent more as compared to FY20. We successfully did business for 25,000 products and catered to 15,000 newly acquired customers. Our repeat customer rate is around 22-25 percent,” said Hiren Shah, Founder, The Men's Lab.
Also, this sub-segment saw several acquisitions like the acquisition of The Moms Co by The Good Glamm Group in an estimated Rs 500 crore deal.
However, in terms of potential, fashion is at the highest among all sub-segment of the D2C sector, which is poised to reach $44 billion by 2025, according to a report.
Fablestreet, Bewakoof, Snitch, XYXX were some of the most sought-after brands.
Complete Market View
As per a report, the D2C sector in India will be worth $100 billion by 2025. Currently, it is worth $44.6 billion at the end of the fiscal year 2021 compared to $33.1 billion in 2020. In 2019, the D2C sector had a total valuation of $26.8 billion compared to $20.8 billion in 2018. This suggests how the industry has experienced growth over the years.
SinceTier-I cities are close to saturation level, most D2C brands are penetrating deep into Tier-II cities and beyond and are experiencing decent growth in these cities.
“The focus has been on major metropolitan cities based on the demand for sustainable products. But with the consumer shift in buying behavior in Tier-II cities, we have witnessed a steady surge in demand in these markets," Ruia further added.
Given the need to expand pan-India, several D2C brands have been considering opening retail stores and servicing consumers at multiple touchpoints.
The Omnichannel Buzz
Adopting an omnichannel strategy, where the brand engages with a customer at more than one touchpoint, puts the customer at the center of its strategy.
According to a survey by Accenture, "91 percent of consumers are more likely to shop with brands who recognize, remember, and provide them with relevant offers and recommendations."
Some D2C brands like XYXX have already adopted an omnichannel strategy from its early stage where it has been in constant touch with its consumers getting regular feedback. The trends suggest that more and more D2C brands are going to bet big on omnichannel.
Licious, which currently operates in 14 Indian cities, is looking to extend its presence into the offline channel as well. "Aggressive expansion plans are on cards," the company stated.
Expected Future Trends
Given, the rate at which the D2C sector is still evolving, a lot of innovation and more sophisticated personalization are likely to happen in this space in the future. Focus on 'sustainable packaging' and 'health-conscious products' are other important trends which the D2C brands are stressing upon.
“One of our most ambitious goals is to become an ESG (Environmental, Social, and Governance) Complaint organization. Over the last year, we have been working consciously and consistently towards achieving that goal,” Licious spokesperson said.
"We have now seen personalization and sustainable packaging already practiced by a few brands, we are also working on sustainability and have a few products which will be eco-friendly and will be made from bio-degradable materials. The modern consumer is aware of their responsibilities to the environment and we are working to provide sustainable solutions to our consumers," added Chaudhari of Zlade resonating the same thoughts.
Another D2C brand in the food delivery segment, FreshToHome has stressed the growing demand for better quality products.
"Health and wellness play a key role in the consumers' choice today. Especially post-pandemic we see this as a key consideration for consumers. All of the products at the Freshtohome platform are guaranteed to be chemical-free such as are our antibiotic-free chicken or our formalin/ chlorine-free fish," Shan Kadavil, Co-founder and CEO, FreshToHome concluded.
Business Possibilities For 2022
Given the rate at which is the industry is growing the next year is going to be another happening period for the D2C brands. Many new entrants are also likely to be entering given the attractiveness that it holds with huge investments coming in.
"D2C segment has grown really well this year and with the kind of investments coming in the sector, it's going to go higher and up in the coming year also. We are also hopeful to have new products and to grow exponentially next year. We are expecting 100% increase as per the demand we are witnessing currently and D2C market is expected to grow exponentially and reach a market size of $100 Bn by 2025," said Hitesh Rathi, Founder, Aadvik Foods.
"D2C brands are going to challenge the legacy brands in 2022 and will start owning a market share of the overall market, not just the online market. For Bewakoof we will continue to invest heavily on talent, brand building, newer product categories and adding distribution to the brand," said Prabhkiran Singh, Founder and CEO, Bewakoof.
As for the brands that have been thriving in the market and have had raised quite some amount of funds, their next year will be about upgrading their processes across all departments to match the competition against other D2C and traditional legacy players.
Aarti Gill, Co-founder of popular D2C nutrition brand OZiva that recently raised a $12 million Series B round at a valuation of $80 million, has said: "The funds are being allocated in 5 key areas that are crucial to drive our growth in the next 3 years - scaling the team, category expansion by investing in R&D, brand building, expanding our offline presence and scaling our technology platform to provide more value-added services."
Similarly, Jatin Gujrati, Business Head of one of the leading Ayurveda beauty brands Vedix has said, "2022 should turn out to be another blockbuster year for D2C as more and more consumers embrace online commerce. Increased awareness around products is driving demand for customization and clean beauty and we believe Vedix is well-positioned to leverage that trend. We doubled our revenue in 2021 and we expect the same to continue in 2022 as well."
Given the strong internet penetration across Bharat, Tier I and Tier II are seeing a major demand for e-commerce. The Tier I cities have dominated the fashion festival figures, while transactions in Tier II cities such as Jaipur, Lucknow, Guwahati, Mysuru, Kochi and Bhubaneswar are at an all-time high, rising 82 percent from the year-ago period.
The festival season trends indicate a healthy and fast-evolving competition that bodes well for customers looking for quality products at affordable prices, experts believe.
Also, a majority of e-commerce consumers are between 26 and 35 years old, accounting for 37 percent, while the 18-25 segment accounted for 26 percent, according to a survey by Bobble AI.
Moreover, overall speaking, India’s e-commerce and D2C business surged 77 percent between 2020 and 2021 with transactions from Tier II and III cities higher than ever.
Specifically, among the etailers, Flipkart remains the dominant player in terms of engagement metrics such as active sessions and search frequency, while Amazon has higher transactions. The festival season also witnessed a direct battle between Amazon and Flipkart — the country’s two biggest e-commerce giants. Flipkart’s active user base grew 83 percent during the 2021 online shopping festival against Amazon’s 72 percent.
However, despite Flipkart’s dominance over active sessions and search frequency, Amazon is winning the battle in terms of transactions with significantly lower average session times.
Among the categories, 64 percent growth for beauty e-commerce apps is recorded, while fashion segments grew 368 percent on over. The recently-concluded festival period led the two e-commerce domains to surge, with individuals completing at least two transactions during the season.
Experts see that the fashion segment has become a lot more competitive with Flipkart-owned Myntra now facing competition from Meesho, TataCliq, and Ajio. Myntra bagged 46 percent of all transactions during the 2020 festival period, while Ajio bagged 69 percent in 2021. The share of active Myntra users also using Ajio, Meesho, and TataCliq has also gone up, indicating users are now exploring multiple options.
In the online fashion segment, Purplle’s active user base grew a staggering 70 percent growth during the 2021 festival period, while Nykaa had a 50 percent rise, the survey further stated.
D2C industry is growing at a rapid pace. More than 800 brands have already entered the space and many more are expected to join the league. Considering the benefits its offer – direct touch with consumers, simplified supply chain –many brands entered the D2C space to check how it works for them and decided to expand the D2C way.
Explaining it further, Gaurav Sharma, Chief Strategy Officer, Furlenco says, “We went D2C and put our supply chain, logistics, etc in place. Along with this, we also did something radically different from other furniture players in India, and we set up our design team. Even now, we have our in-house furniture designers, and our people design everything that we rent out. For us to build that category, making consumers understand that they can buy or subscribe to furniture online was challenging. So, we had to get close to customers, and if they didn't like something, we could pick it up and replace it. Today we can safely claim that we have created space for ourselves by opting for D2C strategy.”
