Investments in the D2C Ecosystem Redefining India's Retail Landscape

D2C today sounds like a new, fancy trend that has just been picking up over the past few years. But the core concept of Directto-Consumer has been in existence for decades: technically, the exclusive brand outlets in malls and theice-cream cart on your street werealso D2C.

 The litmus test being do you get to control the user experience from start to finish. However, thanks to rise of ecommerce infrastructure (Flipkart, Amazon, Delhivery, etc), smartphone and internet penetration (esp. Jio) and the sheer influence of social media (Facebook, Instagram) on today's consumer, the consumption landscape in India has been disrupted beyond anyone's imagination. A quick comparison between our parents' and our bathroom shower will help understand the effect of this disruption- our parent's shower probably had a soap from Lux, a shampoo from Head and Shoulders, and a face cream from Fair & Lovely - all brands owned by FMCG giants with hundreds of crores at their disposal. A typical millennial or Gen Z consumer's shower will probably contain body scrub from mCaffeine, a customized shampoo and conditioner from Vedix, face wash from Mamaearth, and serums from Minimalist- all brands started by first generation entrepreneurs.

How were these new age brands able to thrive with such limited resources, and why are investors pouring money into such brands? There are 4 key areas where D2C brands have an edge over the traditional model - distribution, proximity to consumers, marketing, and speed of decision marking.

DISTRIBUTION

This is one of the most important differences - typically, post a 1-2year R&D and consumer survey cycle and prior to launching a new product nationwide, a traditional FMCG organizationwould usually hire a multi-layer sales and distribution team comprisinghundreds of employees, and get the products listed in lakhs of stores. These stores would need to get serviced manually on a periodical basis and customer feedback collected at various steps. This not only is cumbersome, expensive and time consuming but also comes with a host of other challenges such as inventory management, accounting complexities and manual payment & collections cycles and lack of transparency.