How D2C beauty brands can benefit during the pandemic

Updated: August 14, 2021 3:30 PM

A startup entering an established industry has the advantage of drawing from pre-existing learnings

According to a 2021 report by Avendus, the online personal care and beauty market in India is expected to reach $4.4 billion by 2025.

By Gagandeep Makker

The pandemic was a bittersweet experience for the Indian beauty and skincare industry. The series of lockdowns and mandated social distancing norms impacted brick-and-mortar businesses. However, the story was slightly different for e-commerce and online storefronts. The D2C space witnessed growth. According to a 2021 report by Avendus, the online personal care and beauty market in India is expected to reach $4.4 billion by 2025. That’s a compounded annual growth rate (CAGR) of 29 percent. In India, this market is a whopping $27 billion opportunity (Statista report). Hence, despite the pandemic, the growth potential was pretty clear to us. It was an ideal opportunity for us to enter the market and make a mark. It was also the start of our challenging yet exciting journey. As an entrepreneur who raised Series A funding from Fireside Ventures, I can tell you how challenging fundraising can be. So, today, I want to share key learnings from this experience with aspiring entrepreneurs looking to enter the industry.

Identify the right market opportunity and its growth potential

Before a D2C brand decides to enter a new market, three key questions must be asked. The first is whether the chosen category is large enough. If the target market is too small to sustain the expenditures associated, don’t go down that road. Only a strong product category provides scope for the future growth and profitability of a brand.

The second has to do with identifying a gap that needs to be filled. This will define your USP – could be a new product, an untapped price band, or desired feature. It will enable you to define a niche – one where your brand offering will truly make a difference. You can then easily build a clear differentiation strategy and figure scalability.

The final question is determining the innovation your brand can bring to a market. D2C businesses rise and fall on the power of innovation. You should explore only if you’re confident of your ability to innovate to the satisfaction of your customer base.

Keep iterating until you land on the right business model

 A startup entering an established industry has the advantage of drawing from pre-existing learnings. This is especially true of the D2C space. Incorporate these lessons from day one. Speak to industry players and get their perspectives. This includes fellow entrepreneurs, competitors, investors, and VCs in the space. Coming to the D2C business model – the advantage lies in the interactions it offers with the customer base. Direct interaction offers the opportunity to understand and respond to their needs. The data collected also allows for deeper insights into behavioral and purchasing decisions. However, the flip side is the substantial capital it takes to build a customer base from scratch. This is a factor that must be accounted for from the very start. For an investor, the business model you propose is a crucial decision-maker. It needs to have its unit economics and channel partnerships in place. To show promise, your model should also have a well-thought-out sales strategy across channels.

Never compromise on the right talent; they can make or break your business

The success of a business is built with the support and dedication of its employees. Every business will inevitably encounter difficult situations. It’s the quality of the team that ultimately determines how it fares. This correlation between the business and the quality of employees is also a crucial factor for investors. Employees who are motivated to see the business succeed will invariably offer effective solutions. Choosing the right team is a process that evolves as a company grows. In a startup, each employee needs to wear multiple hats when the need arises. A willingness to take on new responsibilities, try unorthodox approaches, and think outside the box are a must during this period. As the business begins to grow, single-role specialists can be brought in to apply their expertise and help scale the business. As the company grows, it is imperative for the founders to ensure that the company’s culture remains intact. This is simple enough to achieve when the founders are directly involved in the daily workings of the business.

 

The author is co-founder and COO, Pilgrim. Views expressed are personal.

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