“We went to D2C because none of the retailers listed our products. We had no choice, and we had a product which no one wanted to buy, at least the retailers where we wanted to go. This was 2016 when Shopify had just entered India, and we had no choice but to put it online. So we thought at least we'd force our friends to buy it. Now, D2C is a buzzword, but it was just selling a product and making ends meet,” adds Ajai Thandi, Co-Founder, Sleepy Owl Coffee.
Acquiring consumers for D2C brands is comparatively easy as the brands can directly interact with their consumers. They get direct feedback and can make changes in the products accordingly.
“The first month in any start-up founder’s journey is the best because your friends and family are buying from your website to make sure you are happy. The second month is when people you know have brought your products, and now you are looking for new customers who believe in your brand; that's when the reality kicks in. We did things differently, or one reason we started The Souled Store was that all of us are fans of superheroes, comics, music, comedy, etc., and we wanted to do something for the fans. Back in 2013, when we started and if you're going to buy an official Marvel or Star Wars T-shirt, then you have to spend Rs 2,000-3,000 ordering from the U.S. or if you are lucky and have a cousin get it for you or you buy some cheap product of Rs 200-250 from the street where you can't be assured of the quality. We saw a massive gap of good quality products in good design and at an affordable price. Our mantra has been "For the fan, by the fan”. We, as a brand, make sure that you are not just buying a product but also have an experience. This is the advantage of being D2C that we can control the experience of customers in terms of freebies, communication, and an overall experience you have while buying licensed merchandise from The Souled Store. When it comes to acquiring customers, I think Harry Potter, Marvel, DC have already created the demand, and we have to fulfil it. This has helped bring down our marketing costs significantly,” explains Harsh Lal, Co-founder & Director, The Souled Store.
“When Vedix was started 3 years back, the idea was to deliver customized products that suit customer needs and requirements in a scalable fashion. This cannot be done offline because if you go to an outlet, they'll ask many questions and then create something for you. The only way to do it at scale was to leverage technology to go the D2C way. For us, we have in-house doctors who create these types of questionnaires that help us understand what a customer journey is. We know what Prakriti is, what Vikriti is, what issues they are suffering from. Based on responses to those 30 questions, we create an SKU bundle that caters to that customer's requirements. Initially, it was difficult to explain the value proposition, but once a customer sees the impact of the products, it will spread from there. We have tremendous success in terms of word of mouth and recommendations. We have customers getting products for 5-6 members of their family on a single prescription. It creates a problem for us, but it's a good problem to have. There is intense competition in the D2C space, so the only way to stand out is to have a strong value proposition and a unique offering to create a long-term brand,” adds Jatin Gujrati, Business Head, Vedix.
The consumer is spoiled with choices with the entry of so many D2C brands. The moment they have a bad experience with the brand, they don’t hesitate to switch to other brands.
“We are a kind of brand where our products and our people enter the customer's bedroom because we need to take the furniture inside, which comes with a lot of responsibility. We spend a lot on the training of our people. We make sure that everyone from the warehouse to the last mile to the tech team and so on is tuned to the whole customer experience. Furniture is difficult, it can break, and quality issues can happen, but if something like this happens, we are proud that we fix it. So many times, detractors become promoters for us; this is where the MPS comes in. In the last 6 months, we have tripled our revenue, and for every social media complaint we get, we get 7 social media testimonials from our customers,” asserts Sharma.
“The biggest advantage is that the average age of our team is probably summed 25. It has been sum 25 for the last 8 years, and I feel like I have not grown older. Everyone who joins the company is somewhere a fan; so we make sure that everything from the product to design to customer care to shipping has a personalized touch, and the fact that everyone who is a part of The Souled Store is a fan themselves makes it a lot easier for us,” adds Lal.
Betting Big on Technology
The success of any D2C brand depends upon how they are investing in technology. The brands need to identify the technology which can further help expand their reach.
“Investment is a key thing to think about from the sales front, so Shopify has been a boon. Shopify is an easy plug-and-play technology, and most of the D2C brands are on that. Shopify has multiple apps that enable you to do many things, from shipping to lifetime analysis to data analysis to email marketing. The other thing we worked on is creating a customized proprietary data analysis center linked to Shopify. It takes out all the data and understands what customers are more likely to buy next time. Therefore, we use that data to drive our marketing efforts to reach customers through Whatsapp or email. On the backend, we sourced directly from farmers - tamarind, and jaggery for our Desi Pops’ image. We set a process where you can track each Desi Pop you eat from which tamarind tree it has come from. Blockchain supports us, but again it is a very plug-and-play kind of technology. There are a lot of such technologies in the ecosystem and brands have to just identify them as per their preferences and needs,” explains Vinay Kothari, Founder & CEO, GoDesi
How Bright is the Future?
In India, the simplest way in which the retail industry understands is the demographic. The youngest population in the world, 65 percent of our population is under the age of 35, most of these people in the next 5 years will have more money in their pockets, and their shopping habits will grow stronger.
“Customers, understanding of customers, and customer loyalty will be the key in any product category industry, whether offline or online. The data can be used for, and we can make meaningful offerings according to that. I think that's going to be the theme in the country for many years,” concludes Sharma.
D2C is becoming an attractive option as it presents a unique opportunity for building the relationship between consumer and brand. In the past few years, there has been a significant surge in D2C brands as an innovative marketing strategy that enables the brand to enter the market directly.
It is the future of customer engagement as mentioned by Scott Ginsberg very aptly that, “don’t want to rely solely on the stores to put the products out in the right places for the right people, or for the local sales reps to be educated about it. The other upside is, brands who go direct to consumer take ownership over their most important assets: their customers.”
Having a D2C strategy gives the business direct contact with the customer and a direction to focus on understanding the evolving needs. And thus, brands need to ensure their fulfillment operation by ensuring rapid shipping, excellent unboxing experience, and effective return management.
Make Error-Free Deliveries
The backbone of any retail business is, its efficient supply chain management, and managing the same is a daunting task. The growth of technology has helped the brands capture and improve the real-time data by error-free tracking of stock availability and delivery preference. And for smooth supply chain operations, brands need to update their Warehouse Management Solutions to reach the customer efficiently.
As per the report by a media portal, “The Indian D2C market is expected to triple from $33.1 billion in 2020 and touch $100 billion by 2025 on the back of the projection that online shoppers in India will reach 350 million by FY25, up from 128 million in FY2”.
There are various prominent platforms across India providing warehousing solutions like Delhivery, DHL E-commerce Fulfillment, Shiprocket, Unicommerce, to D2C sellers. Beyond these providers, there are huge modern-day solutions that can help in eliminating the middlemen and streamline the supply chain. Artificial Intelligence, cloud-based inventory management, big data, all hold the ability to analyze the insights from customer data and turn them into actionable insights.
D2C fulfillment, with the help of platforms like Shopify, WooCommerce, BigCommerce, is delivering excellent benefits to brand like easy entry, high-profit margins, and direct oversights. D2C brands should include technology for more transparent and error-free delivery to improve the efficiency of the supply chain and enhance the experience of the brand.
D2C Fulfillment Process
D2C fulfillment is a journey of making a product reach its end-user by directly engaging with customers. And a recent survey by Barclays has highlighted, “that tech-savvy manufacturers who had adopted a Direct-to-Consumer strategy, stand to gain £13 billion in revenue in the next five years”.
In the current scenario, retailers need an effective D2C fulfillment strategy to manage the seamless shopping journey of unique orders with their unique destinations on daily basis. The centralized fulfillment ensures consistency as consumer demand is never uniform. Thus, D2C brands are focusing on optimizing their delivery logistics keeping multi–depot management, improving fleet dispatching, real-time visibility, optimizing the route with maximum cost-effectiveness in mind.
