Traditionally, small product-based enterprises require dealers such as supermarkets and retail outlets to reach their products’ masses. This means that wholesalers and retailers share a great deal of profit. Unorganized door to door sales that became outdated and of little use to understand the target market and consumers were the only direct relationship that the manufacturers could establish with the consumer (1). With the advent of the Internet after the 1990s, however, the development of e-commerce platforms made it easier for India to reach its consumers directly. These firms were known as the D2C brands or Direct To Consumer. It has shaped the future of the sector.
D2C brands are firmed in direct digital marketing rather than online marketing, retail, or auctioning. D2C brands offer direct digital marketing channels. In India, the D2C business model removes intermediaries from reaching the end users, thereby saving many distribution costs. Any seller or manufacturer that wishes to sell its products directly to its end customers can set up an online website or promote its products on various social media platforms that eliminate the intermediary. A study shows that around 55 percent of consumers rather than retailers and dealers prefer to buy products directly from a brand or manufacturer’s website (2).
India is one of the world’s largest retail markets, with over 1.3 billion people and diverse cultures and preferences. In terms of the low numbers of malls and shopping complexes and the high cost of property and rental, the market is expected to exceed 1.7 trillion dollars by 2025 (3). In the organized retail industry, the shift to organized retail will take place over the next five years in India with greater e-tail penetration. The trend is similar to the trend in China trend, where e-tail accounts for more than two-thirds of the organized share. As it becomes convenient and reliable for more consumers to purchase products from the manufacturer’s website, establishing a direct relationship with consumers allows businesses to clearly understand their needs and personalize their experience to make them feel satisfied and return to their store.
If the company reaches its customers independently, it denies any third-party distributors’ function that had to be paid for earlier. Since companies do not need a specific area to sell their products, they can sell from a varied product catalog to offer a wide range of products that attract their customers (4).
Rise of the D2C Trend
D2C (5) is a business model in which a brand circumvents the traditional negotiating methods of selling with a reseller and retailer. India is one of the fastest-growing e-commerce markets, and it is estimated that the country has some 330 minutes of digital buyers this year, according to reports. If we see Amazon India’s projected sales of 500 million dollars in 2017 to an estimated 200 thousand million dollars over the next ten years, it leaves us clear. ECommerce is perfectly set with increasing digital consumption, changing Indian consumer sales trends, advanced technological support from applications, and small business online sales tools.
The 639 million-strong Internet population showing 24 percent year on year growth has fuelled India’s increase in online shopping. For the last many years, India has added 80 million shoppers to 130 million today. Due to the temporary closing of physical shops and increasing public awareness, the COVID-19 pandemic has further increased online adoption. In this context, online expenditure is projected to grow in India from 39 billion dollars to 200 billion dollars over the next five years at a CAGR of 35 percent and growing, supported by Internet and payment infrastructures. In India, the type of consumer is evolving (6).
New business models have become viable through the Internet ecosystem and evolving consumer needs and have brought about the direct consumer (D2C) channel’s emergence. Companies that use the D2C channel always have an emotional connection to their consumers, supported by unique brand identity and a clear value proposition. Their agile DNA, innovative marketing, efficient operational processes, and efficient use of technology characterize D2C’s brands. D2C (7) brands use consumer insight, work on a feedback-driven model, and quickly develop products to address customers’ evolving needs. Although D2C brands have shown mixed results worldwide, some notable companies, for example. By becoming a distinct brand of choice for a host of consumers, many brands have created a significant value for their stockholders.
Initiatives including Atma Nirbhar and #vocalforlocal, growing investment in Indian brands by governmental policies to address domestic e-Commerce start-ups, further boost the wave and bring more new ages D2C fold. While affordable goods attract new customers, D2C firms also create powerful brands that stand for quality and innovation. During the lockdown, consumers in recent months started to purchase from their own homes the most important products. This meant higher sales for those brands that chose to be sold online, but it was the best time for those who discovered the digital scene. Consumer behavior has changed permanently, and maybe the way forward is direct or D2C (8).
Why is D2C mostly revered?
