India is riding the D2C wave
There is no doubt that the pandemic has changed the way we live – eat, socialize, study, shop, travel, work. Brands have also realized the power to connect directly with consumers – they have pivoted and transformed traditional distribution models, shed reliance on middlemen and embraced digital as a platform to educate and engage, inspire and sell.
When it comes to consumers, there is a growing confidence to experience new brands and retailers, products and services – online, minus the “touch and feel” or “familiarity” once considered a must before any purchase. New stories of buying behavior are seen in consumer cohorts and subways, level 1/2 cities and Bharat! In the truest sense of the word, digital natives or digital natives have found their place in our minds, hearts and homes.
India’s Direct-to-Consumer (D2C) movement was on the move long before Covid-19 – data-driven companies had already realized that the value of transactions with consumers is not just the sale but also the one-to-one relationship. one that grows from this. The pandemic has only accelerated that and made the proposal for direct engagement much more pronounced than ever.
The wave of D2C in India can be best understood with the statistic that 200 million online shoppers would be added over the next 4 years! The momentum is evident with venture capital funding, consolidations, IPOs and market reactions of late and all indications that the Indian D2C ecosystem is at an inflection point of rapid growth driven by the seismic movement towards online and growing social media consumption across cohorts.
What is D2C and how is it disrupting the market
Direct-to-Consumer (D2C) is a business model in which brands derive the majority of their revenue or customer acquisition from direct-to-consumer online channels or started with online distribution before moving on to omni-channel. India boasts of being home to over 600 D2C brands and growth dynamics suggest the total addressable market will represent a $ 100 billion opportunity by 2025.
The major trends shaping the D2C boom in India are:
Access to affordable internet data and smartphones
E-commerce adoption – growth trajectory of social media consumption and online shopping
Rise of individualism and lonely economy – structured shift from buying for the whole family to buying for smaller units and for oneself
Fickle brand loyalty – consumers experiment across categories, brands, retailers
Robust infrastructure and ecosystem – payments, logistics and warehousing, delivery
Emphasis on well-being, hygiene, nutrition and sustainability and thus the needs and segments of untapped / underserved consumers
Today, D2C is changing the game! With the growing demand for e-commerce, the barrier between sellers and consumers is being broken down by D2C. Overall, there are 5 ways that D2C players differentiated themselves, namely:
Need identification of consumer state / class – understanding themes and trends to exploit and NPD (new product development) focused on feedback; Ex: Wakefit identified the need for affordable mattresses that meet the ergonomic requirements of consumers
Innovative Marketing – digital marketing, social media influencers and storytelling; For example, The Mom’s Co. tapped into a network of social media influencers to foster communication around the brands goal, share real-life experiences, new launches, and more.
Democratization of content, commerce and community; For example, Good Glamm Group is leading the revolution from content to commerce while its user communities in group companies help build a strong network of consumers and straddle all categories.
Agile supply chain – access to first party data allows better forecasting of demand, managing inventory and SKUs based on consumer needs; for example – FabAlley owns manufacturing with design to shelf life.
Technology Driven Experiments – AR-VR enabled virtual trials and consultations establishing phygital experiments; Ex: CaratLane launched 3D visual imagery for virtual jewelry fittings
D2C is more than a sales channel
D2C isn’t just limited to new age consumer businesses, but even those that weren’t born on the web are dipping their feet into this space to connect with consumers. Several mainstream companies have acquired brands online first in the past three years and why? Indeed, D2C is not limited to being a sales channel, but helps companies better understand consumers and demand by accessing data to inform their marketing strategies, strengthen and refine their innovation wheel, test and launch. products / services within weeks and check hyper-local demands. D2C is part of the future of CG – according to the Salesforce Global Study, 99% of CG leaders say they are already investing in D2C.
What would it take to be successful in D2C
None of it is that simple or instantaneous. Investments in technology and a good understanding of the underlying economy are essential before embarking on the D2C path. To harness the benefits of consumer data, it is necessary to have a back-end infrastructure that breaks down data silos and harmonizes online and offline. Most importantly, a good data strategy is crucial in evaluating when to build a Customer Data Platform (CDP) that can ingest and integrate data from multiple sources and produce actionable insights shaping sales and engagement initiatives. .
Driving sales and engagements based on data-driven insights is valuable, but if margins and the economy aren’t working, is it worth it? There are certain considerations beyond the obvious (i.e. brand vision and purpose, organizational talent) that brands need to take into account when plotting their D2C journey. –
Role of the D2C channel – sales, consumer information, brand awareness, etc.
Product-to-market adjustment (PMF) – problem being resolved, product offering, economics of the underlying unit
Set of categories to understand the addressable market, margins and scalability potential
Mixture of products to strike a balance between revenue potential, operational feasibility and consumer benefits
Pricing to balance premium justification and stay competitive
Technical infrastructure for seamless integration with third-party payment and delivery systems, as well as CRM support for a smooth customer experience
Partnership costs to consider delivery models and packaging costs depending on the nature of your portfolio
Our outlook for the future
We believe D2C is here to stay. It opens up new proprietary relationships that wouldn’t have existed otherwise, and enables micro-segmentation / profiling by digitally connecting with consumers through demographics and psychographics to deliver more personalized experiences.
The sustainability of companies would involve capacity building that reinforces the proposition of a convincing product or service offering. This would cover technology (website design, optimization, integration, etc.), data and analytics engine (platform architecture, tools and reports), operations (inventory automation, demand forecasting, warehousing and execution), the operating model (governance models and talent) to ensure customer focus.
There will of course be a D2C maturity curve. Success factors will vary by category and distribution games could expand online only to multi-channel (own website, markets, offline), multi-category / geographies and brands. The operating models are very different for mainstream businesses and D2C brands born online. That said, the only business continuity imperative that industry executives would agree on is that of an omnichannel strategy. Additionally, as D2C brands evolve and mature, the reverse journey of entering offline retail is observed. Mamaearth, Sugar Cosmetics, MyGlamm, among others, leverage physical retail formats, increasing brand visibility, experience and reach. This omnichannel foray would require investments in talent and channels incl. digitize in-store experiences.
The times demand brands to reassess and definitively assess how best to connect and own the battlefield of consumer relations. The need and the ability of brands to be relevant, personalized, accessible, authentic and scalable is a game-changer.
The opinions expressed above are those of the author.
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