Blogger’s Park: How D2C is changing the game

November 19, 2021 6:53 AM

Decoding the rise of direct-to-consumer players and its impact on legacy brands

Customer reviews and ratings powered by easy returns/ refunds have reduced the cost of making a mistake, and are allowing Indians to experiment without fear.Customer reviews and ratings powered by easy returns/ refunds have reduced the cost of making a mistake, and are allowing Indians to experiment without fear.

Jitender Dabas

The numbers being floated around direct-to-consumer (D2C) brands are mind-boggling: a $100 billion addressable market by 2025; nearly 600 brands in the category; an explosion of completely new brands with no legacy or pre-owned expertise clocking Rs 100 crore in no time, in categories across beauty and electronics to food/ milk. Players with no expertise in categories like automobiles are flaunting record-breaking booking numbers.

What just happened to the risk-averse Indian shopper who was not willing to look beyond the ‘trusted’ and ‘familiar’ brands? How is it that they are welcoming newbies with open arms? What does the future hold for legacy brands? With consumer behaviour changing, will we see further growth in D2C brands? What we need to understand is that the internet has altered a few things fundamentally.

Taking risks

The Indian consumer has always been characterised by a few unique traits. She/he is by and large risk-averse, seeks value, and is a follower by nature. Income constraints and lack of knowledge lead to a situation where the brand choice behaviour is characterised by trying to reduce the cost of making a mistake. Hence, they always gravitate towards bigger, trusted brands that have been bought by many others, especially those they look up to. And these behaviours supersede even their value-seeking tendency. No wonder that in the Indian market, the No. 1 brands across categories enjoy disproportionate market shares. Scale and stature earn brands the ‘trust’ that holds them in good stead for a long time. From our superstars to political establishments to daily use brands, we don’t change our preferences that easily. This is an advantage for trusted, legacy brands.

But the internet has changed a few things radically in society. It has changed the way we trust and, hence, who we trust. It has also changed the meaning of scale. Firstly, it has increased our ability to trust strangers. Be it Airbnb, OLX or Tinder — all allow us to trust strangers. Customer reviews and ratings powered by easy returns/ refunds have reduced the cost of making a mistake, and are allowing Indians to experiment without fear. Further, online communities on Facebook and WhatsApp as well influencers are the new surrogates of ‘what the world is buying’, and hence driving not just comfort in numbers, but also aspirations.

Trust factor

So, it isn’t that trust doesn’t have a premium anymore. It is just that today trust can be earned faster than ever before; and trust-plus-stature can be earned without scale today. And that can neutralise the advantage the legacy brands enjoy.

Even at a societal level, our ability to trust younger people and institutions has increased manifold. The massive growth in scale for the likes of Flipkart, Zomato, Paytm and Oyo, and the fact that they are all creations of young people, has reset the established equation of ‘trust = old + legacy’. And this can reduce the perceived gap between the established legacy brands and D2C brands further. With a lot of D2C brands going omnichannel after hitting a certain critical mass, their brick-and-mortar presence starts to act as a topping in the trust and comfort game.

A large part of the current success of D2C brands is attributed to an affluent, more demanding and experimentative millennial consumer cohort, who is being targetted with fresh and unique propositions across categories and reached through e-commerce. But the fundamental shifts around recalibration of trust would have a much bigger impact on the future and scope of D2C brands. The established market leaders will also have to rethink the game as they themselves enter the D2C play.

The author is COO & CSO, McCann Worldgroup India

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