Of digital-first consumer brands and challenges3 min read . Updated: 12 Nov 2020, 09:09 AM IST
- A sound, tech-enabled ecosystem is critical to build trust for digital-first brands
Bengaluru-based Sreedhar Prasad, an independent internet business expert, is about to enter the segment that he best understands. He is gearing up to launch a slew of online or digital-first brands, the details of which are under wraps.
Prasad is not the only one ready with a business plan for such direct-to-consumer (D2C) brands, a category that is seeing an unprecedented growth. Hundreds of startups aim to establish their online presence in varied consumer product categories, more so in the post pandemic era, which has accelerated digital adoption in the country. This is borne out by Shoptimize, an eight-year-old D2C e-commerce platform that helps brands drive online sales. In the last six months Shoptimize’s business has doubled, says Mangesh Panditrao, its chief executive officer and co-founder. The company provides the technology back-end for internet businesses, as well as analytics, insights and digital marketing.
Panditrao says that even pre-covid they were working with a clutch of new-age D2C brands but as the pandemic hit offline sales, more brands started relooking at their digital presence and strategies. “A traditional, large fast-moving consumer goods (FMCG) client of ours is launching digital-first brands," he said.
At present, Shoptimize counts brands such as Whirlpool, Luminous, and Haldirams among its bigger clients looking for digital sales solutions. It also services several digital-first startups in the footwear and beauty categories.
A recent report by Avendus Capital, the investment banking arm of financial services firm Avendus Group, said that India’s e-commerce story is being written by its 639 million internet population, which has added 80 million online shoppers in the last three years alone to touch 130 million today. Consequently, D2C brands may be looking at a $100 billion addressable consumer opportunity in the country by 2025. Since 2016, more than 600 D2C brands have entered the market. The growth in such brands is driven by the evolving consumer. Women have emerged as a new consumer class with the final say in more than half the household decisions and they now form almost half the online shoppers. “Consumption trends are also evolving and large pockets of product and price white spaces remain untapped by industry incumbents. New-age consumers seeking niche and customized products are underserved by traditional players," it said. Besides, the opportunity is huge as the overall contribution of e-commerce to India’s total retail is still about 4% and online spending is expected to touch $200 billion over the next five years, Avendus said.
According to Ankur Pahwa, partner at EY in the strategy and transactions practice and also the national leader for the e-commerce and consumer internet sector, companies are tapping into digitization opportunities on a war footing, with D2C and omni-channel models witnessing an uptake. “With the exponential rise in the number of first-time users getting online to meet their shopping requirements, brands and companies will need to have their presence online either through marketplace listings or the more lucrative D2C channel," he said. Online channels have been able to quickly bounce back after the lockdown and have shown going digital can help ring-fence disruption, Pahwa said.
Among D2C brands, there is a surge in fashion, electronics, beverages, mother-child care, and various other FMCG categories. A host of niche categories such as health food, wellness and organic products, and hand-made items are also finding increased traction among customers.
While internet experts paint a rosy picture of the future of internet-first brands, they come with their own unique challenges. The biggest one is creating a digital-first brand itself. “It’s the most difficult part. Only when you create a brand comes loyalty and the consumer returns. Else, in a marketplace, often the cheapest products sell," says Panditrao.
Also, instances of counterfeits or low-quality products, bad experience and reviews, fake sellers, and cybercrime can cause severe harm to both customers and the brand, Pahwa said. So a sound, tech-enabled ecosystem is critical to build trust. Monitoring the cost of customer acquisition is equally important.
Finally, building scale online is a challenge. Prasad says that once D2C brands achieve a certain turnover, they need to open offline stores as the importance of footfalls in stores cannot be ignored.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.