D2C brands ensure customer satisfaction with their sound fulfillment process by using the right technology and self or third-party logistics services. As mentioned by Ankit Kaushik, COO, Pickrr, “As a brand grows, logistics operations can quickly become tricky, leading to cost escalations and erosion of profits. At this juncture, businesses should explore opportunities to partner with a logistics solution provider that has expertise in end-to-end supply chain management. This will bring operational efficiencies and customer satisfaction in the long run.”
The Game Has Changed
At one go where D2C brands are growing because of referral marketing, social media, digital advertising, it has its own set of challenges w.r.t reverse logistics, warehousing, and real-time tracking.
Beyond technology, smart transportation, better road links will ensure the growth of the D2C brand as NHAI announced the development of 23 expressways and corridors by March 2025.
Although in the coming years D2C will reach $100 million in sales, one thing is clear that the same has already set a standard of building connections with customers. The key to success lies in focusing on consumer pains and maintaining consumer centricity to build a sustainable business.
Homegrown brands have started performing well. The effects of the last year’s economic downturn are gradually vanished, thus, demonstrating a promising future ahead for the Indian business sphere.
Of late, many women-led D2C brands are grabbing attention in the business marketplace. D2C brands are proliferating in the market, exhibiting massive growth. Here are some women-led D2C brands that are leading in the D2C segment.
OZiva, which is a plant-based nutrition and wellness brand, reported that its operating revenue recorded a 3.43X jump to Rs 72.11 crore in FY21 from Rs 21.02 crore in FY20. Aarti Gill-led company has made all the revenue from sales of health and nutrition products.
Meanwhile, OZiva’s expenses spiked 4.43X to Rs 83.57 crore in FY21 from Rs 18.83 crore in the preceding fiscal year (FY20). It has splurged on advertising to fuel growth and these costs blew 11.63X to Rs 28.15 crore in FY21 from Rs 2.42 crore in FY20.
Besides this, the company is ventured into the kid's nutrition segment with the launch of OZiva Kids. Under the new sub-brand, the company is offering a range of superfoods, fortified with essential nutrients and blended with powerful ayurvedic herbs, to cater to the varied needs of growing children.
The Sleep Company
The Sleep Company, which is a digital comfort tech firm, helps transit people’s sleep via its patented SmartGRID design and tech. The company directly renders its offering to the customers.
Priyanka Salot, Co-founder of The Sleep Company, ventured into the sleep science realm and met various scientists and technicians in the sleep science niche. The massive research and hard work paid off when the company was established in 2019 and begin catering to the needs of people.
The company stated that it will increase its portfolio in the offing, thus, extending the SmartGRID technology to go beyond mattresses.
“It is our goal to be the first in Asia to introduce the exclusive patented SmartGRID technology based on sleep research, and we are planning to expand our operations to international markets within this quarter, initially entering into UAE and Japan. We have also filed for a patent in more than 20 countries,” Salot stated.
Homegrown babycare brand, SuperBottoms has recently secured Rs 3.5 crore in venture debt funding from Alteria Capital. Pallavi Utagi-led brand engenders eco-friendly cloth diapers, SuperBottoms UNO, potty training products, and accessories for babies as well as moms.
The brand is run by a passionate team of moms who are themselves users of the products. Besides offering babycare products, the company administers an active and growing community of customers on social media.
It will be using the recently raised funding to expand its product portfolio to meet the growing demand for innovative and sustainable products for babies and kids. The company has recently ventured into the kids' segment by launching kids' underwear and sustainable sheet detergent.
After bagging a sum in a debt venture fund, the company plans to raise funds sometime in the future to fund its growth plan.
“The company is focusing on expanding the category of cloth diapering and sustainable baby care needs. It also intends to become Rs 100 crore brands in FY 22 and seeks to become the first choice of new mothers for diapering their babies,” Utagi said.
Sugar Cosmetics, which is an online beauty brand, is blossoming this year in the D2C segment. Vineeta Singh-led beauty brand has withstood the economic downturn and is making a great comeback with several campaigns as well as new launches.
The brand has garnered $35.3 million in the aggregate to date. In the past year, it raised Series C funding from investors. According to media reports, it is in discussions with big PE funds to raise funds in the Series D round.
“We focus on building more to our mobile app that already garnered 800,000 app installs in just a year. Content marketing, strong collaborations, and introducing trendy products, remain on the chart for 2021,” Singh shared plans.
Melorra, which is a lightweight D2C fine jewelry brand, is focusing on expansion this year. The jewelry brand lately its experience centers in Mumbai followed by Bengaluru. Saroja Yeramilli-led company is reportedly launching its international website as well.
It claims to have grown at 200 percent year-on-year and stands at a revenue of Rs 350 crore. It lately secured $24 million in funding from investors.
“It is a moment of great joy for us as we expand our experience center presence pan India. It was natural for us to have our center in Mumbai given how women in the city are dynamic and fashionable – and the stores are also new age. We wanted to give them access to both the physical and online experience. We are on our way to becoming the largest lightweight and fine gold jewelry company in India,” Yeramilli said.
The above-cited women leaders and many more have braved economic recession and now heralding success in their respective fields. Today’s women entrepreneurs are showing their caliber by plunging into a challenging, competitive D2C segment.
Owning the entire end customer relationship is a dream come true for any consumer brand. The direct-to-consumer (D2C) route enables brands to communicate directly with their customers, get actionable feedback on products and services, do away with multiple intermediaries and enjoy higher margins.
As good as it sounds, owning up the entire customer relationship is not easy, and comes with its own set of challenges!
Delivering a consistent shopping experience to online customers requires D2C brands to develop capabilities around e-commerce technology, logistics, and payment infrastructure. Today’s online shoppers not only want a high-quality product but also a delightful purchase, delivery and returns experience. Building these capabilities is a tall order for any brand because this is not their core competence or focus area, and needs a specialist approach requiring the significant deployment of capital and resources.
Until a few years ago, it was a real challenge for D2C brands to enable 1-2 day deliveries, set up a high-quality online brand store, and offer other services like subscription and BNPL (buy now, pay later). With a large number of businesses going online and a rise in the number of D2C brands, the e-commerce enabler ecosystem has also evolved quickly and most of these services can now be availed on a pay-per-use basis, enabling brands to focus on what matters most to them i.e. building best quality products and acquiring new customers.
Warehousing as a Service (WaaS)
D2C brands often strive to be closest to their customers to serve them in the fastest possible way. But it is not possible for young and upcoming brands to set up warehouses across the country. Also, setting up a warehousing facility is capital and time-intensive. The shared economy innovation has also hit the traditional warehousing businesses. Today, brands can easily expand their footprint pan-India through WaaS providers who offer easy-to-operationalize warehouses on a pay-per-use basis. Such warehouses can be operationalized as early as 72 hours, after complying with regulatory formalities.
After creating their online store, brands also need a technology stack for integrating with other marketplaces and service providers like freight and payment gateway partners. There are ready-to-use, software as a service (SaaS) Order Management Systems, and Warehouse Management Systems available that can enable D2C e-commerce in a fast and affordable manner.
Managing shipping in an ecosystem with high returns rates and a large number of cash-on-delivery (COD) orders is very challenging for any D2C brand. Also, with e-commerce penetrating the interiors of the country, it is impossible to rely on just one shipping provider to serve the entire customer base. Brands need a partner that can help them serve a wide customer base and handle the complexities of returns, CODs, etc. D2C brands can now easily leverage e-commerce shipping enablers to navigate this complexity.
Access to Increasing Number of Marketplaces
In order to grow online, brands want to be available on as many e-commerce platforms as possible. But there are more than 20 horizontal, vertical, social, and hyperlocal platforms and it is getting harder for brands to be present on so many demand channels. For D2C brands to get listed on a new platform, it requires them to navigate through several complexities, such as finding out and connecting with the category team, understanding the commercial structure, aligning logistics, integrating with technology systems, etc. This is a long drawn process that can take weeks or even months.
