India’s growing D2C landscape: Opportunities, challenges, and solutions

The last few years have seen D2C or direct-to-consumer brands grow phenomenally in India, accelerated by the pandemic and the growing digital adoption that came with it. Now that offline or brick-and-mortar stores are back in action, they continue to thrive across platforms.

According to KPMG, the Indian D2C market value is worth approximately $12 billion in 2022, and is projected to surpass the mark of $60 billion by 2027. The insights suggest that the Indian D2C market will continue to grow, owing to factors such as changing consumer preferences, increased funding, government support, and technological advancements.

Opportunities

As per industry experts, an all-encompassing shopping experience that blends physical and digital worlds seamlessly, meeting all customer needs will solidify the D2C landscape further. Brands following an omnichannel strategy and providing services such as hassle-free return and exchange policies, convenient payment options, flexibility to shop at any time from anywhere, hyper personalised experience, and more will thrive and succeed.

For example, successful D2C brands such as Noise, SUGAR Cosmetics, Wow Cosmetics, and Vahdam Teas have embraced this approach, utilising Shopify's innovative solutions to seamlessly connect with customers through various touchpoints and enabling a consistent experience. By doing so, these companies have not only increased customer loyalty and retention but also boosted their revenue streams.

Ecosystem enablers such as Delhivery on the logistics and warehousing front, Payu from a payments standpoint, and the likes of Zoho Commerce and Shopify are together making it easier for D2C players to follow the omnichannel route for success.

Technology really is at the heart of solving for D2C and delivering goods in time. Delhivery’s Chief Operating Officer Ajith Pai says, “At Delhivery, we rely on technology and automation as the key elements of how we are driving our network to be more reliable.” Delhivery's integrated supply chain solutions enable warehousing for brands to stock closer to their customers’ geographies. With system integration, brands can get the flexibility to optimise inventory placement as they gather sales intelligence. Additionally, Delhivery provides value-added services such as WhatsApp-enabled communication, and doorstep quality control through QC-RVP for an enhanced customer experience.

On how D2C brands can ride the next wave of growth, Priyanka Gill, Co-founder, The Good Glamm Group, and CEO, The Good Media Co, says businesses can improve their operational efficiency, reduce costs, and enhance the customer experience by leveraging various tools and solutions.

“These include inventory management, warehouse management, transportation management, order management, demand forecasting, and supply chain analytics. These tools can help businesses avoid stockouts and overstocking, optimise warehouse and transportation operations, streamline order management, accurately predict demand, and identify supply chain bottlenecks,” she says.

With over 800 D2C brands in India and more than 100 million online shoppers, the D2C landscape is poised for explosive growth to reach the magic $100 billion mark in less than two years.

Anurag Kedia, Co-founder, Pilgrim believes that there is a huge opportunity for brands to be innovative and solution-oriented as there are many white spaces in every industry where consumer needs are waiting to be met.

As per industry experts, Tier II and Tier III cities are still untapped areas that brands can explore and have vast potential especially for the health, wellness and premium luxury products categories.

Additionally, there are opportunities for Indian D2C brands to go beyond borders with some having already gamed cross-border commerce.

Cross-border sales expand the total addressable market for a brand, says Bala Sarda, CEO of specialty tea brand VAHDAM India. This gives investors confidence that a brand can scale and replicate its initial success in other markets.

Challenges and solutions

According to Vineet Khanna, Co-founder, Supertails, D2C brands face numerous challenges in accessing funds and resources, particularly in their early stages of growth.

“One of the significant hurdles is the high upfront costs required for building and launching a new brand, including product development, marketing, and logistics. This can be overwhelming for smaller startups with limited resources. Moreover, securing funding from traditional sources such as venture capitalists and banks is often difficult, as these institutions may be hesitant to invest in untested business models,” Khanna says.

He adds that this is why D2C brands often turn to alternative financing options, such as crowdfunding or revenue-based financing, to fund their growth. “However, these options may come with their own set of challenges, including the need to relinquish some control or ownership of the business.”

Gill believes D2C brands in India can leverage technology and collaborate with enablers such as crowdfunding platforms, social media, ecommerce platforms, payment gateways, and logistics providers to overcome funding and resource challenges.

Khanna opines that D2C brands today have a variety of tech options that can help organise supply chains and logistics. The best tool for automating and enhancing transportation procedures like route planning, carrier selection, and freight tracking is transportation management software (TMS), he says.

“Warehouse management software (WMS) is an additional helpful solution that enables businesses to effectively manage inventory, track orders, and automate fulfilment procedures. Inventory management software can help D2C brands as well because it gives real-time insight into stock levels, reduces the risk of stockouts and overstocking, and facilitates more effective order fulfilment.”

Khanna says “a fully functional and agile control tower” for D2C brands to enhance visibility and customer experience in a digital fulfilment environment is the “need of the hour”.

“Brands can also forecast demand, optimise inventory levels, and boost supply chain effectiveness with the help of predictive analytics and AI-powered supply chain management systems. These technological advancements can help direct-to-consumer brands streamline logistics,” he adds.

“Being customer focussed” remains a critical aspect as per Kedia. “Ensuring that every touch point is customer friendly, the products are very high quality and the brand is easily understood by the customers. From the quality of your products to the clarity of your brand messaging, everything should be tailored to delight your customers and keep them coming back for more,” he adds.

The D2C Playbook

Against this backdrop of opportunity and potential, Delhivery, in association with YourStory, is bringing you The D2C Playbook, which will take a closer look at India’s D2C landscape, and examine how D2C brands are using disruptive technologies to build innovative solutions for the new India.

From crafting a killer brand story to acing the fundraising game and everything in between, the initiative will bring together experts from various established and emerging, high-potential brands along with ecosystem enablers, influencers, and more to solve problems for how D2C brands can thrive in this ever-competitive market.

The D2C playbook will, through a series of videos, articles, interviews, and discussions, deliberate on significant D2C growth drivers and factors such as fundraising, brand building, optimising customer experience, reducing RTOs, international shipping, leveraging AI/ML, payment gateways, sustainability, and more.