India’s DTC boom: Fuelled by technology and Millennials

India boasts a staggering 750 million active internet users armed with smartphones. Even if only a fraction of these users convert into consumers, it spells immense profitability for retail brands. This is precisely what direct-to-consumer (DTC) brands have been capitalising on in recent years.

Imagine if they could bypass middlemen and reduce costs. 

DTC companies are poised for substantial financial gains and a broad customer base. India’s DTC retail landscape has been evolving rapidly, driven by factors like increasing internet penetration, a shift in consumer preferences towards online shopping, and the ascent of digital marketing.

These brands sell their products directly to consumers, circumventing traditional intermediaries, across a range of sectors including fashion, beauty, health and consumer electronics.

Brands such as Boat, Wow Skin Science, Sugar Cosmetics, Lenskart, Licious, and Mamaearth have carved out a niche in the Indian retail market by connecting directly with consumers.

Estimates suggest that India is now home to over 800 DTC companies, with the ecosystem’s market value reaching about US$12 billion in 2022. A report from consultancy firm KPMG states that this value is expected to skyrocket to US$100 billion within the next two years.

DTC’s role in the Indian retail landscape

India’s retail scene is complex, fragmented and dynamic, with various players vying for market share. With a substantial percentage of its 1.4 billion population young and enjoying rising disposable incomes, alongside the rapid spread of technology, India has brands placing big bets on direct consumer experiences.

While bricks-and-mortar stores still dominate the retail landscape, online retail is on the rise. DTC, though still a small part of the overall ecosystem, has shown impressive growth in recent years. Industry experts predict significant further expansion in the DTC market in the years to come.

Indian consumers have become increasingly aware of DTC brands, thanks in part to aggressive digital marketing campaigns and influencer partnerships. These brands differentiate themselves by offering product quality, affordability and sustainability. 

Many initially sold products through their websites and social media platforms but have since expanded their reach by leveraging e-commerce platforms like Amazon and Flipkart.

The backbone of successful DTC brands remains their adept use of technology – employing digital marketing strategies, collaborating with influencers and implementing SEO best practices to reach their target audience directly. Technological innovations have streamlined supply-chain management and warehouse operations. 

Online spending in India is projected to grow at an annual rate of 35 per cent, reaching a massive $200 billion over the next five years.

“With the help of social media marketing, fashion and personal care brands have been enabled to market their products more effectively, be it through their portal or with the help of influencer marketing. Voice-based shopping and direct interactions through WhatsApp and chatbots are also gaining traction,” the authors of the KPMG report wrote. 

Since 2014, DTC start-ups have secured over $2.5 billion in investments. These firms, with their promising potential, remain attractive destinations for both angel investors and venture-capital firms, enabling them to scale operations, expand product lines and enter new markets.

What lies ahead?

Among the indirect beneficiaries of the DTC boom are third-party logistics providers (3PLs), responsible for delivering products even to remote locations. In a vast country like India, where the hinterland is not yet fully connected to metropolitan areas, connectivity and delivery remain critical challenges.

With about 185 million online shoppers, India hosts the world’s third-largest digital shopping base, after the US and China, and its numbers are rapidly increasing. Redseer Consulting estimates that DTC companies shipped about half a billion deliveries in 2022, with this figure expected to soar to 3 billion by 2027.

“3PL solutions complement the DTC segment, as demand varies across cities/regions, and the required logistics investment is substantial. Brands require reliable logistics partners with a wide reach across India to ensure a consistent customer experience,” Redseer partner Mrigank Gutgutia explained. 

DTC players must also invest in building robust supply-chain and logistics networks, a formidable challenge in India’s diverse landscape.  

“The keys to success for 3PLs vary widely, depending on the category of DTC players. However, tech-enabled reliability, shipment protection, and competitive pricing are the most sought-after attributes by DTC brands in India, with a comprehensive pan-India reach being a common expectation,” Gutgutia added.

Amidst fierce competition from both peers and other retail players, DTC start-ups must maintain sustained marketing efforts and prioritise customer satisfaction to thrive in the market.

The post India’s DTC boom: Fuelled by technology and Millennials appeared first on Inside Retail Australia.