D2C brands have their own branded channels as the main point of engagement with the customer. These can be websites, social media, or retail outlets. These can be an e-commerce platform. These brands use their native channels without any intermediaries’ involvement from Digital is most brands. Some brands, which have already established their Online Content base, are looking to expand into brick-and-mortar shops; some are introducing pop-up stores, some are opening up their flagship shops.
Save commissions paid to aggregators, markets, distributors, and retailers otherwise. The D2C Model allows companies to interact with potential purchasers and learn about evolving needs. A D2C company provides an opportunity to talk to the consumer directly at all stages of the process – from insight into an individual’s concerns about what it can expect from the brand and how it can solve it. If necessary, you can also make suitable changes to your products. It takes a long time for a traditional CPG from design to market for 12 to 24 months (9).
The D2C business has complete control from the design to the moment the customer handles the product. How should the product be packaged, and how should the customer receive the marketing message? The D2C brand can receive potential customers’ solutions and does not need retailers and distributors from third parties. During the product development stage, they can cooperate with customers, experiment with new product releases, and much more.
The marketing message and the brand identity are often diluted in traditional relationships. You don’t find your brand on the retail shelves, for instance, imagine. This can be due either to inventories or to negotiations on the space of the competitor’s brand. However, this creates a negative view of your brand that leads to an off-scale customer experience. You may not have to worry about this negative customer experience, even with the customer. D2C marks. Furthermore, they can introduce consumers to more products and subbrands by presented product recommendations across different touchpoints (10).
Different D2C brands in India
In India, D2C brands have succeeded and became challenging brands in lifestyles such as clothing, beauty & home decor, and CPG as food & drinks and personal care. The machine marks are good traction as Wakefit, Sleepycat, Bombay Shirt Company, Henry & Smith, Label Life, Mamaearth, Sugar, and The Moms co. By engaging with its customers in social media, D2C brands such as Baby Chakra create unique niches. Start-ups are not merely on the D2C routes; although wholesale and retail partners support the bulk of their sales, even established brands expand into the D2C sector. In this category, some well-known brands have even acquired D2C brands. One example is the purchase of Beardo, the first online brand.
Through the years, the explosion of D2C brands has brought about a shift in brand-to-consumer relationships. How consumers purchase everything from beauty, personal care goods, sunglasses, colors, vitamins, and sanitary towels is a disruption to established industries and an end-to-end relationship for retailers. These D2C brands are typically born from the Internet and target smaller audiences, digital indigenous people, and the millennia to increase customer engagement. They also often have high potential margins for start-ups (11).
Mamaearth is an online retailer of the Indian baby care products list of d2c companies. It is one of India’s fastest-growing brands and the first brand in Asia to obtain MadeSafe certificates for toxin-free products, crossing the Rs 100 Crore turnover mark in just four years. This firm’s idea started as soon as they expected their baby and was co-founded by a married couple, Ghazal Aalgh and Varun Aalgh. They browse the Internet like every protecting parent for healthy, toxin-free products for babies, but they can find no products on the market that meet the safety requirements. Mamaearth is currently one of India’s best d2c brands. Over a million consumers in more than five hundred cities across India were attracted directly and through e-commerce (12).
F&G is another of India’s best brands of d2C. It is organic ingredient wellness and personal care company. In 2016, Wow became Amazon India’s top five brands in the health sector. Arvind and Ashwin Sokke, Manish, and Karan Chowdhary are making their dreams come true through this company. When they went bankrupt, they started on the F&G journey. But today, WOW (13) is a successful company in the Indian and Overseas markets, which has become 350 crore businesses and its brand. Fit&Glow has developed its business exclusively with an offline presence through e-commerce. They are a challenger brand that takes over the dominant market player.
D2c to the future
There will be a high level of funding activity in this area, increasing over time, as more successful D2C outcomes will validate the hypothesis for a newer capital deployment. Investor interest in high-quality companies with good growth and focus on capital efficiency will be increased. It is estimated that the IPO timelines in this sector maybe 3 to 5 years away. Logistics is a huge obstacle and acts as one of the main challenges of the D2C Model. Brands face severe competition from e-commerce firms that facilitate faster one-day and two-day delivery. Most of the time, brands rely on third-party transporters and shipping companies to serve their customers (14).