Bidding farewell to the middlemen, the D2C sector dominated the news and the M&A cycles within e-commerce, despite the reverberations of the crisis. Quick look at how it uncoiled post the crisis
Exhibiting a double-digit growth rate over the past few years, the direct-to-consumer (D2C) market in India has only risen through the ranks. Undeniably, Covid did invite business disruptions and paradigm shifts in consumer behaviour, but only to facilitate the growth of the D2C sector. In fact, the pandemic acted as an accelerant for the already existing consumer behaviour trends.
Brands too have been accommodating to these changes, which are further expected to linger and also be the longer-term changes in consumer behaviour shaping the future, mention experts. “Recent reports have recorded a growth of 94% in Q4 2020 as compared to the same period in 2019, while the marketplaces saw a growth of 58% during the same time frame. This only proves the point that brands who have tried to accommodate the needs of consumers via D2C have led to not only their prominent growth but also scaling of the sector,” points Mayank Shah, Sr. Category Head, Parle Products.
With 600+ brands playing in the Indian market currently, a 2.5x projected growth of online shoppers in 5 years is on the cards, says a report by Avendus.
Inspecting The Pitfalls
Realising that the sector is radiating positive business results, there still remain obstacles that limit its performance. D2C brands face unique challenges as the revolution they started keeps changing retail—and the playing field they themselves built. The rules of the game are constantly shifting as the competition intensifies and traditional players join the bandwagon. “Hence, building profit, sustainability, scalable business, along with high customer acquisition costs, low conversion rates, poor retention, etc. remain the key challenges,” feels Mihir Kittur, Co-Founder and Chief Commercial Officer, Ugam.
Hareesh Tibrewala, Joint CEO, Mirum India finds rapid scaling up of the supply chain, and customer service to be the other prime barriers, “Nobody expected such a dramatic shift in consumer behaviour overnight. Also, frequent lockdowns have contributed to this disruption.”
For Tarun Abhichandani, Head of products and solutions, Zirca Digital Solutions, challenges persist in terms of technologies used for interacting with consumers. “One of the biggest challenges is to actually understand varied personas of the consumers and how they react to the environment around them. Addressing cohorts by tailoring conversations with them is an immediate challenge that brands need to focus on,” he suggests.
Chaitanya Nallan, Co-Founder & CEO, SkinKraft Laboratories explains how venture capital investors used to see the direct-to-consumer trend as the next wave of successful e-commerce but they are acknowledging its weaknesses. “It has become increasingly easier to start a DTC company, meaning that segmented niche brands could begin to face a highly competitive market in just a short period of time. Advertising strategy and product differentiation are two roadblocks that brands need to be aware of while planning their marketing strategies,” he comments.
Pluses Post The Pandemic
With challenges comes an even greater scope of capitalising on them and milking the best benefits. Especially in the D2C space, the customer shift to digital and democratization of commerce post-pandemic has created an opportunity for brands to reach new markets. Opportunities abound in the activities of measurement, identification and targeting of consumers.
Brands are able to measure the incrementality in their campaigns, correlate with the brand lift, shift their spending to the channels that could result in better RoI. Further, utilizing ecommerce channels and setting up delivery points by brands not known to take such steps is an opportunity that was waiting to be tapped.
Shauravi Malik, Co-founder, Slurrp Farm asserts that opportunities have been in the space of making content-community and commerce come together like never before. “For brands which have either a strong play on community or a strong play on content, they have been able to bring this together with a D2C proposition in extremely innovative ways,” she witnesses.
For Nallan, one of the main advantages for DTC brands is their ability to control products end-to-end, “As an organic form of marketing, partnerships between DTC brands can help benefit each other through these processes. DTC companies that find other non-competitor DTC companies with a similar type of customer can most effectively partner in giveaways and in-store experiences. If the partnership is based on store location proximity, special events can dramatically increase foot traffic and therefore brand awareness.”
Shah observes that with a direct push due to Covid-19, a large number of retailers came up with their independent e-commerce platforms or tied up with delivery platforms like e-Kart, Delhivery, Swiggy, Zomato, Dunzo, etc.
Networks, like Swiggy and Dunzo, have to be the most effective brands in the industry who have indeed made the most of the present circumstances. "They are making it handy for many companies and brands because all these online companies have an app, or are based on a platform. They get their orders on it, and then it is just about delivery. It is unlike traditional distribution networks, where a salesman goes and takes orders, and then a delivery person enters the picture," he shares.
While there are many interesting success stories, Kittur focusses on what these successful brands or D2C leaders are doing right, “They are increasingly investing in analytics, technology, and tools – such as survey tools, social listening tools, sentiment analyses, journey analytics, customer experience management systems, and much more – all to better understand the customer and their needs.”
Mapping The Pre & Post-Pandemic Trends
D2C brands are more powerful today because of the pandemic. However, this trend has been growing for many years, and the pandemic simply shifted the interest of consumers and made home delivery even more important. Across countries, people were forced to stay at home. Previously, getting products delivered to our door was a luxury. Suddenly, it became a necessity.
While much of the D2C growth came before the pandemic, everything adjusted after it, think experts. D2C players have been able to master the art of being agile in a very unpredictable environment, which might have been a design thought to begin with but now has become a necessity. This is what works now and will be in a more evolved manner going forward.
However, Abhichandani believes that the major change has been the pace with which newer innovations are being adopted. "The trends in pre-pandemic existed but there were no immediate drivers for adopting the direct-to-consumer approach. Interactions and offers are more personalized, feedback more immediate and measurement even more primary step,” he says.
For Tibrewala, the overall trends have not changed, just the trend lines have become sharper, “The D2C sector has now become very hot. Large established brands are contemplating launching pure D2C brands. And the scale of ecommerce created by Flipkart and Amazon has helped create an entire ecosystem that can well be leveraged by niche D2C brands.”
Future Face Of D2C
D2C business model has been an absolute game-changer and has taken the business world by storm. With the growing demand for ecommerce, the barrier between sellers and consumers is being eliminated by D2C. Numerous brands in India are launching their own websites and reaching customers has never been this easy. Not just new brands or start-ups but traditional players are also initiating a strong presence in the market. This is the right time when markets are growing for D2C brands.
“Recent trends back the growth of D2C including the development of plug-and-play supply chain and logistics alternatives enabling brands to compete with marketplaces for fulfilment. The demand and push for D2C is expected to increase in the years to come with a more consumer-oriented approach than products. Keeping customers as a priority and centre of the focus, the product value correlates to being apt and businesses can expand remarkably with technology and data,” advocates Shah.
Malik, however, pins hope on the regionalised categorization of D2C brands in the next few years, “There are some amazing innovative businesses working on the translation of sites into all languages and speech. If today we have 90 million digital shoppers, this market will both expand in size and go deeper as people also spend more online. The possibilities are immense. It will also be a time for the entire infrastructure to strengthen and for the larger incumbents to change how they operate as well.”
The years 2020 and 2021 have taught both the companies selling the goods and the consumers consuming the goods to be flexible and quick to respond and adapt. This possibly is going to be the way forward. Also, with a very well evolved remote delivery ecosystem, we will see more and more brands taking the D2C route.
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