To deal with this problem, emerging e-commerce enablers offer a one-stop solution. A brand now needs to interact with only one partner, which will take care of its entire go-to-market needs.
Growing online is quite different from being online! Brands need access to actionable insights to make critical decisions like pricing, marketing strategy, stocking points, stocking levels, etc. to grow their customer base and reduce the cost of customer acquisition. This is an emerging area, and e-commerce enablers offer SaaS platforms for such insights.
End-to-End e-Ecommerce Enablers
E-commerce enablers like Prozo provide all these integrated, end-to-end technology-driven solutions. This is turning out to be a game-changer in increasing revenues, enhancing profitability and customer experience for any D2C brand. With a booming e-commerce market and ever-changing consumer preferences, the time is right for brands to optimize their supply chain infrastructure to win in this market.
In-store sampling has been one of the most proven marketing strategies for brands to engage and reach out to consumers. It drives trials, builds awareness, and boosts sales for brands. Trying a product involves no obligation or perceived risk for consumers, so they are more open-minded and are willing to give the product a chance after they get a free sample. They are more likely to buy a product they've tried rather than one that is foreign to them. A lot of the brands credit sampling for helping them establish their brand through a more physical, face-to-face shopper interaction. However, the physical aspect is what makes in-store sampling a difficult practice for the foreseeable future with a plethora of changes in the overall retail environment post-pandemic and the increasing propensity of online buying by consumers.
So with diminishing in-store sampling and interactions, brands and consumers are both adapting and finding new ways to discover and engage with each other. One of the ways that allow brands to give consumers a physical experience of their product in a contactless manner is digital sampling. The relevance of digital sampling has not only increased drastically amid the new stay-at-home culture, but also it is emerging out to be one of the most efficient ways for brands to directly reach out to their most relevant consumers leveraging the digital data and insights. By taking a direct-to-home approach, brands are reducing their sampling pilferage and operational challenges to a great extent. For many upcoming and growing D2C brands with zero or limited store presence, digital sampling has become the most powerful medium to deliver their product experience memorably and more safely to their potential consumers.
As brands continue to adapt their marketing strategies and consumers continue to move towards online purchases, one thing is certain: consumers still want to try new products, but now in a safer in-home environment. A digital approach to product sampling is a great opportunity for brands to get creative and elevate their branded experiences. From DIY instant meals to the new stem cell face mask to the new aromatic coffee body scrub, brands are now designing unique product experiences for consumers and delivering them right at home for their potential buyers to try. One brand very familiar with the merits of in-store sampling - Maybelline, also leveraged the power of digital sampling at scale in a recent partnership with Smytten. The brand was able to target the right set of users for sampling, assess product feedback and also execute innovative campaigns for re-engagement post-trial. Smytten aims to build relationships between brands and people via data-driven sampling and curating new trial experiences.
When consumers get the opportunity to try a product, they also get a chance to intimately interact with it by tasting, smelling, and experiencing. This creates a sentimental bond that is more powerful than any other media exposure. By the means of sampling, brands can create a stronger first impression with a high-quality branded experience uniquely and memorably.
Two decades ago, it was the flair of a particular salesman or the quality of products that would get customers thronging outside a store. Their first purchase at a store was encouraged by the sensory experience, where they could see, smell, hear, touch, and feel the products. Keeping the quality of product and service consistent was not very difficult for stores, which encouraged new customers to purchase while retaining old customers.
Currently, building trust with the customer has been given a facelift, thanks to an increase in mobile penetration and cheap data packs. New businesses are looking to capture an internet-hungry country that runs on messaging and social media apps. Smart digital marketing strategies can help narrow down and target the customer, but how are digital-only organizations retaining their consumers post the first purchase?
Great Customer Experience
Just like the days when mom-and-pop shops ruled the roost, great customer experience remains the topmost way to retain consumers. Though the process may have changed, the objective has always remained to gain loyalty. D2C brands have to ensure that their platform, whether the website or an e-commerce portal is intuitive, well-designed, and has the right sprinkling of SEO-based content.
According to Market Metrics, the probability of selling to an existing happy customer is up to 14 times higher than the probability of selling to a new customer. What can be inferred from this fact is the importance of ensuring a seamless first experience to ensure customer loyalty.
Upsell and Cross-Sell
Human beings are curious by nature and are adept at exploring all their options. This behavior gets translated into making purchase decisions as well. A well-researched consumer profile will help brands to identify the interests and motivation that lead to buying behavior. Better knowledge of the consumer profile can help D2C brands offer products with better and upgraded features as alternative buying options. And also help consumers make an educated decision about their purchase.
Some brands have mastered the art of cross-selling. Offering additional products that compliment or add more value to the product can shorten the decision-making time, leading to a stress-free experience. D2C brands could look at offering bundle packages that help in fulfilling customer requirements. And will also help in improving CLTV (Customer Life Time Value).
If loyalty programs work in physical stores, they work even better with D2C brands, thanks to the increasing e-wallets and credits. Loyalty programs create an infinite loop where the more the customer shops and interacts with the business, the more rewards they reap and vice versa. With exclusive digital previews and early access discounts, D2C brands have been successful in creating both short and long-term loyalty programs that benefit the brand and consumer. Tie-ups with e-wallets and creating credit points have encouraged consumers to buy repeatedly from the brand.
D2C brands reach more inboxes and can create top-of-mind recall through new announcements and offers. However, it is more likely for the customer to visit the e-store if there are offers and discounts on their purchases. Sharing a discount code for the next purchase with the first order is also a great strategy to retain or bring back customers.
Personalization in sales of D2C brands can be leveraged through field service technology. With its plethora of customer-centric features, field technology platforms provide field sales force teams with a powerful and robust platform that enables them to create and implement personalized sales approaches, even on the go. These platforms give sales executives fast and easy access to their CRM sales applications, along with customer information and sales data, that is otherwise not available. FTS empowers sales executives to create tailored messaging and push relevant promotions that customers, which most likely receive positive responses.
The growing demand for online shopping and convenient deliveries has brought about a new revolution in the consumer goods and retail supply chain. While traditional mom-and-pop storekeepers have started selling products digitally, big-scale retail brands and consumer goods manufacturers have adopted the direct-to-consumer selling model in order to fulfill customer demands.
Direct-to-consumer or D2C selling is a fast-track retail model wherein brands sell merchandise directly to consumers through an online storefront, without involving intermediaries such as wholesalers or distributors. Brands sell directly to consumers via in-house fulfillment centers, e-commerce marketplaces, or with the help of third-party logistics providers.
Why are Brands Gunning for this Business Model?
Going D2C has several advantages, and retail brands are stepping up to meet the evolving needs, expectations, and behaviors of the tech-savvy, post-pandemic consumer.
Cost-Effective Retail Distribution - By implementing a D2C distribution model, enterprises can save the logistical costs involved in the secondary mile, by avoiding shipping and transporting to wholesalers, and directly shipping goods to customer locations. Companies also save the added cost of beat planning and sales reps visiting retail stores to replenish stocks.
Safe Doorstep Delivery - Post the pandemic, consumers are concerned about the quality and safety of the things they are buying and the way they are handled. In D2C distribution, goods are shipped and delivered directly from the manufacturing location to the consumer’s address, minimizing the number of places a package travels to and the number of people who handle it.
Brand-Consumer Relationship - D2C allows brands to offer customers personalized product options, resolve issues quicker, and ensure a satisfying fulfillment experience. It also allows consumers to know the brand well, share their shopping experiences, product feedback, and grievances directly with the brand. By selling directly to consumers, retailers can build stronger relationships with their customers as well as an improved brand image in the market.
Faster Last-Mile Operations - In D2C distribution, manufacturers and big retail brands simply take orders online and deliver faster, using their own logistics arms or with the help of 3PL distributors. By skipping middlemen involvement and wholesaler distribution, enterprises can speed up the last-mile delivery process by shipping goods to consumers directly as and when an order is placed.
