All D2C Brands Looking to Grow, Will Inevitably Have to Go Offline

Sheth believes it is easier now than ever before to start a D2C brand

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It is raining accolades for Skillmatics since 2021 when it was awarded the Global SMB of the Year by Amazon. It ranked 16th on the Financial Times List of 500 Fastest Growing Companies in Asia Pacific, 2022 and 5th on the Economic Times List of 150 Fastest Growing Companies in India, 2022 last month.

Skillmatics
Dhvanil Sheth, founder and CEO, Skillmatics

"Today, we are at INR 150 crore in revenue and growing y-o-y. Not only are we a digital first brand, we have largely been a profitable digital first brand for most of our life because of a very high base of repeat customers, says Dhvanil Sheth, founder and CEO, Skillmatics."

Explaining their stupendous growth, he says, "Way back in 2016-17, it struck me that it would be wonderful to build a digital first brand, as technology was enabling a young company to communicate and distribute products to the consumers. With Skillmatics, our vision was always to think global from day one."

He also attributes this to the investors' role. Funding from Sequoia Capital imparted them the credibility to make partnerships and hire talent.

Skillmatics also featured as the largest start-up in their category in India and the US. Says a proud Sheth, "We are not just selling overseas, we are actually dominating those markets. We are now India's first ever brand, across categories, to sell in Walmart, Target, and other large retailers in the US. So, it's one thing to go global online. We managed to make the transition from online to offline as well. We are also partnering with Marvel, Disney and Harry Potter."

So, is going offline inevitable even as a digital first start-up? Says Sheth, "Yes, I have always believed so. To become an INR 500-crore company and to address the market, you have to go offline. All D2C brands looking to grow, will inevitably go offline, says Sheth."

On how the $US 100 billion market toy market has evolved from the time they started, he says, "From our perspective, the market size is really not a constraint, just because of how large the global pie is. What has changed since 2016-17 is, the market continues to move online globally, resulting in the dramatic increase of the share of e-commerce sales year after year and COVID accelerated that in India, in the US and Europe too."

"From a consumer perspective, COVID, accelerated the shift to educational products and a greater demand for educational learning resources and games."

"Secondly, at Skillmatics, we primarily sell products made from paper/wood, ditching harmful plastics, paints and toxins."

"Also, the market is becoming more organised from our distribution perspective. The penetration of the development of this category has grown significantly in India."

"The other big change is, after the introduction of BIS norms, 80% imports from China have dropped by 75%, opening up the market to more Indian players. We have a bigger opportunity and lesser competition; extremely exciting times from an India perspective as well."

Speaking about building a D2C brand in India, Sheth sharing a positive perspective he says, "I think there are challenges to building a D2C brand in India or globally. But I would say that, I don't think it's ever been easier to start a D2C business than ever before. The payments/logistics/delivery/website hosting have been solved, there are marketplaces and contract manufacturing is now widely prevailing."

On the current challenges he says, "However, because we run a global business, the international shipping costs have gone up by 400% in the last 3-4 years. On top of that, there is a lack of consistent availability of containers."

"Coming out of COVID, the government printed so much money globally, that there's been so much of cost inflation. As costs go up, product/paper/packaging costs go up, and as fuel gets more expensive, transportation becomes more expensive globally."

On the company's expansion plans for FY 2022-23, he says, "One, we are expanding significantly into Europe this year, as well as a new region. Secondly, to continue to build a more omni-channel distribution in every market that we are in. Third, we are expanding Skillmatics to include several exciting new products and product categories. Lastly, we are looking at acquisitions of smaller start-ups within the toy and game space, both in the US and in India. We will also close Series B."

FACTSHEET

  • Best seller: Guess in 10
  • Total SKUs: Around 100, 20 of which contribute significantly to the business.
  • Team size: 5-6 (USA) and 125 (India)
  • Repeat customer ratio: High
  • Online platform resulting in maximum revenue: Amazon
  • Turnover for FY 2021-22: $US 20 million (INR 150 crore)
  • Split between offline and online sales: 70% online, 30% offline