13 Jan 2022, 15:10 — 9 min read
India’s Direct-to-Consumer (D2C) segment has flourished on the back of the consistent growth seen in the ecommerce market over the last couple of years. India’s evolving ecommerce infrastructure, robust logistics network, consumer connect, and authentic storytelling have led to more and more D2C brands gaining customer mindshare and wallet share. It has changed the way consumers spend their money. The success story of D2C has forced traditional businesses to rethink their business models and practices.
According to ‘Rise of India’s D2C’ a report by Inc42 Plus, the D2C sector in India is currently worth USD 44.6 billion and is slated to grow to USD 100 billion by 2025. And the growth story of D2C brands is just getting started.
The D2C growth story
A question on the minds of countless traditional retailers and even ecommerce players is: What makes D2C brands so attractive to consumers? “D2C brands have managed to address niche and specific pain-points, which were not getting solved by horizontal businesses. And they are doing it while providing the right customer experience,” observed Anshuman Agarwal, Co-Founder, Increff.
According to a report, the D2C sector in India is currently worth USD 44.6 billion and is slated to grow to USD 100 billion by 2025.
Today D2C brands offer an experience that is similar to or sometimes even better than ecommerce giants, making them attractive for customers.
Dhruv Toshniwal, CEO & Founder, The Pant Project believes that the rise of D2C brands can be attributed to three key factors. “First, legacy brands were built for the physical world while most of their D2C counterparts are digital natives. So, the way they think about customer experience is different. They use data to respond to customer needs and are very flexible in the way they operate,” he said.
Listing the second and third reasons, Dhruv said, “Second, the Indian consumer today is open to trying new brands and new digital experiences. Finally, D2C brands offer the convenience of shopping from home—a trend accelerated by the pandemic.”
Convenience is indeed a major factor behind the phenomenal growth of D2C brands. Early adopters of D2C ecommerce were mostly young individuals who were looking for value or comfort. But over the last couple of years, customers seeking convenience have joined the wagon. “With everything from how you make your product, to how you pack your product and even how you deliver it, convenience plays a major role. And whatever is happening in the D2C segment is all the implication of how consumer behaviour has changed to seek convenience,” explained Ridhima Arora, Founder, Namhya Foods.
Apart from the above, other macro factors like digital penetration, technology & logistics solutions becoming affordable and simpler, and reduced barriers to entry for brands have also played a major role in the growth of D2C in India.
D2C success mantras
Find a Niche: D2C brands have seen large-scale success have managed to identify unsatisfied consumer needs and fill those gaps with their products and services. Once they find the right niche. Speaking about this, Pallavi Utagi, Founder & CEO, SuperBottoms, who was also the winner of the 2019 Retail Start-Up Awards at RAI’s Retail Leadership Summit, said, “In most cases, these gaps already existed. The consumer demand was there for certain niches, but traditional businesses were probably not in a position to service them. And that’s when the D2C brands came in and offered a solution.”
Talk to Your Customers: D2C brands thrive on feedback. The direct nature of their business leads to shorter, more personal feedback loops when compared to legacy brands. Pallavi calls it ‘one of the biggest advantages’ that D2C brands have over traditional brands. Some brands build their products based on consumer feedback while others tweak their strategy. Amit Sarda, Founder, Soulflower believes that every D2C brand must get feedback from its customers on two key elements: Delivery and packaging.
Use Technology: For many D2C players technology is as core to the business as the product. Anshuman advises investing in automation tools that help intelligently decide products to stock based on demand prediction using AI and ML. The technologies that Amit of Soulflower found the most useful in his journey includes ERP systems, CRM systems, and NPS measurement tools.
Focus on Experience: D2C brands can craft experiences that conventional brands in retail stores might never be able to because they don’t own the channels. So D2C brands should capitalize as much as possible on this tactical advantage and curate experiences that build both brand and channel loyalty. They should create a product experience that’s different for the consumer, create demand that didn’t exist before, and scratch a customer itch that wasn’t scratched before. Listening to the customers, empathising with their needs and then curating experiences helps create something magical.
Be Penny Wise: D2C brands have to keep one eye on growth and the other on unit economics. Especially for bootstrapped D2C brands, breaking even as soon as possible and making a profit on each unit sold is the only way to sustain the business. D2C brands enjoy huge margins and conventionally keep a 65% gross margin which helps them make profits even with low-velocity products.
Marketing is a huge expense. Most D2C brands use more new-age and cost-effective forms of marketing like social media, affiliate marketing, influencer marketing, and content marketing. According to Amit, D2C brands should look at two key money metrics— Customer Lifetime Value and Customer Acquisition Cost. If they are working well in tandem, then he believes that the business is healthy.
Due to the nature of their business D2C players are connected to their customers and have short feedback loops
Brand Names Matter: In the world of branding, names matter. From brand recall to image and characteristic or category attribution, a name has the potential to chart the journey of a brand. Too niche and it becomes hard to expand later. Too broad and it becomes tougher to dominate a niche. Too abstract and it might not create any connect with the customers.
There is no real formula when it comes to brand names. The only thing one must keep in mind is that it needs to describe the organization and what it stands for. Then the devil is in delivering the brand promise to the customers.
Retain the Right Team: “The team is the most important element when trying to make a D2C brand successful,” said Amit of Soulflower.
“Brands need to, both, make a compelling promise and be able to consistently deliver on that. And so, the ability to tell a compelling story and being able to captivate an audience digitally is an increasingly important skill that one should look out for in employees. The other skill is the ability to deliver on that story,” said Dhruv of The Pant Project while speaking about the qualities to look for in team members for D2C brands.
When it comes to her hiring process, Ridhima of Namhya Foods follows one thumb rule, “Irrespective of who you are hiring, ask yourself if they are aligned to your values and your vision. Because a brand reflects what you and your team think, and if they don’t think the way you do, then the brand’s reflection gets distorted, and consumers can see through it.” She feels that this is incredibly important because if they don’t match, then the stories that D2C companies craft around their brands will be inconsistent too.
There is a huge potential for D2C in the country. According to Dhruv, there’s a huge opportunity to innovate and create something new even in categories that don’t traditionally lend themselves to D2C. Direct to consumer brands have just scratched the surface right now. As the barrier to entry goes lower because of technological advancements, we will see further democratization of D2C brands. There has never been a more exciting time to join the D2C brand-wagon.
Also read: Transform or be transformed
Article & image source: STOrai Magazine
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