India is seeing an exponential hike in the popularity of D2C brands! Do you know that modern e-commerce is shifting from B2C to D2C? Why so? The chief reason for this trend is the increasing adoption of digital technology. Sounds complicated? Let me explain it in simple terms.
D2C (Direct-to-Consumer) brands are companies that sell their products directly to consumers bypassing the intermediaries. It means that you can buy the products directly from the product’s brand i.e., from their online or offline portal. You don’t have to go to any middlemen like retailers and wholesalers for that.
These brands offer high-quality products at affordable prices, while also providing convenience and a seamless customer experience. They have enormous growth potential due to the rise in the use of the internet, smartphones, social media, and window shopping.
However, D2C brands in India face several challenges, and their outlook depends on their ability to overcome these challenges.
In this article, we will discuss the scope, challenges, and outlook of D2C brands in India. Stay tuned!
Scope of D2C Brands in India
Undoubtedly, the scope of D2C brands in our country is vast. As there is a considerable rise in the disposable income of people. Due to this, the countrymen are looking for good quality products at affordable prices. D2C brands grabbed this opportunity brilliantly to provide personalized and high-quality products to consumers at a lower cost than traditional retail channels.
How did they achieve this? You may ask. Simply by having better control over their supply chain. The fact that the products of D2C brands are always authentic with no duplication or fakeness wins customers’ trust. Therefore, people prefer to purchase it directly from the brand’s portals.
Some of the major scopes for D2C brands in India are-
Inclination towards digitization
Digitization is a boon not only for you but for brands as well. Through digitization, brands can access the data and customize the experience of consumers. Also, brands can reach out to their target consumers in a precise way.
If you are a Millennial or Gen Z person, then surely you heavily rely on digital media for new trends and online purchases. This factor perfectly aligns with the shopping value proposition of D2C brands. In short, digitization aids the prosperity of D2C brands.
Push toward sustainability
You must have heard the terms like “eco-friendly products”, “cruelty-free products”, “vegan products” etc. Have you ever wondered why such terms are trending nowadays with every brand? Because most folks care about a handful of things while buying a product. Among these, the major concern is the impact of products on the environment. Their purchase decisions heavily depend on the effect of the products on nature.
That’s why they prefer to shop from nature-friendly brands. Consequently, the D2C companies that put sustainability at their core attract a humongous number of environment-conscious shoppers. This factor helps them to build a strong connection with the consumers.
Also, investors are more interested in the D2C industry. Because once the brands acquire customers’ trust and retain them, they flourish astonishingly.
Omni Channel Strategy
An Omni Channel Strategy is a method with which you can create a flawless and harmonious experience for your customers across all the channels through which you sell your products. This strategy confers an efficient scope for D2C brands that aspire to build a hybrid ecosystem i.e., the brand’s website as well as offline stores. Omni channelization helps to combine online and offline portals of D2C brands to create a courteous relationship between the brand and its consumers, to enhance brand awareness, and to approach potent customers. It immensely helps in the retention of customers and increases a loyal customer base.
Data-driven decision-making and Personalization
D2C has enabled brands to effectively understand the customer and their needs. This has been possible through your data. By now, brands have realized that other than analytics and technology, the data of customers is also a valuable tool. With these tools, they make a product-centric approach. By understanding the engagement patterns and other metrics on e-commerce platforms, social networking sites, and OTT entertainment platforms, they predict what kind of products the folks like. Eventually, data-driven decision-making paves the way for more accurate sales. Thus, D2C brands are capable of delivering personalized experiences for customers.
Image Source: Hellomeets
Due to the massive scope in India, numerous novel companies following the D2C model have emerged in various sectors. Such as personal care, fashion, make-up products, food and beverage, home appliances, etc. Some notable examples of D2C brands in India are-
Challenges of D2C Brands in India
Despite significant growth potential, D2C brands in India face several challenges. Some of the major challenges are-
Maintenance of originality
As per the definition of D2C, the company manufactures the products and directly sells them to customers. However, in today’s world, most of the D2C brands depend on OEM (Original Equipment Manufacturer). OEMs make systems and components that are used in the end products of another company. Most of the D2C brands assimilate or integrate the OEM parts to make the final product. So how does it affect originality? You may wonder. The originality of the product is shaken when different companies use the components manufactured by the same OEM. Although OEM makes only parts or components of the products; it highly impacts the authenticity of the product too. Hence, the company should maintain its originality by focusing on R&D (Research & Development) to create unique products. It effectively helps to maintain the brand’s edge.
Building trust & managing Customer retention
Since most of the D2C brands lack brick-and-mortar stores, therefore, building trust with potential customers is a quite challenging task. It is important to create strong branding to attract customers. Thereafter, it is important to provide a good customer experience and meet their expectations to retain them.
Cost of customer acquisition, & Working Capital
D2C brands heavily depend on digital marketing to influence their target audience. However, the companies need to pay a bigger chunk for the advertising budget. Therefore, as many brands compete for the limited eyeballs of consumers, the cost of customer acquisition (CAC) is growing further. Also, they need to maintain the working capital too for the timely production and innovation of good products.
Order fulfillment & logistics
Order fulfillment, logistics, and shipping are the major challenges that D2C brands face in India. As they do not rely on intermediaries they need to have an extensive network and robust system to fulfill orders and timely deliver them to customers. To ensure a good customer experience, the D2C brands need to make heavy investments in storehouses and delivery partners. Also, to manage the supply chain, they coordinate with multiple partners and suppliers to manufacture and deliver the products to customers in a timely and cost-effective way.
Revenue growth and Funding
Often D2C brands find it challenging to secure funding from investors in the early stages of the business. Also, earning a high revenue becomes a critical factor. Because they have to heavily invest in marketing and partnerships. Many D2C brands rely heavily on a single platform, such as Amazon or Shopify, to sell their products. While this can be an effective way to reach a broad audience, it also means that the brand is dependent on the platform’s policies and algorithms. If the platform changes its policies or algorithms, it can have a significant impact on the brand’s revenue.
Marketing & Branding
These are the crucial factors for the success of a D2C brand. It is important to maintain online visibility to raise brand awareness. The emergence of so many brands and marketing channels in the market intensifies the challenge. Because it becomes difficult for a particular brand to reach and engage with customers effectively.
Competition of D2C Brands in India
One of the most difficult challenges for D2C brands is the highly competitive Indian market. The current market has well-established players as well as new entrants. They go through fierce strife to gain market share, attention, and loyalty from customers to stand out in the competition. The D2C brands not only compete with each other but with traditional retail brands too.
Do you know the Indian D2C e-commerce market is expected to grow at a CAGR of 25% during the forecast period, 2022-2025? However, the D2C brands have more autonomy abroad (Like the USA, China, and South Korea) as compared to India. This distinction occurs concerning experimenting with different distribution models, providing better services and support to customers, tax regimes, etc.
Image Source: Inc42
Despite these challenges, the outlook for D2C brands in India is positive. The Indian government has been taking steps to promote entrepreneurship and digital technology, and to improve the country’s logistics infrastructure. Consequently, it could help to alleviate some of the logistical challenges that D2C brands face. Additionally, Indian consumers are increasingly interested in purchasing products online, which means that there is a growing market for D2C brands.
Thus, with the right approach to logistics, marketing, and customer service, D2C brands in India can succeed in a crowded market and provide consumers with high-quality, affordable products.