In the year gone by, India saw a steep rise in the demand for new-age D2C products. With healthier and more environment-friendly alternatives at challenging prices, the sector became home to 600 or more direct-to-consumer brands with an estimated market size of over $66 billion in 2023 (Statista).
While 2023 was all about expanding to offline retail stores, catering to the premium and luxury consumer, going public, reaching tier II and III cities or securing record-setting fundings, the D2C industry is quite hopeful that 2024 augurs even better times.
According to Varun Gupta, Co-Founder, BOULT, “In 2024, the Direct-to-Consumer (D2C) market is poised for disruption in ‘conscious fashion’, travel, lifestyle and home decor categories, with increased expenditures expected to shape a dominant trend throughout the decade.”
The D2C landscape has fully embraced omnichannel strategies and 2024 is expected to be a period of substantial growth for the industry, with a key emphasis on the pivotal role of value-added services. The 'Make in India' initiative will also play a crucial role particularly when it comes to consumer technology brands, fostering local manufacturing and contributing to the industry's overall expansion.
Trends to watch out for
Moreover, Bala Sarda, Founder & CEO, VAHDAM India believes, sustainability, innovation, and personalised experiences are expected to be pivotal factors for the success of D2C brands in the coming year.
Deepak Gupta, Co-founder, Bombay Shaving Company said, "The future of D2C lies in the experience delta they can create over other online and ecommerce platforms where consumers access their products."
Kshitij Ladia, Co-founder of D2C Insider Community has observed a different trend. “The year 2023 was a tough year for D2C brands since the overall funding environment had dried up.”
Perhaps, the fertile landscape of D2C also makes the ladder to success very competitive. D2C brands that can adeptly adapt to changing consumer behaviour are more likely to come up trumps.
“The role of an omnichannel presence is expected to be a key determinant of success in the D2C industry. Brands that seamlessly integrate their online and offline channels, providing a cohesive and integrated customer experience, are likely to gain a competitive edge,” highlighted Sarda.
New names to add spice
Uptownie’s CMO & Co-founder, Shivani Agarwal said, “There are a lot of new entrants in the fashion and apparel industry, it will be interesting to see who can take the most market share."
She added, "Personal branding is one technique that will help business entrepreneurs have an edge since people like to know who they’re buying from.”
But will these drivers of growth like premiumisation or tier II and III market outreach stay consistent in the upcoming year as well? Industry experts say yes.
Luxury push
Deepak highlighted, "The Indian consumer is happy to spend more for the benefit of a superior or specialised experience. While 2023 is indicative, we're likely to see this trend play out emphatically in the coming years. A younger Indian consumer, more exposed and aware will be at the forefront of this."
“We always think India is a market with a price-conscious consumer but India has become a place where the consumer wants value,” Agarwal of Uptownie said, “In order to cater to a value conscious consumer, you can't be giving a very low-quality product. Hence, premiumisation is definitely the way to go ahead.”
Spotlight on tier markets
The VAHDAM executive said, “In India, while our primary customer base has traditionally been from tier I cities, there is a noticeable shift with increasing contributions from tier II cities. This trend is propelled by a rising awareness of product quality, reflecting consumers' growing discernment and emphasis on reliability and authenticity in their purchasing decisions.”
For Bombay Shaving Co., Deepak elaborated, "Metros and Tier 1 still contribute to the majority of our revenue and we expect it to continue for the coming quarters as well. But on the whole, the long tail has become even longer as the brand gets more penetrated through platforms like flipkart, meesho and social commerce."
Nevertheless, few challenges were faced by the D2C industry in 2023 and they proactively plan to solve them this year.
The D2C industry became a very hot space in 2022, as per Ladia. Everyone found it to be a lucrative business model. In 2023, a lot more brands stepped in, looking at the entrepreneurial success stories of other pandemic-born D2Cs.
He further explained, “So if a brand was fighting with five people, by the end of the year that number went up to 20. And each one of them were nibbling away the share from each other. The worst part was none of them had a solid differentiated product.”
Hence, Ladia underlined, setting up a brand is easy, going offline too doesn't require much of a CapEx but scaling up a brand has been a challenge in 2023. “This year till the time a brand doesn't have an extremely differentiated product and a proper scale-up plan, they shouldn’t raise funds.”
Bombay Shaving Co has noticed that maintaining healthy customer acquisition costs with efficient performance marketing and improving cost of operations at supply chain levels without deteriorating consumer experience are two major challenges for D2Cs currently.
In 2023, the industry also encountered a significant challenge in the form of intense competition from major e-commerce giants such as Flipkart and Amazon, as per BOULT. The market landscape was dominated by these industry giants, posing a threat to the growth and visibility of D2C businesses.
Varun explained further, “To address this formidable challenge head-on, we plan to differentiate ourselves by introducing exclusive D2C products that offer unique value propositions to consumers. This strategic move is aimed at not only carving out a distinctive niche in the competitive market but also at establishing our brand as a preferred choice for consumers seeking innovative and specialised products.”
Furthermore, Ladia shared the top three trends for 2024. “The need for building a fundamental brand and a business that doesn't look like a typical tech model will continue because the two get valued very differently.”
He added, larger or mid-sized brands will be looking at offline as a very critical channel. Some seeds were sown last year, this year there will be significant expansion.
“A lot of brands were focussing on marketplaces being their key focus of business in the past and this year the focus is going to be more on their website since the former is becoming extremely tough to make money on,” he concluded.
