A model of selling products has exploded in India, Is it just a flash in the pan or a more settled trend? Here's what.
Direct to Consumer. Or just D2C. You must have heard or read about this term a ton of times. It is the shiny new thing that marketers are drooling on! Here's how D2C is different from the traditional channel of distribution:
You see, with the power of the internet, the manufacturer/importer/licensee bypasses all the intermediaries & directly reaches out to the end-user! The seller either has a direct site (like coffee seller Sleepy Owl or wearables company boAt) or the seller lists himself/herself on an e-commerce site like Flipkart or Amazon.
WHAT EXACTLY ARE D2C BRANDS?
Some features which define D2C brands are:
· Start with pure digital play
· No intermediaries
· May evolve into direct omnichannel outlets
· Direct access to consumer data points
· Simpler Supply Chain
· May outsource some portion of manufacturing
Here are some Indian brands you may know:
Initially, they came into prominence in the cosmetics industry. Beauty brands like mamaearth, sugar & myglamm emerged. They also operate in:
1. boAt (audio wear)
2. flatheads (footwear)
3. licious (meat)
4. Lenskart (eye wear)
5. Country Delight (dairy products)
6. Sleepy Owl (mattresses & pillows)
7. Healthkart (pharmaceuticals)
8. Bewakoof (fashion)
WHY GO THE D2C ROUTE
Higher margins: Remove the intermediaries & either pass on the benefits (lower price) or enhance your own profits (positioning as a niche/luxury/subscription-based product).
Personalised Offering: The seller has access to the personal data of the end-user (if it is sold through their own websites). This way the company knows what colour of the product you like or what fabric best suits you or even what is your skintone & body size.
Better metrics: D2C brands have better return ratios, higher second purchase rates & the payback on customer acquisition cost is usually on the first purchase itself due to fatter margins.
The zeitgeist of the digital era: This channel is way better suited to online shopping than the traditional route. Therefore, this trend is in vogue as per changing consumer trends.
Low barrier: In order to set up a D2C business, all you need is a flashy new product, a domain & a flexible marketing budget to capture early buyers. This is infinitely cheaper than even setting up a single physical retail store.
Future potential: As per Avendus, a financial services firm, India is witnessing the rise of D2C brands across categories. India is estimated to have a USD 100 billion addressable market by 2025.
FINAL THOUGHTS
HUL. Gilette. ITC. Tata.
These are four of the many big names who have opted to utilise this model for their products. That's a foreshadow of the huge shift that is coming soon. Are you well equipped to handle the same?
WHAT YOU LEARN FROM THIS
Don't just be a cog in the wheel. If you are a person who has generic skills, upskill now. If you are indulged in a business where you are a mere intermediary, now is the time to rethink. You never know when disruption will catch up.
Analyse the competition & look at gaps in the market to exploit and serve like D2C player Lenskart: It succinctly used technologies like augmented reality & machine learning to enhance the online shopping experience. It also achieved economies of scale & passed on the value to consumers, making products more affordable. Saw a lack of nationalized branded opticians & went omni channel to drive brand recognition. They valiantly broke the Luxottica monopoly (more on that here) and raked in millions by serving the consumer.
Don't invest in companies that are indifferent to change. Analyse & decipher if your next investment is ready to take on the challenge. Look at the graph below.
A company at the peak of its power was humbled when it failed to detect the rise of touch screen mobile & better OS. It stuck to its redundant technology stubbornly & its investors paid the price. Companies like HUL & Gilette are waking up to such threats (D2C) & rather than dismissing, embracing them.
Thanks for reading!
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