Of D2C brands & the great Indian consumer

As I began wrapping up my day’s work, I casually looked up Instagram and fell for doom scrolling (Yes, guilty of it)! While I began that eventful exercise that sucks up time, MamaEarth suddenly popped up and spoke to my heart as if it knew of my non-existent hair fall issues. Then came DaughterEarth with its Wild Himalayan Apricot Oil for heavenly skin. (Glad, they’re gender-neutral products!)

I was quite surprised at the Mama-Daughter brands wooing me into buying their products while Fast&Up decided to boost my immunity through their range of Vitamin C tablets in different flavours in the midst of a pandemic. As if that wasn’t enough, Calm app decided to jut in and bring me some peace from all this buying! As someone who has survived and somewhat thrived in the startup space, I was elated to see these Direct-to-Consumer (DTC or D2C) brands vying for my attention — a reflection of how they are creating their niche in a neo-consumerist India and acing their game!

Well, for starters, D2C Marketing is when a product or service is promoted to a consumer without intermediary advertising such as television commercials, radio ads or public displays. While some D2C brands are amping up their value by directly speaking to their consumers, they’re also breaking up with the Amazons of the world.

If one were to truly understand where the D2C marketing began, it dates back to trade catalogues which were produced for customers to sell their products in Venice in the 15th century apparently. Later, in the 19th and 20th centuries, door-to-door salesmen contributed to the gradual growth of the industry in the US and other first world countries. Then came the newspapers advertisements/announcements, followed by TV and Radio commercials. Later, with the information age and the advancement of technology across the world, D2C marketing got a massive fillip through commerce platforms bombarding us with choices and craving our attention.

How India’s D2C journey began

In India, however, we need to trace back our journey to the time where D2C marketing was a thing when Rickshawallahs used loudspeakers to make announcements to their customers in villages, which was also a clever door-to-door selling strategy! Our vernacular newspapers and mainstream ones too were the existing media to propagate the message of a product or service to the people. Whether it was about “The Emergency” imposition by Indira Gandhi or Amul selling its “utterly butterly” delicious butter, our newspapers spoke to us directly.

A few years later, every radio and TV commercial proudly advertised “washing powder” Nirma through Hema, Rekha, Jaya aur Sushma while Vicco Turmeric “Nahi Cosmetic” gave us a lesson on Ayurveda and organic products when we didn’t hear that term then! However, a little before the liberalisation era began in India, the retail industry began flourishing, following which organised retail came into being.

Remember the “Complete Man” ads by Raymond or those Bombay Dyeing, Vimal stores in shopping streets? Or the pamphlets that came home inserted in the newspapers to tell us about the existence of Trinethra Supermarket or Food World? Until 2012, India’s retail sector relied heavily on unorganised players where small stores and street carts contributed to 92% of all retailing value.

Following the approval of single-brand and multi-brand retail in India, the sector witnessed fragmentation where organised retail began growing at double the rate of unorganised retail. Currently, bigger players like Future Retail, Reliance and numerous multinational brands like IKEA, Walmart are part of India’s organised retail industry.

Organised Retailing is India’s one of the fastest-growing industries and also contributes to a major source of employment in the country. The ratio of the retail sector’s revenue to GDP in India is amongst the highest in the world. For most developed markets, retail sector revenues are 15–20% of overall GDP, whereas for India it is around 25%.

As the contemporary retail sector in India is reflected in sprawling malls, these multi-storeyed complexes offer shopping, entertainment and food all under one roof. This has entirely redefined the experience of shopping and consumer buying behaviour, ushering in a new era of shopping. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business.

Traditional retailers relied heavily on the “Brand-Retailer-Distributor-Customer” formula. What this also meant for them was a loss of time, value, resources, revenues and eventually customers, too. Coupled with this challenge is the lack or shortage of land/space availability and huge capital requirements for retail businesses operating offline. This has resulted in e-commerce evolving into a marketplace model in India. Despite making humble beginnings in India, the e-commerce sector has witnessed extraordinary growth in 2016.

