The Times of India recently opined India’s D2C (direct-to-customer) wave could potentially be a $100 billion opportunity. Here’s more:
That the pandemic has completely altered our living, socialising, studying, travelling and working habits is reflected perhaps none better than in the way that brands today have started reaching out to customers directly. They have made major pivots and “transformed traditional distribution models, done away with reliance on middleman and adopted digital as a platform to educate and engage, inspire and sell.”
The consumer side is also undergoing a major shift – both in showing a growing level of confidence in newer brands, products and services as well as in moving away from traditional brick-and-mortar stores and ‘touch and feel’ purchases. An April 2021 report from Vaimo found that “while only 4% of millennials prefer D2C brands over traditional retailers, this grows to a whopping 40% to 45% for Gen Z-ers.”
When it comes to the numbers, according to Statista, “the total addressable direct-to-consumer (D2C) market in India is expected to grow by over 15 times from 2015 to 2025. In 2020, the total addressable D2C market was valued at $33.1 billion. By 2025, the total addressable D2C market is forecast to grow almost threefold and reach $100 billion, with fashion and accessories leading as one of the largest D2C segments in India.”
At the very basic level, D2C takes place when products move from the manufacturer to the consumer directly, without any distributor or retailer. It has evolved into a popular choice for brands wishing to enter the market quickly and at low costs. The rise of e-commerce has been crucial to this.
This wave of D2C expects almost 200 million online shoppers to be added to Indian markets in the next 4 years. The momentum seems evident given the volume of venture capital funding, IPOs, consolidations and market responses in the Indian ecosystem in the recent past – we seem to have reached an inflection point. Currently home to over 600 D2C brands, growth trajectories suggest the space to be worth over $100 billion by 2025.
Indian startup Mensa Brands, a forerunner in the D2C market, developed a model of acquiring local D2C brands and helping them scale within home as well as overseas markets. After raising over $300 million in equity and debt over two rounds of funding, it became the first Indian startup to achieve unicorn status (i.e. a valuation of over $1 billion) within just six months of its inception.
US-based consumer goods firm Thrasio Holdings, pioneers of the model Mensa used, are now among many of the global firms venturing into the Indian D2C space, partnering up with local D2C firm Lifelong Online with a $500 million (₹3750 crore) investment to make headway into the realm of Indian digital-first brands.
Fortune India reported on the deal: the idea behind partnering with Lifelong Online is to be able to navigate the local nuances of the Indian market. The country with a huge population and a diverse set of customers is quite distinct from Western markets like the US and Europe. “Their (Lifelong Online’s) team of proven executives has already built an amazing business and their understanding of the Indian consumer is unparalleled,” says Carlos Cashman, CEO at Thrasio.”
The future for Indian D2C does indeed look bright – and high sales in cheap smartphones coupled with increased access to affordable internet data have been among the major causes for it. Additionally, given that e-commerce adoption, social media consumption and online shopping growth trajectories seem to be moving hand-in-hand, this innovation stands against a sturdy backbone of robust infrastructure and product ecosystems, logistics, warehousing and delivery systems.