What are the Supply Chain Challenges in D2C Selling?
The D2C model has various benefits but there are also some logistical challenges brands must consider:
Supply Chain Visibility - When customers purchase from a brand, they expect complete transparency from the seller. They want to know when their order is shipped, where exactly their order is in transit, and who is handling their delivery. If a D2C brand does not have an efficient delivery tracking system, they might not be able to establish this transparency with their customers and makes it difficult for logistics managers to monitor on-ground operations, and take preventive measures in case of any deviance from planned delivery schedules.
Fleet Utilization Challenges - In order to fulfill customer demands with doorstep deliveries, companies might depend on either in-house fleet or rental fleet, based on demand fluctuations. Businesses are faced with the challenge of identifying the right mix between owned and outsourced fleets to carry out delivery operations cost-effectively while ensuring vehicle capacity utilization.
Last-Mile Delivery Bottlenecks - A shift to D2C selling comes with an underlying requirement of efficient last-mile delivery. However, many brands may be new to last-mile dynamics and challenges such as delivery route planning, rider allocation, route restrictions, customer address verification, and more.
Competing with e-commerce giants and ensuring timely and efficient last-mile fulfillment, especially during the festive season is a major challenge ahead of D2C sellers.
What’s the Solution?
Digitization is the need of the hour, and D2C selling is not an exception.
With logistics SaaS solutions such as route optimization, fleet management tools, and last-mile visibility tools, brands can plan delivery networks and routes optimally, reduce costs, build greater visibility in the supply chain and automate manual processes such as dispatch planning and rider allocation.
The new ground reality also demands companies to be prepared for different scenarios and challenges in business. Logistics SaaS tools can enable businesses to come up with optimal game plans that can tackle these challenges efficiently.
Whether planning to expand retail sales by entering the D2C market, or trying to optimize existing D2C operations, it’s essential to consider implementing intelligent logistics tech in your D2C supply chain to gain a competitive advantage while fulfilling customer expectations effectively.
New-age customers are impacting retail marketing strategies like never before. They are not just tech-savvy but are also highly discerning and demanding. They place the convenience of shopping at the top of the pecking order whether it is online or offline or a hybrid one. Then come quality, price, brand image, rewards, and other benefits and features, alternating with each other in the pecking order, totally depending upon the mood of the consumer at the point of purchase.
Yes, indeed the world of retail is fast changing. To be top of the game, retail enterprises, be it a brick-and-mortar or a direct-to-consumer (D2C), have to be extremely agile in catering to the varied needs of the consumer. Consumers today strongly believe that the products they use reflect their personality – who they are, what they believe in, and what values they cherish. A retail enterprise armed with this data can accordingly tailor differential experiences and offerings to the consumer. There is no one-size-fits-all marketing here. The combination of offline and online is here to stay even as digital platforms, new technologies are bringing about a paradigm shift in retail enterprises.
Consistent Shopping Experience
According to retail consulting firm BRP, 87 percent of customers want a personalized and consistent experience across all shopping channels – offline/ online or a combination of both (click-and-collect). Retail customers looking for personalized service, online/ offline/ hybrid experience, discounts, rewards, brand engagement, and more. As the new age consumer is hyper-connected, retail enterprises would do well to push relevant notifications to them in a channel-agnostic scenario.
To reach out to the customer, the retail enterprise has to deploy all channels of communication as forecasting which service channel a customer would use at any given time via a mobile device is a difficult proposition. The retail enterprise has to have in place all channels – social media platforms, web, chatbots, email, SMS, IVR, and a live executive answering all the queries. This is not an easy task, hence it is imperative for the retail enterprise to pick the right technology partner who understands what, whom, when, where, and how to connect with the consumer whose buying behavior is so dynamic.
A consistent and complete view of its customers allows a retail enterprise to engage the customer with connected, hyper-personalized, and meaningful interactions, to take the customer experience to greater heights. The bottom-line is a convenient shopping experience for the customer, be it online or offline or a hybrid such as researching the products online then purchasing from a store or vice-versa. With the pandemic, customers prefer omni experience and convenience over everything, compelling brands to become omnipresent with the focus being online channels. With growing shopping avenues, the need to improve engagement across channels is a must.
Customer Engagement is the Key
With the right engagement, a brand can easily fulfill this need of being a convenient shopping store. All that a brand needs to do is add relevancy to its customer engagement and assist customers aptly during their shopping. The retail enterprise should:
a) Understand customer shopping journeys and create engagement campaigns based on the various journey stages;
b) Utilize the right channel and touch-points when engaging customers;
c) Focus on social influencer marketing to gain reach and brand awareness;
d) Add relevancy to engagement by tweaking messaging and communication based on shopping journeys and historical data; and
e) Provide timely information on various seasonal, annual, and festive sale periods; or any important discount periods.
Consumers Make or Mars Retail Enterprises
The consumer’s buying behavior makes or mars retail enterprises and understanding and addressing that consumer need is a challenge for all marketers. Right algorithms at the right time are showing the way for retail growth, fulfilling customer needs and aspirations. Successful retail enterprises are customer-centric, offering hyper-personalized solutions to their customers with digital technologies at play, customized content, customized product, enhanced quality, customer rewards, and a holistic customer experience.
Interplay Between Channels
Avendus Capital in the report ‘Decade of D2C – Disrupting the Next Decade of Shopping’ talks about how there will be an interplay between its own platform, marketplaces, and omnichannel strategies. The D2C segment is likely to have a US$ 100 billion addressable market by 2025, projected to surpass the US$ 1.7 trillion retail markets by 2025. In the last three years alone, India has added 80 million online shoppers to reach 130 million. Online spending in India is expected to grow at a CAGR of 35 percent plus from US$ 39 billion in 2019 to US$ 200 billion over the next 5 years, supported by internet and payment infrastructure developments. No doubt, digital technologies have been core to D2C but the most critical element is the ‘C’, that is the consumer, who is driving the digital transformation.
Pandemic Accelerates Shift Towards Digital
The pandemic has merely accelerated the shift towards a more digital world and triggered changes in online shopping behavior that is likely to have lasting effects. It has taken in its swathe the initiated and the uninitiated and the D2C segment has benefitted the most.
The United Nations Conference on Trade and Development (UNCTAD) reported that consumers in emerging economies made the greatest shift to online shopping as women and consumers with tertiary education increased their online purchases more than others during the pandemic. People aged 25 to 44 reported a stronger increase compared with younger ones, being early adopters, swearing by smartphones and the Internet of Things, while having purchasing power.
It is not just enough for the retail enterprise to be omnipresent, it has to also monitor the changing buying behavior and have agile customer engagement strategies. A retail enterprise with a 360-degree customer engagement view can easily control its product movement through push or pull marketing strategies, achieving omnichannel equilibrium and the recipe for growth.
For a new D2C brand or one planning to enter into the segment, certain things need to be kept in mind. The rapidly booming space in India has received mixed results globally. Despite being an attractive space with the freedom to control one’s entire distribution, the model is not without perils.
Notable global brands, on one hand, like Warby Parker, Fenty Beauty, Perfect Diary, Dollar Shave Club have seen phenomenal results, while many brands like Eleven James, Cocodune, Raden, etc. though had done fairly good initially ultimately missed the mark. Consumer demands, costs, awareness are some of the common challenges. Let’s look at how Indian D2C brands are tackling these challenges and what the future holds for the D2C sector.
As per data shared by KPMG India, currently, over 800 D2C brands are operating in India. D2C players have raised an excess of $2.5 billion since 2014, making the D2C sector worth $44.6 billion in India as of 2021. It is expected to reach $100 billion by 2025. In the last couple of years, several D2C brands such as Boat, Wow Skin Science, Lenskart, Licious, MamaEarth, etc. are occupying unique niches and building a strong brand experience for the consumers.
