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What is D2C?

Direct-to-Consumer (D2C) is a model that gives companies an end-to-end control of every step in the business process. Let’s understand the evolution and the scope of this rapidly growing e-commerce business model.

The term D2C did not exist in the lexicon of the Indian business system until the last few years. If an average Indian person from any city arrived straight from 2017 to 2022, he might have a tough time understanding and recognizing many consumer habits and how the brands work today.

In the pre-internet era, the mortar stores reigned supreme for a classic Indian customer. This also led to the rise of retail chains like Lifestyle Store, Shoppers Stop, Sephora, Big Bazaar, etc. Physical retail store structure dominated the consumer market. As a brand, if you weren’t on the shelves of supermarkets with fancy labels, you would have to forget about making any penny.

Transformation in the Sector

The rise of India’s digital economy started with the advent of 4G, smartphones and nationwide internet penetration. The total number of Internet Subscribers in India have touched 834 million. There are about 931 million smartphones users in India.

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The E-commerce marketplaces like Amazon, Flipkart, Nykaa, Ajio and Myntra offered easy to use platforms and enabled brands to offer a large bouquet of choices to customers across the globe. The market mutations were further aided by many logistics services providers who teamed up with e-commerce aggregators to reduce the time-to-market timelines of newly launched brands.

Beginning of a New world

Most of the D2C brands witnessed a spike in demand due to the pandemic-induced lockdowns. COVID-19, indeed, changed it all. Due to the temporary closure of retail stores and growing wariness for public spaces, consumers had to adapt to online shopping like duck to water, albeit for survival. The online e-commerce market exploded. People learned to do everything online. Teachers were teaching online, employees were working online and home-makers were ordering groceries online.

Grocery e-commerce skyrocketed in the light of pandemic. Post-COVID-19 delivery platforms like Grofers (now BlinkIt) claimed 64% of their customers switched to online shopping and 20% new customers were onboarded.

COVID-19 has accelerated D2C adoption, making it necessary for even the Fortune 500 companies to directly deal with the customers. For example, Nike reported sales from its D2C channel in 2020 at 35%, which is expected to grow to 50% till 2025. From grocery stores to lifestyle and fashion brands, everyone has been flocking to the e-commerce more than ever before.

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Rise of D2C brands in India

D2C, or digital first brands, which leverage internet to sell directly, are having a dream run in India. The D2C brands are spread across segments ranging from beauty and lifestyle to electronics, pet care, fresh meat and seafood.

Brands like Sleepy Owl, Wow Skin Science, MyGlamm, Sugar Cosmetics, Country Delight, among many others, are occupying their niches and creating aspirational brands. They are crushing the market and providing extraordinary value to their respective sectors. According to statistics, the D2C market size in India can reach up to a staggering amount of $100 billion by 2025.

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The D2C brands are attracting significant VC attention and investments, and are likely to continue doing so. While Licious, Mamaearth and Lenskart are the new D2C unicorns on the block, BoAt is strongly following the suit.

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Direct-to-Consumer on a Boom (Pros of D2C business model)

D2C is the fastest growing E-commerce sub-sector in India. The reasons for a rise in the direct online sales are apparent.

1. Direct access to Customer Data

Understanding your customers, their preferences and how they interact with your brand and your products can enable you to-

  • Optimize existing products and services
  • Build better and more personalised offerings
  • Boost your marketing efforts

2. Higher profit margins

Cutting out the middlemen enables the D2C companies to reduce costs. The extra income can be used for strengthening marketing so you can reach to a larger customer base and enhancing your customer experience to build better brand loyalty.

3. Innovation is quicker and happens more often

D2C companies have to freedom to launch new offerings at a smaller scale, assess their customers’ response and make the needed developments on the real-time customer data.

This gives the D2C brands an upper hand in terms of launching new products or discovering new untapped markets.

4. Scaling is easier

The D2C business model is highly digital and allows the companies to reach their customers all over the world. The brands are able to reduce their geographical restrictions gradually and expand their operational capacities.

The D2C boom, to a large extent is driven by Tier 2-4 cities, where consumers who were well-off but starved of brands are willing to experiment with products.

5. Increased Brand Loyalty and customer engagement

Building a brand means understanding that “Customer is the King, the Queen, the Jack and the Ace”.

D2C brands are able to control everything related to branding, imagining, messaging and values. It enables them to interact, communicate and empathise with their customers and ensure the best customer experience and makes them keep coming back for more.

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Emerging Trends leading to D2C Growth

The market size statistic is enough to establish the significance of D2C e-commerce. With reasonable certainty, it can be said that 2021-2030 will be the decade of D2C brands.

But what are the reasons or the trends that will lead to this extensive growth? Let’s find out!

1. Artificial Intelligence in E-commerce
One of the most significant technologies to enhance Customer Experience is AI. The reason is simple. Consumers want personalised brand recommendations.

D2C brands are making the of AI to study parameters as follows:

  • Customer Habits
  • Brand Affinity
  • Conversion rates
  • Trust build-up

2. Growing Popularity of Content Commerce

Content commerce, a fast-emerging trend in the Indian Ecommerce space has accelerated influencer marketing, social media consumption and rapid development of social commerce. Brands are being out there to create a sustainable social presence to increase visibility and customer retention.

3. Subscription Commerce on a Roll

D2C brands are adopting subscription models linked to loyalty programmes to lock in their repeat customers, while buyers get to save more. This means, creating strong connections with customers, building a loyal community and leveraging the creamy layer of shoppers.

4. Immersive Shopping Experience with new-age technology

As the world shifts towards Metaverse, trends like virtual trial rooms, customized lifestyle products, UI animation are expected to completely change the online shopping experience.

5. More Ecommerce and D2C companies heading for IPOs

Large scale funding is ruling the startup narrative nowadays. Many D2C companies in India like BoAt and Lenskart are eyeing IPOs this year. The bigger the market share and the deeper the investor confidence, more will be the chances of a successful listing.

Endnote

D2C technology has streamlined data and access to consumer purchase patterns. The customer is truly the king now with a bouquet of choices and the ever-expanding market. D2C brands who gain deep insights into customer needs and acknowledge smart implementation of technology will thrive.

Dedicated D2C e-commerce solution provider companies will assist the brands in developing full-proof infrastructures.

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