“The best things in life are just a click away!”
With all of us adapting to an increasingly online world, we have witnessed the explosive growth of the E-commerce industry in the last five to ten years. The COVID-19 pandemic has accelerated this shift, bringing about a paradigm-altering change in consumer preferences and buying behaviours.
To be honest—nothing could have prepared us for the Direct-to-Consumer (D2C or DTC) wave!
It all happened so fast. In response to the global pandemic, companies across the world pivoted online for fear of losing business. Even those that were hesitant about taking their business online had to make the switch to strive in the face of unforeseen challenges.
In what seemed like an overnight transformation—restaurants, grocery stores, coffee shops, and even some of the more traditional retail stores opened up for online ordering and delivery.
Direct-to-consumer businesses are uniquely positioned to take advantage of this trend, given how they sell directly to consumers online (bypassing third-party retailers and wholesalers). Fast forward to today, D2C businesses have skyrocketed. India is home to over 600 D2C brands, which include the likes of market leaders—Mamaearth, boAt Lifestyle, Wakefit, and Licious.
Decoding the growth trajectory of D2C start-ups in India
The Indian D2C market was reported to be worth USD 12 billion in 2022. Considering how several D2C brands like Zivame have crossed the 100-crore mark, the D2C market in the country is on its way to becoming a $60 billion industry by 2027.
More recently, popular D2C start-ups confirmed a 40% surge in orders.
Source: shiprocket-cII-Praxis- report around the D2C market
So what had led to this phenomenal growth?
There’s no denying the role that technology has to play in the rising popularity of D2C start-ups in India. For instance, India is expected to have over 1.3 billion smartphone users and 500 million online shoppers by FY30. The arrival of 5G is poised to further accelerate the upward trajectory of D2C start-ups in India.
The key catalysts behind the expansion of India’s D2C landscape
The booming E-commerce sector, coupled with conscious consumerism and increasing online-first shopping behaviour, are some of the factors driving the rapid growth of D2C brands.
With D2C start-ups gaining the status of unicorns, take a look at what’s fueling their growth:
1. A shift in consumer preferences:
Consumers are now more open to buying products online. During the pandemic, D2C brand websites witnessed a 94% growth in Q4 2020 compared to the same period in the previous year. While consumers are spoilt for choice with multiple touchpoints across digital channels, there is also a growing demand for product innovation and sustainability. The D2C brands are rising to the occasion to meet these evolving customer needs.
2. Key initiatives by the government:
D2C start-ups have come to the forefront owing to India’s robust digital infrastructure as well as timely measures taken by the government to fund and fuel the e-commerce boom in the country.
3. The role of digital payments:
Given how earlier consumers preferred the ‘cash on delivery’ option, the introduction of the Unified Payments Interface (UPI) and other innovative digital payment options has changed this. Considering the ease of payment brought forth by options such as QR code payments, we now see a significantly increased trust in transacting online.
4. The evolution of social commerce:
Social media presents a promising opportunity to build a brand. Businesses can drive engagement with creative content across channels such as Instagram. These innovative models of social commerce are opening up new avenues for D2C strat-ups across categories such as beauty and skin care, healthy snacks, and apparel.
ONDC will revolutionise the future of D2C brands in India
D2C is projected to grow over 15x from 2015 to 2025. Along with investments from celebrities like Deepika Padukone powering up well-known D2C brands, we also see a majority of Sharks on the entrepreneurial reality tv show Shark Tank choosing to take the D2C route.
D2C brands are expected to get a massive boost from the launch of Open Network for Digital Commerce (ONDC). This is a pioneering initiative by the government to democratise E-commerce and take it away from platform-centric models to an open network.
ONDC creates a level-playing field for D2C start-ups—giving them PAN India reach and simplifying the selling journey with high-end technologies. With ONDC, we expect to see a rise in demand for instant credit and need-based financing among D2C brands. As the government plans to expand the ONDC network to more online sellers in the coming days, UpScale by CredAble, a super app for small businesses, will play a pivotal role in helping D2C start-ups connect with ONDC and scale up their operations with timely access to affordable credit.
The D2C model has tremendous potential in India
D2C brands are playing a crucial role in India’s start-up ecosystem. The D2C model has helped many homegrown brands kick-start their businesses and reach out to consumers easily and at lower costs.
Currently, with most businesses in India looking to cut down on costs and cater to their customers more efficiently, D2C start-ups will continue to shape the future of online shopping. Brands that are able to demonstrate a clear product-market fit and leverage innovative technologies to secure financing and drive business growth have a better chance of winning the D2C game.