FY-23 Will Be the Year of D2C for the Post-Pandemic Indian Market

There are over 800 successful D2C brands in India today, with a sector valuation of $44.6 billion (as of 2021) – according to a KPMG report. The valuation of these D2C brands refers to those of online first brands such as Lenskart, Wakefit, PeeSafe, Ozaiva, Candes and others.

This is supposed to grow to over $100 billion by 2025. This activity also explains the attention from some of the eCommerce roll up brands like Mensa / GOAT Brand Labs, in this sector.

However – our prediction for FY23 is that offline first / omnichannel brands (the likes of FabIndia, Bodyshop, Biba, Pothys, Soch, and others) would get super serious about the D2C channel. 

They will make more investments in this channel – they will hire better talent dedicated to this channel.

After China and the US, India had the third-largest online shopper base of 177 million in 2020 – which I’m guessing now would be pushing closer to 200 million in 2022. 

The pandemic really accelerated this trend. There were a few factors for this: 

  1. Brands had to figure out how to reach out to customers: During the early 30 – 60 days of the lockdown (April and May ‘2020) there was no way for the brands to do business except for their D2C channels. Those that didn’t have it – launched a quick and dirty version online. Those that did – focused on it straight away.
  2. Brands had the time: With stores shut – they found the headspace to focus on their D2C initiative. So that focus itself upped the customer experience of the D2C store.
  3. Restricted access for brands on Marketplaces – for non-essential items: Customers had time as well and with shopping restricted to essentials on marketplaces – a lot of customers were open to explore the world of D2C brands (partly also due to the fact that time being spent online skyrocketed).
  4. Brands seeing some traction – started to spend some more money on their D2C initiatives fueling further growth of traffic and awareness of the channel.
  5. 2 – 3 months of focus by the Brand’s management team on the D2C channel was enough for that change to stay – especially when it was the only source of revenue for an entire quarter.

So by the end of FY21, along with Brand Stores, MBOs, Marketplaces – D2C channels also firmly became a key channel in the brands omnichannel journey.

Like mentioned above – the D2C channels were set up / optimized at fast turnaround time – while establishing a functional D2C eStore, the customer experience was still lacking in many ways. Post the 2nd wave in mid 2021, the brands started implementing the upgraded versions of their D2C platforms.

Digital budgets went up. The management got involved in actively understanding the metrics of the D2C channel. The channel got more focus and the revenues being driven from it has been surprisingly good for many retail leaders. 

In FY22, the focus was still on learning and smaller digital marketing investments – it was about understanding the ROI for the channel, what kind of metrics to track for the D2C channel. And then as the buzz around the valuation of the online first D2C brands started becoming louder – omni channel brands have now set higher goals and targets for their own D2C revenues. 

So what does a bigger focus in FY23 on D2C look like? 

  1. Better UI/UX – Where design and technology meet. Cleaner interfaces that load fast across devices.
  2. Upgrade of Platforms – More openness to invest in enterprise grade platforms of Magento and Shopify.
  3. Better Coordinated Creatives for Promotions (Banners / Emailers / Push Notifications) – Better coordinated planning of creative shots
  4. Conversion Rate Optimization – Critical aspect – but the most ignored one by brands
  5. Hyperlocal deliveries in multiple cities – With Quick commerce expanding, brands will definitely try this out in cities where they have stores.
  6. Higher Digital Spends – Having done some trials last year – brands this year will spend a lot higher.
  7. Increased Spends on Marketing Automation – More adoption of tools which can help personalize the experience better

Analytics – More brands want to know how analytics can help them scale – but they’re not sure how to embed that capability around their day-to-day.

At the most recent Retail Leadership Summit organized by the Retailer Association of India, heard from Domino’s India President, Rajneet Kohli, that by the time the person adds a 4-cheese pizza and goes to checkout – there is a 92% chance of that order converting, so they start doing the prep work for the Pizza, and that piece of actionable data allows them to delivery 3 – 4 minutes faster. And that increases the NPS even higher (already at a 70%+ positive rating).

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