How the outlook of D2C industry changed in 2021

Some of the biggest changes in 2021 came from incumbents within the D2C space

Traditional retailers are likely to continue expanding their D2C offerings

By Aaradhya Khanna

The global pandemic may have brought in several changes in our lifestyle and we can assay new differences in objects and communication on a day-to-day basis. We are comforted with technology and our growing predilection towards it has increased exponentially. Who wouldn’t want the elan sweetness while the viruses have been mutating, delegation and vaccine production has given rise to exulting success in the supplier industry.

In 2021, the direct-to-consumer industry underwent a few significant changes. There were some impressive new entries to the market, while others struggled to keep up. 2022 is shaping up to be an important year for the industry, with many predicting big things for the sector.

This is a new generation of digital-first brands that have witnessed a significant rise in popularity over the past few years and are now challenging established brands with a direct-to-consumer (D2C) strategy. These brands are addressing the rising group of internet customers, engaging with them directly to find gaps and build unique items for them.

Global performance

Some of the biggest changes in 2021 came from incumbents within the D2C space. While there were some new entries, it was the traditional players who really shook things up. Amazon, Walmart, and Target all made major moves in order to stay ahead of the curve.Walmart acquired Bonobos and ModCloth, while Amazon bought Whole Foods and Zappos. These acquisitions gave both companies a stronger foothold in the fashion and e-commerce spaces. These moves demonstrated that the traditional players were still willing to innovate in order to stay ahead. They also showed that the D2C industry was becoming more mainstream, as these companies were not pure-play D2C businesses.

This trend is supposed to continue in 2022, with more acquisitions from traditional retailers. Meanwhile, some of the newer entrants to the market had a tough time in 2021. Several startups shut down, while others pivoted their businesses. This was largely due to the competitive landscape, as well as the high costs of doing business.

Nationwide performance

While the D2C industry in India has witnessed steady growth since 2015, it has seen the most significant increase since 2020, following the outbreak of the pandemic, which has undoubtedly bolstered the figures. More than 600 D2C brands are already functioning in India, which has resulted in an increase in the valuation of this market. It has also prompted private equity firms and venture capitalists to express an interest in these brands and to invest in them in consecutive rounds of funding.

This industry’s customer base has become increasingly fragmented and diverse as a result of greater penetration and the emergence of the Next Billion Users (NBU). These enterprises have grabbed the attention of the majority of investors because they eliminate the need for intermediaries, who are involved in practically every aspect of the processes of other industries. Even though venture capitalists has given D2C products a push to acquire brands, it is also due to their desire to expand their market beyond India, which will help it scale up faster in the market.

Numerous factors have contributed to the growth of these industries, one of the most important being that these businesses have been able to address the pain points of their customer base by designing products that are both useful and also have been able to provide their customers with a stress-free shopping experience above all other considerations. In terms of profit margins, direct-to-consumer brands have the upper hand. Consumers should expect lower prices and larger margins from D2C brands because they avoid the typical sales process.

Expectation in 2022

Looking ahead to 2022, there are a few things to watch out for. Firstly, traditional retailers are likely to continue expanding their D2C offerings. This could mean more acquisitions and/or investments in startups. The expansion of India’s internet and payment infrastructure is predicted to contribute to a CAGR of 35 percent or more in the next five years, resulting in an increase in online spending in India from $39 billion today to $200 billion.

Secondly, the D2C space is becoming more competitive. This means that startups will need to be more innovative in order to succeed. Finally, consumers are likely to become even more discerning when it comes to choosing products. This means that startups will need to focus on quality and customer service in order to stand out from the crowd. Also, price will play an important role in determining the competition with similar brands.

Overall, the outlook for the D2C industry is positive. Traditional retailers are starting to take it seriously, while startups continue to innovate. Consumers are also becoming more engaged with the sector, which bodes well for the future.

(The author is CEO, Khanna Gems. Views expressed are personal.)

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