Several factors are enabling a rise in the D2C segment. The larger factor in play is the 700 million-strong internet population which is growing at 24 percent. Secondly, the Covid-19 pandemic has further accelerated online reliance willingly or unwillingly. Online spending in India, which expected to grow at a CAGR of over 35 percent from $39 billion today to $200 billion over the next five years (supported by internet and payment infrastructure developments) is another crucial reason.
Since D2C is still pretty much in the nascent stage, the above scenarios will prove to be just right for the D2C companies to explore and experiment with the market to find the right formula. However, even though the macroscopic factors may be in favor, obviously, D2C firms individually have to go through various challenges to succeed in the segment.
Riding on the D2C boom, In FY21, a Bengaluru-based D2C company Wakefit recorded 2X growth, clocking Rs 410 crore of revenue. Continuous and extensive focus on research and innovation, customer consciousness, personalization based on feedback are some of the reasons that the company cited for the growth. Wakefit pointed out that customer acquisition and retention along with a need for strengthening logistics infrastructure especially in remote parts are some of the major challenges it is facing.
Ankit Garg, CEO and Co-Founder, Wakefit stated, “We have invested in Capex regularly to strengthen our operational capabilities and have also set up a sleep laboratory at the factory to ensure our products are extensively tested in a simulated environment. Despite the challenges, we believe there are a plethora of growth opportunities within this segment.”
Another, a plant-based nutrition D2C brand Oziva has claimed to have grown 4x in the last 12 months. Currently, their annualized turnover is between Rs 150-200 crore and the company is looking at growing 2-2.5X YoY. The company has also said to have raised $12 million this year, $17 million to date.
The Mumbai-based company is allocating the funds in five areas: scaling the team, category expansion by investing in R&D, brand building, expanding offline presence, and scaling technology platform to provide more value-added services.
“2021-22 so far has been very promising as well. We have always focused on providing value and holistic solutions to the consumers which have helped us grow over the past year,” says Aarti Gill, Co-Founder and CEO, OZiva.
Another home appliance D2C brand Candes has clocked revenue worth Rs 60 crore in FY21 and aims to achieve Rs 200 crore revenue this year. The products manufactured by the company are low-priced as compared to larger companies like Crompton, Luminous, Usha, Bajaj and more. For instance, the fans by Candes start from Rs 1,200 whereas those sold by others start from somewhere around Rs 1,500. The company attributed 'sincere pricing' and 'well-planned strategy as reasons behind such cost structure from the company’s side.
The one major impact of the D2C model of business is on the brand-retailer relationship. If a customer visits one of the retail outlets for a brand, there are hardly any data available for the company to customize. However, if the customer goes to the website – there are over a dozen touch-points for the brands to connect with the customer: email, Whatsapp, SMS, Instagram, etc. (omnichannel). However, brands would rather want to look at their retailers as channel partners as D2C customers can be redirected to the nearby localized retailer stores for order fulfilment.
Harsha Razdan, Partner and Head, Consumer Markets and Internet Business, KPMG in India said, “D2C model helps in providing personalized products and services to the consumers and improving customer satisfaction. An omnichannel presence further enhances customer experience, leading to increased customer stickiness. Beauty and personal care along with food and beverage are segments that have witnessed a tremendous rise in D2C brands.”
In fact, ‘omnichannel’ has been one of the trending words in retail circles. For the Uber consumers living in Tier-1, Tier-2 cities, customer experience may be a greater priority than the price. Moreover, with the rise in influencer marketing, customer experience is becoming paramount for almost everyone. Likewise, we see almost every retail brand onboarding itself into the omnichannel front.
D2C brand Pee Safe, which has a strong pan-India footprint in more than 10,000 stores in over 100 cities, has been growing its omnichannel presence as well. The idea behind the omnichannel is to build touch-points with the customers anywhere and everywhere possible.
“It is important for us to reach customers wherever they are,” said Vikas Bagaria, Founder and CEO, Pee Safe. He added, “Hence, this (omnichannel) strategy works well for us and we have been seeing great traction across both online as well as offline retail channels.”
Future Of D2C
Pandemic has reminded that nothing, including in business, is certain. And, as we saw, the brands have been trying out different strategies in costs, retail experience, doing the needed research to provide the specific personalized service, etc. to sustain and excel in the D2C segment.
Razdan stated, “Going forward, as customer experience is building up to be an important lever for brands and retailers, technological dependence is also expected to be a game-changer for D2C brands. In order to boost sales, D2C companies could play more in the personalization and customization area.”
“With consumers now moving to more ‘safe and hygienic buying’ with D2C models, we expect order management and fulfilment to be key for long-term customer stickiness,” Razdan added.
Famous skincare brand Super Smelly is targeting a turnover of Rs 80-100 crore (currently bootstrapped) in the coming few years and aims to roll out products pan India and expand to the Middle East, the UK, and the US. Pee Safe is planning to diversify its product portfolio and increase its retail presence. Similar growth plans are in the process for other D2C brands as well.
Most start-ups are built with an aspiration to scale into unicorns (if not decacorns) - however, more than 97 percent of them eventually get consumed as popcorns! And the biggest reason for this is their cash running out or 'almost' running out and lack of follow-on investments. Does it mean it's a wild goose chase - maybe and maybe not? Some might call it luck as well.
As Paul Graham famously said, "You do everything right and then you roll the dice of luck!" but then Hasan Kubba at Unfair Advantage quipped aptly "you keep rolling the dice until you get a six."
In the world of start-ups, we think financial prudence is more definitive than that. Certain principles - Let's call them the 3Cs for the sake of jargonizing things - help you avoid looking at finance as rolling the dice and trusting your luck completely!
Cash Flow - Sail Before Scale
Of the 3 reports you get in financials, cash flow is the most undermined report - this holds more precedence over P&L or balance sheet. As long as you know you are making cash, you will be able to sail through. While cash is king is usually undermined, I learned it the hard way, when suddenly we had 10 days of cash with us, while we were gloating in happiness for being ‘profitable’. Your P&L might be in green, but cash flow helps you understand how much float you have to literally 'play the game' in the next few months.
You are Building to ‘Build’ and Not to Fundraise
In the era where a fundraise is an embellishment to your profile, getting funded has virtually become the raison d'etre for start-ups. Have met a lot of entrepreneurs (or ‘wannapreneurs’ in true parlance) whose major goal is to build something that will get ‘funded’ quickly or who take actions that are more ‘fundable’.
Once again, from personal experience, we realized that if you keep ‘fundability’ as the objective, you will most likely be distracted from the core of what you are building, and might compromise on that most of the time. The risk you run is that if you don't manage any funding, steering it back to the main road becomes a tough task. This is one shortcut path from where there might be no u-turn for you.
CAC for CLV and Not CLV for CAC
CAC is the most abused word in the name of marketing. Customer Acquisition Costs - whoever talks about it, ends up defending any weird number through performance marketing, by picking a brilliant superlative 'lifetime value' of the customer, or as they, the CLV. With the era of highly distracted multi-loyal customers, where most customers have a repertoire of brands and not a single brand that they love, basing CLV on high loyalty levels is highly preposterous. It always helps to be highly pessimistic and assume a very high churn rate (we assume customers would move on in less than a year) and then check your CACs - not the other way around.
Finally, while CAC/ CLV jodi would help you decide how much to spend on advertising, it might not completely help you in building a sustainable model. You should make sure the unit economics works for you - which means you should be making money on every single transaction, all spend inclusive. Most of us do not realize the significance of contribution margin, as that's something that is usually skipped during our finance classes. If there is one variable you should chase after cash flows, it is contribution margin.
If you know you are making money on every transaction, you know how much business you need to do (or how many units you need to sell) to pay for your fixed costs - the unpaid part of ‘fixed costs’ is what you need to minimize at the earliest. Ideally, you should increase your fixed costs gradually to ensure you don't run out of cash earlier than you anticipate.
