D2C Brands To Focus On Customer Acquisition And Retention
D2C is one of the fastest-growing segments in the country
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The D2C sector is growing tremendously in India and around the globe. According to data by KPMG, India currently has over 800 D2C brands, with the sector being worth approximately $44.6 billion in 2021 and projected to touch $100 billion by 2025. The demand for these online-first brands is increasing by the day.
D2C is one of the fastest-growing segments in the country, which is seeing multiple new trends. Here is a look at what experts predict about space in 2022.
Diversification and Expansion
"Given increased competition in the space, we feel brands will need to diversify their consumer acquisition channel and focus on retention. On the new acquisition side, this will mean brands will start focusing on organic traffic, content-first approach, influencer marketing, better conversion technologies, offline expansion and spending on brand-building efforts," said Rahul Chowdhri, Partner, Stellaris Venture Partners.
He added that on the retention side, CRM and loyalty programs will become the focus for these companies. "Brands will also try to go international if their value proposition sticks with the global audience," he said.
According to Raman Roy, co-founder, IAN, the pandemic accentuated the personalization and the need for omnichannel, thus going forward, personalization and an omnichannel approach will be key focus areas for businesses.
Additionally, roll-up commerce or Thrasio style commerce is gaining a strong foothold in India. With that, we may see many small online brands getting added to the portfolio of these companies. Rohit Krishna, general partner, WEH Ventures, believes we will also witness the emergence of new commerce platforms/tools that would help DTC brands perform better online.
Experts agree that 2022 will be a year of growth and evolution for the D2C segment, which will lead to fierce competition. "For the next year, the competition in the market is expected to rise further, with more and more brands adopting the D2C route which has also altered customer expectations. Nowadays, consumers expect a frictionless post-checkout experience that includes tech-first solutions such as one-step check-out, pre-filled addresses, and RTO predictions, among other aspects of the customer journey," said Saahil Goel, CEO and co-founder, Shiprocket.
According to the Unicommerce emerging e-commerce segment report, D2C brands are expected to expand into tier-2 and tier-3 cities even more and thus expected to open up multiple warehouses to be able to cater to this demand.
"To engage with the evolving consumer needs, we expect to see a lot more innovation in customer engagement models such as more evolved engagement on mass platforms such as WhatsApp, VR/AR led models, live commerce etc.. Similarly, post-purchase experience will increasingly become a focus area with D2C brands ensuring most of their deliveries happen within 24 hours. We expect to see increased investment in technology and processes to ensure D2C brands can sustain the growth momentum," said Kapil Makhija, CEO, Unicommerce. He added that D2C brands will continue to find niches in terms of product, service, positioning etc. to be able to attract consumers and tackle competition.
In addition to this, tech will continue to be the backbone of existing companies and new start-ups accelerating the D2C revolution. "The pandemic not just opened up new markets for startups, but helped several of them to diversify into sectors that are bucking the trend with the creation of demand pockets. With deepening digital acceleration, innovation is playing a crucial role, adding value to the rapidly growing startup ecosystem. Eight to ten years of normal consumer awareness has been accelerated and has happened in less than two years. This is unlikely to reverse," said Roy.
Categories That Will Grow Further
According to the above mentioned Unicommerce report, some of the high growth categories for 2021 are: beauty and personal Care (143 per cent ), health and pharma (119 per cent) and FMCG (74 per cent) and these categories are expected to continue their growth momentum, with increased availability of funds, increased consumer awareness along with robust supply chains being set up by these D2C brands.
"The particular sub-segments which are expected to grow include: face care, gaircare, nutraceuticals and oOrganic foods," said Makhija. Krishna believes apparel, accessories will see an uptick as the market opens up.
"This year, electronics, personal care, apparel, healthcare, and groceries emerged as the top product categories. This is likely to continue in 2022, especially healthcare, personal care, and groceries, as there is now an increased focus on health and hygiene since the pandemic's onset. We also expect some new categories to witness an uptick alongside the existing ones," said Goel.
Home, kitchen, grocery, small electrical appliances, health & wellness are some of the newer categories that Chowdhri is bullish about, apart from BPC and fashion space.
Offline will be key in brand building and brand awareness, says Roy. "Offline will be used to accentuate what is online and more "experience" offline locations will happen," he said.
Establishing physical stores is key for most online-first brands even today. For, the experience it offers is unmatched and once the pandemic is behind us, consumers will want to experience the "touch and feel' that offline shopping offers. So, for brands, offline expansion becomes pertinent after they achieve scale in their online play. "Once there is a certain scale achieved, offline channels become important for the online first brand. They have the brand pull to command the shelf space and consumer offtake is also better. All said and done, offline still is a large market in India and retail presence helps improve the brand perception in the consumer mind," said Chowdhri.
Krishna believes that offline expansion will start happening more through quick commerce platforms like Instamart, Zepto etc, rather than traditional GTs.
An omnichannel approach is what most D2C brands are expected to take in the coming years. "Following the pandemic-induced extended lockdowns, most brands have shifted largely to online mediums since offline channels have become a cause for concern due to the apprehension surrounding physical contact with other individuals. However, this is certainly not the end of offline channels. We expect more hybrid models coming up that have a mix of online and offline for any brand to be successful these days," said Goel.