In India, the concept of brand loyalty is quite fragmented across regions primarily due to the huge dependency on supply chains and retailer distribution channels. In the light of the COVID-19 pandemic disrupting businesses across the globe, it became the need of the hour to reduce this dependency on external intermediaries. This is however not a completely new wave in India as there has already been a steady growth of D2C startups that have managed to gain success by doing away with traditional networks and investing in efforts to reach their customers directly.
How are D2C brands different from the rest?
As the name suggests, these companies sell products directly to their customers under their own brand name, with a business model that hinges on bypassing intermediaries and directly interacting with consumers. Hence, Direct. to. Customer. These companies manufacture, sell and market their products without relying on external middlemen. They are usually Internet-exclusive and distribute their products through their own branded channels.
Think of, a Flipkart or an Amazon. While Flipkart and Amazon have recently started to manufacture their own products, their core business still revolves around an e-commerce marketplace model. They provide a platform where thousands of vendors can sell products online and reach previously unreachable customers.
Similar is the story of Nykaa — A popular e-commerce marketplace for cosmetic products. Nykaa houses and sells most of the in-demand cosmetic products in the market. Now, take a look at Sugar Cosmetics. While they are a competing online platform to Nykaa, the key differentiator is that Sugar does not market or sell any other brand other than their in-house ones. You won’t find a Lakmé or a L’Oréal product on Sugar’s website. Nykaa operates with a D2C model as well but since they don’t only sell their own line of products, they aren’t the kind of D2C brand we are talking about here.
Consumer behavior has started to change with customers flocking to newer brands that are emphasizing more on trust, brand messaging, hygiene, and convenience, even if they are purely online with no physical stores. This is creating a highly conducive environment for D2C businesses to flourish. Additionally, since customers are scattered across markets, geographies, and income groups, niche segments in large industries go largely underserved, making it a great avenue for D2C opportunities. The Bombay Shaving Company is a great example of this. They managed to disrupt the space at a time when legacy men’s personal care brands like Gillette and Nivea filled the shelves of your neighboring supermarket. BSC stood out despite the competition, by offering only high-end shaving products and focusing on creating a new category of customers — Men who make educated purchases in personal care products. Today, BSC has over 2 million users on their website and clocks more than 100 crores in annual revenue.
D2C Brands have coped much better than traditional brands in the current scenario of pandemic-induced lockdowns, due to their minimum dependence on external distribution networks and channels. They were able to easily weather through the initial period, adapt, and cut down on non-core expenses. This coupled with the structural shift of the average Indian consumer’s behavior in terms of being more accepting of the internet as a trustworthy and regular channel for purchase, has paved the way forward for D2C brands. Despite a slow start, today a majority of these brands have experienced a surge in volumes with a few already hitting profitability. Traditional companies have also started diversifying into the D2C route, with some non internet-first companies like FabIndia and Peter England investing heavily in scaling direct-to-consumer shopping platforms. While the increase in online shopping and changes in purchasing trends has set up the D2C segment for exciting funding activities, India will benefit from the learnings of some of its global counterparts in the U.S and China. Let’s look at five popular D2C brands that have been steadily riding the wave.
Meat me at the top
Licious, the popular Bangalore-based online meat and seafood delivery platform, is on its way to becoming India’s first D2C Unicorn start-up brand. The story of Licious and their business model is an interesting one. The Indian meat market in itself was a large opportunity due to multiple reasons. Firstly meat consumption itself was fragmented and compared to other countries, there was some amount of negative social stigma associated with its consumption. There were some players making it possible to buy meat online, but they had not solved the fundamental issues around hygiene, storage, wastage as well as packaging. Licious realized early that in order to grab a meaty chunk of the market, they would need to solve these challenges by controlling the entire supply chain system and operate on a farm to fork model. They emphasized high-quality checks on all their products and trained all their stakeholders in their supply chain. Quality of produce was a major issue in the initial days as vendors and meat suppliers couldn’t cope with their never-heard-before quality assurance checks. However, Licious was adamant to not compromise on quality over growth and slowly convinced their vendors to adhere to their standards. Unlike your next-door meat vendor, they remove all unwanted gizzards in the meat, before shipping a neatly designed package to a customer. Licious’s focus on high-quality meat, control of supply lines, and packaging has made them a customer favorite in metro cities.
