Once hailed as the future of retail, the direct-to-consumer (D2C) space is now showing signs of fatigue. Rising customer acquisition costs (CAC), digital platform fatigue, waning brand loyalty, and a tighter funding environment are making it increasingly difficult for many D2C companies to sustain growth. As Milan Sharma, founder and managing director of 35North Ventures, told FE, “It turns out that building a brand is easy, but scaling one is brutal.”
This shift is evident in investor sentiment, which has cooled significantly. D2C startups raised $672.8 million in 2024, down from $830.2 million in 2023 and $1.8 billion in 2022, according to Tracxn. So far in 2025, D2C players have raised $488.48 million, including a $5 million round by beauty and personal care brand SUGAR Cosmetics from existing investor Anicut Capital and others.
Overcrowding, revenue dip, and brand fatigue
The sector has also become overcrowded. From just 300 brands in 2018, there are now over 11,000 D2C companies, but only 233 have crossed the Rs 150 crore revenue mark, Tracxn data shows. “Just having a slick brand or Instagram presence wasn’t enough as there are too many players,” said Somdutta Singh, founder and CEO of Assiduus Global.
Several prominent D2C startups—including boAt, Wow Skin Science, Ustraa, and Wrogn—reported revenue declines in FY24. Mamaearth’s net profit fell 17% year-on-year in Q4 FY25, while Wakefit posted a net loss of `8.8 crore in the first nine months of FY25. Some brands, such as alcobev brand O’Be Cocktails and ayurvedic player The Ayurveda Co., have shut shop entirely.
The D2C model was originally built on low entry barriers, inexpensive digital advertising, and the ability to engage directly with customers. While many brands thrived during the pandemic-driven boom, experts say that a compelling brand story alone is no longer enough to scale operations sustainably.
“Once the pandemic wave passed, the surge in online demand started to level off. People went back to old habits, and the cost of acquiring customers online shot up,” Singh said. She added that investors are now prioritising profitability over growth.
Offline moves, house of brands, and the road ahead
Even the once-promising ‘house of brands’ model has hit roadblocks. The Good Glamm Group, which began as Myglamm in 2017, has opted to dissolve its group structure and allow individual brands to operate independently. “The ‘house of brands’ strategy sounds great in theory, but in practice, it comes with significant challenges, especially for new-age companies,” said Deep Bajaj, co-founder of Sirona Hygiene. Acquired by The Good Glamm Group for Rs 450 crore in October 2024, Sirona has since been sold back to its original founders.
Selling to legacy FMCG giants also has its drawbacks. Shantanu Deshpande, CEO of Bombay Shaving Company, warned that Minimalist, acquired by Hindustan Unilever (HUL), might not survive without its founding team. “Brand identity can get diluted, and decision-making becomes slower. Consumers who were drawn to the agility or authenticity of a D2C brand might start to feel a disconnect once it is folded into a legacy structure,” Singh said.
Some D2C brands have turned to quick commerce to increase reach, but Sharma is skeptical. “Quick commerce works for impulse buys, not brand-building. Offline touch-points like Nykaa Luxe or Tira allow brands to show, not just sell. That’s powerful,” he said.
Still, offline expansion is far from easy, with high operational costs and margin pressures. “Quick commerce impact has primarily been confined to the top 25–30 cities. For a D2C brand that has successfully established a product-channel-market fit, there is a clear opportunity to expand beyond the top 25 cities. However, expanding offline is complex and involves a distinct set of activities compared to scaling online,” said Sourav Santikari, director of strategy, BPC and FMCG, PwC. Even Mamaearth has struggled with its offline push due to its reliance on super-stockists.
Experts believe the path forward lies in prioritising depth over breadth. “The next chapter for D2C brands should focus on three things — doubling down on their flagship product and loyal base, expanding offline where it is financially smart, and partnering for scale without giving up control,” Singh said.