Nitya Sharma
Emergence of D2C: India, by virtue of being the fastest-growing e-commerce market in the world, is witnessing rapid changes in the manner companies do commerce on the internet. Today, products and services ranging from mobiles to apparel, movie tickets to food and beverages are available at the click of a button over the internet and have been widely democratised by large e-commerce marketplaces.
This led to the rise of Direct-to-Consumer (D2C) companies that are fulfilling the nuanced requirements of consumers which are niche and personalised. According to consulting firm KPMG, the Indian D2C market currently stands at approximately $12 billion in 2022 and is projected to cross $60 billion by 2027, growing at a CAGR of 40 per cent. This assumes significance as an increasing number of people from across the country are coming online and adopting e-commerce.
These D2C companies relied on e-commerce marketplaces to reach millions of customers across the country. However, sole reliance on large e-commerce marketplaces is also restricting their ability to build a relationship with the consumer and are unable to establish themselves as a brand. Coupled with high margins for the bundled services e-commerce marketplaces offer such as a tech platform, financing, logistics, and post-purchase solutions, it is often a drag on the revenues for the merchants.
This is now leading to a shift of D2C companies from large e-commerce marketplaces led by the rise of individual service providers across the value chain. From developing the platform (website and apps) to driving discovery through social media, partnering with checkout network providers to provide a seamless payment experience and third-party logistics service providers, individual service providers are offering these services at a fraction of the cost. This is enabling D2C companies to come out of the shadows of large e-commerce marketplaces and establish themselves as brands. This is a part of the larger “Unbundling of E-commerce” trend unfolding in India and is enabling them to build a direct relationship with the customers and bring cost efficiencies as well.
The pandemic further propelled this shift and turned the traditional model of selling via intermediaries on its head, as consumers and brands both sought to reach out directly to one another in the shortest possible time.
Replicate the marketplace experience across the value chain
As D2C companies focus on bringing customers to their own platforms, it becomes important to offer a seamless e-commerce experience across the value chain, similar to the one offered by marketplaces. This assumes significance as customers are tuned to a certain experience online and replicating the same on one’s own platform becomes crucial for conversion of browsers into consumers. From a simplified yet intuitive user interface to the checkout phase and post-purchase experience, a unified and seamless experience across the customer journey is becoming the need of the hour for D2C companies. Industry reports suggest that the average cart abandonment rate for e-commerce transactions in India stands at approximately 51% while it can spike to as much as 75% in other sectors given the propensity of customers to leave the cart without making a purchase.
Here, the checkout experience in particular becomes crucial for the lakhs of small merchants and D2C brands coming online who are looking to tap into millions of consumers across the country. Therefore, offering a single login akin to marketplaces, seamless payment experience post-purchase product delivery, and return updates becomes imperative to ensure the brand constantly receives repeat customers which is essential for its success.
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To enable this, smaller merchants and D2C companies need to carefully choose a checkout partner who offers tailor-made solutions that fulfil their nuanced requirements and that of customers. While selecting a checkout partner, merchants should focus on companies that help improve conversions and reduce cash on delivery and returns. This is a testament to the “Unbundling of E-commerce” trend which is democratising the e-commerce and D2C landscape. This trend got a significant push by the government-established ONDC (Open Network for Digital Commerce) which is aimed at democratising the e-commerce landscape, empowering small, medium and large sellers including D2C brands to build their own customer experience.
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These factors are further accelerating the unbundling trend which opens up billion-dollar opportunities for D2C companies and individual service providers to connect directly with consumers and offer a seamless experience. Over the next decade, the merchant ecosystem is expected to witness tectonic shifts in customer behaviour with an increasing number of customers fulfilling their nuanced requirements through niche D2C platforms instead of relying on horizontal e-commerce marketplaces. This democratisation of this space will lead to the rise of new-age merchants and service providers which will propel India to its dream of achieving a $1 trillion digital economy by 2030.
Nitya Sharma is the Founder and CEO of Simpl. Views expressed are the author’s own.