The boAt has sailed
The consumer electronics space in India was crowded with international brands like JBL, Bose, and Sony dominating it. However, due to price sensitivity and changing trends, customers were still open to experimenting with newer brands thus paving the way for local players. boAt diligently studied market trends and released electronics that directly catered to them. Newer trends like wireless music consumption, water resistance, and sports-use earplugs were meticulously studied by boAt’s R&D team. They were able to release unique products and make their mark in a few categories within the larger consumer electronics space. Their obsession with quality and affordability has helped them win a large chunk of the market. Over time, boAt has expanded into various products like smartwatches, speakers, and soundbars. Another key difference in the way boAt operates is its focus on creating a lifestyle brand, by partnering up with popular events like the Indian Premier Cricket League, Sunburn concerts, and Fashion weeks making themselves more relatable to young customers. They prioritized differentiating themselves from the average audio company, by building strong relationships with their customers and creating a strong community of audiophiles along the way. While boAt has been diversifying its channels by working with about 5000 retail stores and 20 distributors, 80% of its revenue still comes from D2C channels.
Lenskart was one of the early players to tap into India’s D2C segment. As an optic market, India was largely untapped, and in addition to obvious vision impairment reasons, there was now a growing population of Indian consumers looking at eyewear as a fashion item as well. Lenskart made a crucial decision in their early days to create a lasting business model that is in constant touch with customers for on-ground feedback and market trends. The best way to do this was by expanding their D2C business arm. Lenskart has around 700 retail stores across the country, along with a strong online presence. Since eyewear, like other wearables, needed to be tried on before purchase, Lenskart went all-in with a try-and-buy approach. They focused on conducting thousands of daily home-eye checkups and try-ons, and slowly started to educate the market. Their campaigns have created a strong sense of customer loyalty and have been instrumental in grabbing a whopping 30% of the Indian eyewear space.
How Dairy you
Direct-to-consumer food essential brand Country Delight, delivers fresh and unadulterated dairy products directly to the customer’s door. Delivery is done within a strict time frame to eliminate the need for preservatives. Their fundamental focus is to ensure that all their products are fully developed, right from the source to final packaging, completely under their control. They also had strict testing requirements for raw materials in order to ensure that the end product delivered to the customer is of the highest quality and freshness. Country Delight achieved this by investing in a farm from the start. They are very meticulous while selecting other medium and large farms to partner with as well. Their devotion to their unit economics helped maintain their momentum even during the lockdown period. Since they controlled every leg of their operations, they could excel even during one of the most turbulent periods in recent history. Being a player in the essentials space definitely worked in their favor.
Bewakoof, the popular clothing brand that has been steadily making its mark, differentiates itself from hundreds of competitors largely due to its witty vernacular messaging and great designs. Their mantra is to assiduously study regional trends to connect with the country’s younger generation. Their 5 million + following on social media platforms is a solid indicator of how they have been able to carve out a niche for themselves in the immensely populated clothing category. Apart from R&D, they are also focused on scaling with tech. Bewakoof emphasizes developing ML models to constantly optimize their customer acquisition channels and improving overall customer acquisition costs. Bewakoof has more than 10 million monthly active users and has clocked over 200 crores in annual revenue in FY 2020.
Legacy brands in countries like the U.S took nearly two decades to hit the 100 crores mark, while newer Indian D2C companies like Mamaearth and Sugar Comestics, achieved this in less than 4 years! There is definitely a renewed investor frenzy in the D2C segment due to this fast and high potential for growth. The companies mentioned above are just some of the many success stories that we can see and there will be many more over the coming years. A report by Avendus Capital stated that India’s internet population has reached 640 million, with about 130 million of them being online shoppers. The D2C space has a lot of room to mature. With regulations being eased across industries to encourage and uplift the internet economy, there is no doubt that the D2C wave has only just begun.