Sometimes, the contribution margin itself helps you understand if the gross profits with which you are working, are good enough for you to sustain - and that's circling back to the unit economics challenge that you might be asked a lot of times. If the Contribution margin itself is negative, you need to increase your margins or reduce your variable costs (like commissions, logistics, etc) to build a more logical model. If you ignore this, the 'burn' that you flaunt might soon burn your business.
In summary, while you continue to drive your regular business, you should chase the 3Cs – cash flows, CACs for CLVs, and contribution margins to drive sustainability for your business. Finally, if you stay true to the very reason you started with, across various stages of your scaling up, it does pay out - in ways more than just profit. At the end of the day, you can look into the mirror and into your own eyes, and at least smile back at yourself for adding that tiny little value to the planet as a team and making a true story for more than a few inhabitants.
D2C is an exciting space, and in the last few years, we have seen many changes in the evolution of the e-commerce ecosystem. But the change in D2C has been far more than the overall changes in the e-commerce sector.
Highlighting the benefits for a brand to go D2C, Aakash Anand, Founder, Bella Vita Organic says, “When you are in D2C, you understand the consumer exactly. Compared it with you selling something in a store, for D2C brand, how easy it is for you to call a customer and say to them that you bought a face wash or a scrub last month, come back and repurchase it. Once you have that data with you and with the help of technology and your own platform, you can reach out to millions of people with the click of one button. One push notification can give you an equivalent amount of sale that a two-day offline event would not be able to give. Having that data and access to customers at a minimal cost differentiates D2C companies like us from the bigger ones who are just relying on traditional mediums of selling and reaching out to customers.”
Resonating the same thoughts, Agnim Gupta, Principal - Tech & Growth, Amrutam says, “Because of D2C, I'm able to deal with my consumers directly. I have that bandwidth and freedom to give them that kind of experience. Twenty years back, if I were an FMCG brand, I wouldn't know my consumers that well, and I won't be able to provide them with that experience. At Amrutam, everything is about customer experience. Apart from this, it helps in building a brand in such a way that there is more trust. If you come to my retail store, I wouldn't know all the things, but if you visit my website, there I know all the touchpoints and the channels to reach out to you. I have SMS, web push, email, WhatsApp, and I know when it is the right time to pitch you. I think D2C is an experience not just for the brand but also for the consumer to connect with the brand in a way that other channels wouldn't be able to do.”
Apart from this, data is the center point of the function of any D2C brand. The heart of the differentiation is data. Once you have access to that data and there is no lag between that access, you will be able to make better decisions for your customers, the category you are building, and the products you have launched.
“Once you have the information about your customer, you will make better products for them and be better than the traditional players in the market. By doing this, you will be able to predict consumer behavior, and that changes the game. Distribution is also an important differentiator because earlier, you were putting your stocks in a traditional setup or a modern/ general trade outlet. I'm not saying that either it should be D2C or offline wholesale; I'm a big believer in omnichannel play,” states Bharat Sethi, Founder & CEO, Rage Coffee.
Cost of Customer Acquisition
Consumer acquisition is a significant objective for any brand starting up early in its journey. It's expensive and not easy; it's a treadmill that you need to keep running on.
“It is also important to have your acquisition channels right. Influencers play an important role and so does performance marketing, but it is specific to every brand,” says Anand.
“Earlier it was like you put your products and brand’s story out through your influencers, you will get swipe ups, and you'll make certain sales. Now, that is changing because consumers are also getting smarter and the influencer relationship is changing from short-term to long-term. Brands need influencers who stay with the brand for a longer period of time and consumers are happy to see a particular influencer talking about a brand for a longer period of time. That builds trust, which benefits the brand,” adds Deepak Gupta, COO, Bombay Shaving Company.
However, performance marketing depends on your brand or product or the market fit. If your product is good to be on Amazon, so be there. If you want to maintain exclusivity and have a certain set of clientele and want them to buy products only from your website, then focus on that. It is important to understand where your product will sell, which platform it will sell, and its geography. This will help you scale further.
“These choices also make or break your brand. First, you need to have the conviction of what you want to do and then stick to it because it is accessible in the initial 2-3 years of your business to spread yourself too thin or too wide across platforms. Coming to performance marketing, knowing your cost structure, where you operate in terms of your margins, and how you distribute those margins across these channels can make or break your brand. Therefore, acquiring the right customers at the right price point is necessary,” Sethi asserts.
Technology: The Game Changer
The backbone of D2C is the technology, and many innovations are happening on that front. D2C is not just the website you see on the front where you shop; it includes solving marketing automation, CRM, return, etc. a lot goes at the back end, and for a brand, those are the most critical things.
Explaining it further, Deepak Gupta says, “There is technology to manage my inventory because you don't want to be in a situation where you are out of stock, but your front end is showing the inventory. Then there are technologies to provide a good customer experience because customers are ephemeral they want a response right away. As a brand, I don't need to be worried about it because many startups are solving that problem and coming up with new tech, but I need to be aware of it to implement it. Four pillars that I believe are critical for the success of a brand apart from these technologies are how to create more content in-house, customizations, technology to a cohort longer relationship with consumer and long-term values through the consumer, and lastly, technology to synthesize the data that we have and make a smarter decision every time through learning.”
“Whatsapp bots have popped up in the last 18 months and have hugely succeeded in the previous 6 months. So, the speed at which we can move is being agile and young as companies, by having tech DNA, that is where we differentiate from the legacy giants. That makes all the difference, and that passes on to the end customer,” adds Sethi.
How Bright is the Future?
As a D2C brand, certain changes are happening in the marketplace. Certain brands are taking a bigger role now and more front stage in India.
“The whole ecosystem is growing, and money is going to pump in. Earlier, these big venture funds used to say how much a D2C brand could grow, but today they know the answer. In 2018, when I started, it was difficult to convince what kind of brand it was, how we were going to do it, and getting my seed funding was the most complex challenge. But now, it has evolved, but the negative side is that now there is so much money pumped in that customer acquisition costs are increasing. Everyone has their arsenals, and it is a war that I see for another 5 to 6 years. It will become difficult to capture, stay in the arena, build a brand for ourselves, and survive,” avers Divij Bajaj, CEO, Power Gummies.
“The consumer is king, and this is a bright time for D2C. D2C will continue to grow because India has more than 700 million online buyers. If they don't buy your brand, they will buy some other, so you have an opportunity to create something unique. If you want to be there for a long game, you need to have a good team. Certain metrics are equally important like funding is fuel for the engine, repeat rate of customers, innovations, and consumer advocacy,” adds Deepak Gupta.
Data-driven tailored experiences are at the core of what brands offer their customers today. Using various digital channels as a medium, brands create direct contact with the consumer that helps build a lasting connection.
Using this method, D2C brands have pioneered some impressive strides in the market, both in terms of product offerings and generating a healthy revenue mix. A great reason for brands to use the D2C platform is that it helps them ‘get introduced’ or ‘know their customers better.
Building on D2C
As competition has increased over time, adding several hundred brands in each category, the retail space appears both crowded and expensive. For brands sensitive to their customer needs, targeting their end-users directly beyond the geographic and economic constraints has proven to be a successful approach.
Focusing on the opportunities that direct-to-consumer relationships offer, ensures that brands can develop a unique customer experience and product management that is primarily driven by the ‘KYC’ or ‘Know Your Customer’ factor.
Besides offering a greater understanding of the buyer, multiple benefits stand to be gained from this. The direct-to-consumer route lets brands improve their reputation in the market, develop brand advocacy and consumer loyalty, offers better control and scope for innovation and improvisation over brand packaging, and other such details. All this is done through a D2C marketplace that acts as the eyes and ears for seeing and hearing the customer better.
