The word DTC essentially stands for direct-to-consumer. This, in the last few years, has culminated into many start-ups starting digital first brands, thereby, directly delivering their products to consumers. However, soon these brands changed strategy and in an attempt to expand went offline through brick-and-mortar stores, even tying up with modern retail outlets. To name a few, from MamaEarth to Lenskart, Plum Goodness, Bombay Shaving Company, boAt, Sugar Cosmetics, are some of the D2C brands which have created offline presence. “DTC brands started off in the online category, where reaching customers is easier and it’s a good ground to experiment. Once brands hit product market fit, it becomes important to expand the availability to multiple channels. It makes sense both from a business expansion as well as a customer first approach,” Adarsh Sharma, chief revenue officer, FS Life (previously FableStreet), told Brandwagon Online.
In India, the total addressable D2C market is expected to grow over 15 times between 2015 and 2025, as per market research firm Statista’s latest findings. In 2020, the total addressable D2C market was valued at $33.1 billion. By 2025, the market is forecasted to grow almost threefold and reach $100 billion with fashion and accessories.
Industry observers believe that there are multiple factors which have led to D2C companies’ expansion beyond online, of which first and foremost is high cost of operations. The logistic costs, in these cases, tend to be high per shipment, adding to the cost of cancellation and return especially in case of fashion and lifestyle as a category. For instance, if the average ticket price is anywhere between Rs 800-1,000, the seller will also have to pay for logistics which, depending on the postcode, ranges between Rs 200-300 and if the the good is returned or cancelled then the seller will have pay for return logistics besides bearing the cost of fresh shipment, adding to all this is marketing cost or cost of customer acquisition. In all, these multiple layers of cost can make it difficult for D2C brands to survive just through its online presence.
As per Statista, investment in the D2C sector has flowed in during the first five months of the current fiscal year, even though funding for startups has generally dried up in India. The sector received investment worth $2.15 million, with a total of 105 deals in 2021.
Of the nearly 800 DTC brands, it is believed that only about five percent envisage a Rs 100 crore revenue. The shift from DTC to offline retail is more of a progression to achieve the desired growth or scale. However, the lay of the land is not easy to navigate here too. Industry experts opine that not all brands are able to adapt to an omnichannel model due to an operating cost. Hence, a few also look at tying up with mom-and-pop shops. “While these brands have the wherewithal to tap into offline supply chains, a majority of D2C brands are still not fully equipped to navigate the offline space. The transition to brick-and-mortar isn’t a cakewalk, and managing physical stores vis-a-vis digital requires long-term strategic intervention, besides a competitive edge in this cluttered industry to build customer consideration,” Sampad Swain, CEO, Instamojo Technologies, highlighted.
Touch-and-feel Factor
Even as e-commerce sales witnessed high growth during the pandemic, it is believed that consumers have started to return to offline stores. Another reason is said to be consumers’ need to interact with brands, or what is otherwise known as the touch-and-feel factor, which makes most of these products in the category largely trial-driven. For example, beauty and personal care brands have begun depending on offline stores to drive trials. “Consumer behaviour is certainly a key factor in this shift. While consumers are getting comfortable shopping online, there is a large segment that still enjoys the touch and feel aspect of shopping. Convenience is driving the change in choice of platform, but we are far from the shift. Online will continue to grow, but offline is here to stay,”Ghazal Alagh, co-founder, Mamaearth, said.
Not to mention, in these times, it is considered necessary for brands to strike the balance between acquisition of new customers and retaining old consumers. “Brick and Mortar is more of a top-of-funnel consideration builder and trial generator that helps open up the new-to-brand window. Until any major shifts in coverage and distribution happen, it is safe to say that these D2C brands will keep on leveraging storefronts as top-of-funnel touchpoints to reach out to consumers and trigger active purchase bias,” Shayakh Mirza, vice president- Digital Planning at PHD Media India explained.
So is DTC a myth?
As more and more DTC brands expand their presence beyond online, their definition is also evolving. These brands are now called online first but as they grow, they will be called omni-channel brands. “Consumers are omnipresent, pushing brands towards omni-channel presence as shoppers like to evaluate their purchase options across channels. Brands that are agile enough to understand and implement this stay ahead of their competitors. Since consumers move from one channel to the other, technology is an enabler that helps seamless navigation with hyper personalisation,” Alagh added.
Interestingly, various research points out that due to a stiff competition, these brands now rely on technology to collect data and understand customer preferences. Furthermore, it is believed that AI’s usage can improve personalisation and deliver tailored product recommendations for enhanced consumer experience. It can also help in inventory management, stock assortment optimisation, among others, for a unified consumer experience. “In the food sector, an omni-channel strategy is a necessity, not a choice. At Wholsum Foods, we believe in the importance of e-commerce, D2C and offline channels in reaching our customers. What the D2C channel does is it gets brands much closer to understanding consumers and helps us serve them better,” Shauravi Malik, co-founders, Slurrp Farm (part of Wholsum Foods), explained.
For industry experts, evolution is considered a universal truth and the DTC space is no exception to this. It is believed that DTC will have to transform into an omni-channel retail presence, considering that the Indian market is not only impulsive but also a trial-before-purchase type of market. “Therefore, for brands to sustain and drive growth while being cash-positive, they need to be present offline and forge enhanced consumer experiences”, Mirza concluded.
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