Why local brands are choosing to take the D2C route for festive sales
Festivals = festive sales.
It’s that time of the year, and everyone is joining the online sales party.
Like every year, ecommerce giantsand have announced the dates for their annual sales, Great Indian Shopping Festival and Big Billion Days respectively. , , Ajio, and are among the other leading marketplaces pushing sales.
But how are the many small, local brands that have emerged in the last couple of years preparing to serve customers during the great Indian shopping mela?
SMBStory spoke to the owners of various homegrown brands in metros and Tier I and Tier II cities and found that many have decided to take the D2C route instead of relying on ecommerce marketplaces.
A focus on exclusive products and special deals, they believe, will draw customers to shop at their websites or social media pages.
Taking the D2C route
Ecommerce has seen an exponential rise in India in the last decade.
The pandemic changed business dynamics and all brands, big or small, pivoted to online business models. However, it didn’t take long for brands to realise the ‘side effects’ of finding customers in online marketplaces.
“The advantage of selling through ecommerce portals is the sheer visibility that a brand gets but then you also compete with hundreds of brands in all price ranges. Your own website means a captive audience and the chance to engage them much more than what can be done on an ecommerce platform,” tells Chinu Kala, Founder of Rubans, a jewellery brand that sells on Myntra.
Large ecommerce marketplaces help brands with visibility and discovery, a problem many new companies face.
Siddhant Agarwal, Managing Director of hair care brand, feels small, emerging businesses should use ecommerce as an ‘advertising medium’ that can play an important role in brand building.
He says Avimee Herbal started as a D2C business in 2021, selling products through social media channels and its website. Till this July, the brand had garnered Rs 13 crore in sales without any ecommerce presence and external funding. It is only in the last quarter that the Surat-based brand listed itself on Amazon and is now among the top 10 hair oil selling brands.
“But you see the challenge lies in the marketplaces. Despite being one of the top 10 hair oil selling brands, our brand never appears with keyword searches like ‘amla oil’. It is big brands who have covered this space. Now since ecommerce is a discount-driven platform, the most discounted items are listed on top. So where will small businesses like us, who don’t have funds to burn, go?”
“Fake review buying, a practice adopted by many leading brands, adds to the woes of small sellers,” Siddhant adds.
D2C is still at a nascent stage in India, but Statista says it is expected to grow by over 15X from 2015 to 2025.
By 2025, the total addressable D2C market is forecast to grow almost threefold and reach $100 billion. On the other hand, ecommerce marketplace, which is more than a decade-old, is likely to increase to about $96 billion by 2024.
Mandeep Arora, Founder of smart accessory brand, reveals another reason small brands are taking the D2C route: the ‘price war’.
“Ecommerce platforms do not allow us to run our businesses on our own terms. We do not have the power to set our own prices; we have to stay within their margins,” he says.
UBON has grown 5% in FY21 and is set to grow 10% by the end of 2022.
SMBStory also spoke to ecommerce experts to understand the market division.
A conversation with Chirag Taneja, Co-founder of Gokwik, a leading ecommerce enablement company, revealed that maturity in ecommerce marketplaces leads to an increase in commissions, making it unviable for brands to continue doing business with them.
Chirag gives the example of boAt, an audio devices and accessories brand. “boAt has 85% of its sales coming from ecommerce. They are kind of dependent on the marketplace, but now the brand is planning to solve this via deeper penetration into D2C. In a world where consumers are increasingly shopping, owning data is useful for a myriad of reasons.”
Festivals: Best time to attract customers
August to December is the peak time for sales in India as the numerous festivals across the country draw customers. This makes it the best period for all local, homegrown brands to focus on their strategies to penetrate the D2C space.
Speaking about customer acquisition, Sarita Rawat Singh of fast fashion brand Deebaco, says that she considers ecommerce a barometer to form different ideas and gain insights into market trends.
Deebaco is planning several influencer tie-ups for promotions during the approaching festive season. It is running social media campaigns where one can see a new range of products being launched primarily on its website.
Rubans has also curated a special festive catalogue exclusive to its website, and will target people buying jewellery for Diwali and the marriage season that follows.
“We have special schemes for our customers, especially for the festive season. The aim is to convert people who visit our website into customers,” says Chinu of Rubans.
UBON, meanwhile, is planning to launch new products with flat discounts and deals, and create product combinations at an affordable price with extra benefits.
In a nutshell, exclusive products and deals are what help a brand stand out in the D2C segment.
“When marketplaces were formed, they were a supply-deficit zone where any brand was doing well, supported by discounts, free logistics, etc. As these marketplaces scale, opportunities for a brand to compete without distinctions fade. Thus, a new brand in an established category will have to communicate their brand promise outside of marketplaces - mostly through their D2C channels,” Chirag explains.
More margins, more business
While the advantages of a presence on ecommerce marketplaces cannot be ignored, many brands have witnessed a steady growth in their D2C channels by trying different customer acquisition strategies.
Sharing numbers, Rubans claims to have grown 400% from the last fiscal year. Deebaco claims to have seen a whopping 500% growth in D2C business from FY 21.
Avimee Herbals, a year-old-brand, is witnessing a jump of 5% month-on-month in sales.
The plus points that brands have witnessed selling via D2C rather than ecommerce marketplaces are many. They include complete control over the business, easy cost management, deeper understanding of customer preferences, and reduced marketing costs.
Chinu points out that ‘serious brand building’ can happen through the brand's own channel as it provides freedom to engage with the customer at different levels.
“In the initial years the brand has to invest in marketing as acquisition costs are high. Over a period of time, these costs go down as the brand also starts building organic visibility and a decent percentage of sales month on month happen through repeat customers. The logistics cost in D2C or ecommerce is almost the same,” explains Chinu, talking about the margin difference in ecommerce vs D2C.
Mandeep says UBON has been able to increase its profits by eliminating intermediaries.
“A middleman selling something for us only allows us to earn profit from the markdown on the item’s cost. D2C, on the other hand, enables us to make money directly from the customer, thus increasing earnings and winning their loyalty.”
D2C may have its pros, but it comes with cons.
Sarita points out that a brand only has to take care of operations when working with online marketplaces. Taking the D2C route means the startup has to take ‘everything into consideration’.
“This includes the design of the website, logistics, customer support, and many other things as we have to build our brand identity. But this might yield better results in a longer run. In the short term, it is much more expensive to invest in developing your own website, but in the long run, the profit margin from sales will be higher than those made through a marketplace,” Sarita says.