Following the direct connection that online retail and mobile e-commerce offer, the D2C route has now made activating direct relationships with customers using new channels of communication a far simpler yet extremely gratifying way of doing business.
The Why Factor
Buyers today expect to be in full control of their shopping journey and decision-making experience. What this creates are endless opportunities that allow brands to offer seamless shopping experiences for the users with D2C.
‘KYC’ through D2C, goes on to offer brands a far more established insight into consumer behavior. It explains the ‘why’ behind this behavior. Mapping these patterns lets brands have the advantage of correctly aligning product experiences with identified customer values.
Delivering a hyper-personalized customer experience makes access to behavior data necessary. The data mined from these direct conversations is a boon that lets brands chart out the necessary steps. A D2C route ensures that brands forge deeper relationships by creating improved service yardsticks. It importantly helps brands establish themselves as differentiators and above all to use this knowledge to fine-tune their product offerings through better marketing and channel strategies.
Understanding the measurement that rates the popularity of a given product or brand is something every seller has to know. Known as mindshare, this measurement is a display of product awareness in the mind of a customer or popularity that surrounds a product.
Offering products tailor-made to the expectations of the customers comes through D2C after brands have understood consumer needs. The power of being able to expand the mindshare is easily made possible on a digital platform using the D2C approach as it reduces the time needed in marketing since there are no middlemen involved. A direct-to-consumer brand has direct control over the pricing, placement, and promotions of a product. Depending on customer data and controls on the flow of sales, product presentation to the customer, and how it is perceived by the users can be better understood.
In conclusion, selling directly is today being recognized as re-ignition or fuel, depending on whether the company is an existing one or new. Either way, D2C has ensured that an interaction with a customer is just a click away. Since sales or customer support are better channelized, consumers too expect a quicker solution. Customer experience today is about immediate action when there is an issue. And the best user experience can only come from a brand ‘knowing its customer’ well through D2C.
2020 was a climacteric year. The Covid-19 pandemic brought industries everywhere to a grinding halt and changed the way the world lives and does business. The retail industry was impacted very hard by the pandemic where the sales drastically dropped down. The bulk of whole-sellers and indirect middlemen had been eliminated from the game due to the pandemic which somehow unintentionally helped D2C (direct-to-consumer) e-commerce.
D2C brands are the ones that came up on top in retail marketing. The pandemic gave lots of chances to the D2C brands so that they can directly reach out to the customers without any physical touch (unlike how the traditional retailing process goes down i.e. sell to vendors, retailers, and resellers That's what business-to-business (B2B) usually does, in comparison to this method of retail, D2C is very convenient.
D2C brands sell their products directly to customers without any middlemen. These brands work independently and do not depend on stores or any indirect middlemen to deliver their products directly to their customers.
According to digital agency Good Rebels, “India’s digital transformation has taken off in a big way over the last several years, as of 2020, there are over 800 D2C startups in India with more than 100 million online shoppers. D2C brands are radically changing consumer preferences and expectations and use that infrastructure to grow fast and connect directly to their customers.”
The 19.2 percent growth rate is predicted in 2021. The Direct-to-Consumer Purchase Index states that in the next 5 years, around 80 percent of consumers will end up purchasing at least once from D2C brands.
Correlation with Customers - Any relation between 2 different parties is created through communication. Even in the retail industry, communication is the key to build a direct relationship between the manufacturer and the customer. As we already know that D2C manufacturer has a direct relationship of communication with its customers, unlike the old traditional retail method where there is no direct communication due to so many hindrances between the manufacturer and the buyer. Customers love to be in touch directly with the manufacturing brand. The engagement of the customers allows the brand to grow through word-of-mouth and generates trust amongst the community members, which helps in increasing the customer base.
Say No To Middlemen – In the D2C business model, the seller is the one who directly sells and delivers the product to the consumer, without any interference of a middleman. They do not follow the traditional retail process. The D2C brands don't have to rely on conventional stores, shops, or any other middlemen for delivering their products to the buyers which allow D2C companies to sell their products at lower costs than traditional consumer brands and to maintain end-to-end control over the making, marketing, and distribution of products.
Revealing Brand Stories through Advertisement - Offline sales have reduced rigorously due to the pandemic where online sales skyrocketed. Owing to this, brands saw the potential of online marketing, Many D2C brands started investing more in the digital advertisement which improved return on expenditure and higher sales as well.
Video is the number one way consumers discover a brand before they make a purchase. It is the ideal marketing medium for the D2C industry, brands can use videos to incline an emotional response and engage customers online.
In the personal care category, for example, we can see mCaffeine (which was launched in 2016). mCaffeine, has sold more than 2.8 million products in just 4 years of launch by investing more towards digital ads which enhanced return on expenditure along with higher sales as well.
Shaping Up The Costs And Prices - D2C businesses can charge lower prices as compared to traditional retail businesses. As there are no middlemen and many D2C brands save up a lot of margins which can be used by them to provide some attractive discounts which attract a large number of customers to their products. When companies have control over what they sell then they also have the power to create unique offers and combos that helps to increase the profit margins and stock clearance.
Surfing The Omnichannel Waves - A huge benefit of the D2C e-commerce strategy is that manufacturers get complete control of all their activities, from packaging to marketing. Unlike traditional marketing, many brands have opted for different channels to connect with their consumers. Customers can use any type of medium, such as Facebook, Instagram, Whatsapp to find different D2C brands pages and directly contact the manufacturer for any queries regarding the product or the company. Brands also get direct feedback which helps them to improve their services.
Moving forward, it is evident that D2C is going to become bigger. Moreover, a contactless world (which has become a norm) has further given the D2C space an impetus.
The past 2 years have been a total mess for businesses due to the frequent running lockdowns. These lockdowns have not just made people strict about going out, but also brought them to a situation where they are preferring shopping online more than going to the offline stores. Considering the safety purpose, contactless purchasing is becoming more preferable over the traditional buying methods.
Nowadays, even the most indispensable products like home cleaners and groceries too are being bought online as per the practices of ‘no stepping out’ enforced. This has given a boom to fashion e-commerce brands the most because shopping and fashion were unstoppable even during adverse conditions.
It is not just about the norms of the company, but the government too imposed many legal restrictions that had to be strictly followed for cleanliness. Concerning this, people too had built-up trust in online shopping, after which online platforms have been accelerated.
The D2C business platform has turned out to be a boon to all because of the reduced prices in every manner. The channels from the seller to the consumer have been reduced because of lesser interruptions by the middlemen. Smaller channels have reduced the cost of the sellers. The consumers too have been benefitted from it. Prices of products have declined because of the least additional delivery cost. With this, they also get access to contact the respective seller directly in case of any malfunctioning.
As they say "the future is online". This is being proved immensely after the lockdown. Offline stores are experiencing an immense downfall as people are aggressively shopping online. It is right after this, offline retailers realized that market is half if it is offline and double if it is online. Online markets have come up with numerous strategies which are approached directly to the consumers.
By eliminating the need to have a middleman for connecting the buyers and sellers, the ratio for building trust between the two has increased. Now the businesses have total control over their manufacturing, and somehow they can directly understand the customer’s demand on the basis of SEO. This also creates more customer-oriented products through the D2C channel. It eliminates the risk of damaged products because of direct manufacturing and simplified sales. According to reports, the Indian D2C market is expecting a hike of the $100 billion-plus mark.
At present, India is facing a major hike in the direct-to-customer market. Presently, around 800 D2C brands are ruling the online market. Some of the startups like Beyoung have got their boom right within 3 years of being a start-up. Services of such top-notch brands are available in both rural and urban areas. Fastened delivery, quick addressing, etc. are some of the perks which online services can readily provide.
With the fast pacing digital world, D2C business has emerged out as the need of the hour. People have now switched more to online stores and so do the retailers need to do. The world is soon to be a digital world with everything online.