Evolution & Revolution of India’s E-commerce

Driven by swift acceptance of technology and spike in the use of portable devices/smartphones and penetration of the Internet to rural areas, online retail has scaled exponentially in India. It was a time when India began witnessing a rise in disposable incomes, hefty paychecks, growing middle class and working population as well as the ubiquity of digital influence/platforms (and media consumption).

With such burgeoning demand, India’s e-commerce sector has nearly 150 million customers today who are digitally influenced while approximately 90 million of them buy online. This significant growth in e-commerce has also ushered the era of Internet companies which relied on mobile and cloud technologies to provide services and enhanced customer experience.

To be honest, direct-to-consumer brands didn’t just crop up out of nowhere. They were created in response to new consumer trends and attitudes.

Just consider the Indian millennial’s mindset toward work today. Unlike their parents’ generation, young Indians are less inclined to enter predictable, risk-averse, and staid professions like accounting, medicine, engineering, banking, and government service. The opportunity to forge their own path and create their own destiny is much more attractive for them! This significant transformation also coincides with a drastic shift in Indian societal values where ambition and success have become crucial factors for one’s growth than they were 20 years ago.

Entrepreneurship, as youngsters today believe, provides a faster route to this future — one where you have far greater control over the outcome.

Proliferation of D2C brands

With a drastic shift in consumer habits, India has gone from choosing one TV channel to having a myriad of options on their DTH service while their TVs have gradually transformed to wifi-connected screens, communicating with them! Consumers today dream of aspirational/no-holds-barred lifestyles including foreign travel, more choice for apparel, cars/bikes they drive, the food they eat and homes to live in.

With such a growing demand, several entrepreneurs have recognised these fundamental shifts and are now, using them as opportunities to exploit untapped potential in the retail sector. That’s how D2C brands such as SUGAR, Licious, BoAt, Wow Skin Science, Healthkart, Mamaearth, MyGlamm, IncNut, Country Delight and several others were born.

Interestingly, over the last few years, the e-commerce market in India has matured. With a growing e-tail marketing, D2C brands have been quick to capitalise on the product and price space, witnessing a rapid acceleration of scale. For many D2C brands, customer experience is the new battlefield — a competitive advantage that attracts and keeps customers.

Ever since 2016, over 600 D2C brands have been launched in India while they received nearly $1.6 billion in funding so far. Currently, F&B products rule the D2C segment followed by Beauty & Personal Care categories and Fashion & Electronics.

Source: Avendus

Given that D2C companies have a huge potential for large-scale value creation, here are some trends in the D2C space India is currently witnessing:

  1. Underserved new-age customer: Those seeking a personal connection with brands but existing brands aren’t catering to niche requirements. So, there’s a dire need to satiate the hunger of this kind of consumer too!
  2. Women as a new class of consumers: Did you know that they constitute 44% of online shoppers? Well, now you understand why it is important to target them. Also, they have the final say in most products bought. Along with increasing incomes, they also have a huge appetite for shopping in fashion, beauty and hygiene segments.
  3. Scope for product innovation: Better R&D along with better product and price support will go a long way. Also, keeping it relevant or reinventing with changing trends/time will help brands thrive.
  4. Robust ecosystem: From improving logistics to better customer interaction through social media and digital awareness will define the path for D2C brands. It will also streamline distribution and create a robust ecosystem for further growth.

Well, to sum it up, what has been working for D2C brands in India so far is the plug-N-play supply chain system. An agile DNA along with asset-light operations of D2C firms include emphasis on product design, customer feedback & engagement, contract manufacturing system, data-driven production & inventory management, lower costs and no limitations with respect to the display of product range.

In short, D2C is a distinctive marketing strategy that relies on public-facing brand experience, complete with direct-to-consumer online sales, lets manufacturers control and cultivate relationships with customers that transcend retail channels.

So, with the rise of convenience, growing social networks and connected platforms as well as a switch to health & wellness-driven choices, the D2C market in India will be driven heavily through content marketing, data insights while every single brand competes to create a personal connection with customers.

Reposted from www.aditya-gupta.co