After carving a niche in the online space, direct-to-consumer or D2C brands across FMCG, retail, cosmetics, grooming, personal and hygiene care, among others, are now fast entering the physical store space. The idea behind the move is to tap into a larger consumer base as people still want to touch and feel a product before buying.
In doing so, these new-age companies know they would face competition from the industry’s bigger and established players. These legacy companies already have a stronghold on distribution channels and retail outlets, but D2C brands are still willing to take on the challenge.
Entrepreneurs and executives of some of the D2C brands told FE that the key differentiator between them and legacy companies is that their product offerings are different and the consumer interest is high in their products even from the remotest parts of the country.
Also, physical presence in the brick-and-mortar space gives them higher visibility, which sometimes gets diluted in a flurry of brands present in an online marketplace.
Iffat Haider Jivan, business head of Ed-a-Mamma, which was founded by actor Alia Bhatt, told FE, “People need to see the brand physically and experience it if you really want to create a presence. Today, if you have to establish a brand, you would not want it to be known as a marketplace brand, because there are plenty of them. You may keep selling, but our idea is to build and grow the brand, and expanding into offline space is a natural progression.”
Ed-a-Mamma, which is a sustainable kids wear brand, sold 900,000 units in FY22, up from 100,000-150,000 units sold in the five months of operation since its launch in end October in the previous financial year. The company plans to add new product lines and enter multiple categories in the current year and reach 60 stores across India, along with exploring options to take the brand global.
Varun Alagh, CEO & co-founder, Honasa Consumer, which owns Mamaearth, said that even though the company ventured into the exclusive brand outlet format as an experiment, over the last 18 months, the offline space has shown tremendous growth in terms of scale and revenue.
“Every brand needs to be selling at places where their consumers shop, hence offline will continue to grow in the coming year,” he said.
Mamaearth, a personal care brand that uses natural ingredients, clocked a turnover of `465 crore in FY21. Alagh estimates the revenue to have doubled in FY22.
With multinationals and offline retailers also getting into the D2C market, the competition is intensifying in the online space, too.
However, native D2C players say that the online market is different, and does not fear competition.
Chaitanya Ramalingegowda, co-founder, Wakefit, said, “What traditional incumbents focus on and what we focus on are very different. For large companies built through the brick-and-mortar distributor model, D2C is one more transactional channel to build revenue. For digitally native D2C companies like ours, it is a way to know our customer persona, preferences, pain points and also deliver value added services.”
The company, which is into sleep and home solutions space, closed FY22 with a revenue of `630 crore, with a 53% growth over the `410 crore clocked in the preceding year. Wakefit is also expanding its presence offline as there is more business. “Offline order values are 2x the order value in the online space,” Ramalingegowda said.
Vineeta Singh, co-founder & CEO, SUGAR Cosmetics, which was digital-only till 2017, said, “We always knew that to build a large business we would have to make a strong retail play at some stage. We now intend to strengthen our retail footprint by enhancing the retail marketing and visual merchandising experience.”
Launched as a brand with Indian skin tones in mind, SUGAR aims to be one of the top makeup brands in India and is eyeing a public listing. The company booked operating revenues of over `126 crore in the year ended March 2021, up from `103 crore-plus earned in FY20. Singh said the company’s current annualised revenue run rate is around `500 crore and is expected to reach `2,000 crore over the next 24-36 months.
Men’s grooming brand, The Man Company, launched its first exclusive outlet in 2019 and has more than 52 exclusive brand outlets and over 5,000 offline touch points, said founder Hitesh Dhingra. “Around 90% of our revenue in the personal care category comes from the offline market, and we believe that scaling the business through offline mediums is equally essential.”
The native D2C brands are also tweaking their product offerings to suit offline play in terms of pricing and costs. Menstrual hygiene brand, The Woman’s Company, for instance, has entered the offline space in January with a new range of its bio-degradable sanitary pads catering to the B2B customer segment.
Anika Parashar, founder and CEO, The Woman’s Company, said, “These are also bio-degradable pads made of organic cotton but may not have the same superior cotton like our premium products, and packaging may not be the same. So, we are able to shave-off some costs and with this slight variance those pads are neck-to-neck in terms of pricing with the popular mass brands present offline. However, it is not that we are compromising on our core values and what the brand promises.”
Since January, the company has seen a month-on-month growth of over 115% in sales from offline with presence in Mumbai, Bengaluru, Hyderabad, Kolkata, Delhi & NCR and Jaipur. It is also tying up with certain amount of distributors and modern trade to expand further.
While offline is gaining importance with the D2C players, the companies say it is not that they are abandoning their core base as they continue to grow the online business through innovation, investments, stake sales and strategic tie-ups.
Puru Gupta, co-founder & CEO at True Elements, which sold a 54% sake in the company to Marico in May 2022, said, “We wanted a partner who understands the FMCG industry very well and also believes in the way to nurture this brand as much as we do. We are perfectly aligned on values and core principles thus our strategic alliance was accomplished. Apart from that, it’s business as usual – no tactical calls in brand building or change in operations were made.”
According to Ankur Bisen, senior partner and head (retail, consumer products and food), Technopak, offline presence is essential for digital-first brands to build scale.
India currently has 600 D2C companies and the current size of the market is $2 billion, which is estimated to grow to $20 billion by 2025, according to a Technopak estimate.