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What Is Location Strategy And Why Is It Key For D2C Brands Today? Many D2C brands have captured the online market and are now focusing on offline expansion

By S Shanthi

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

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The pandemic came as a blessing in disguise for some businesses. One such segment or business model that benefited the most is direct-to-consumer (D2C). And today, despite the unstable market conditions, D2C brands are growing consistently.

According to a report, D2C brands in India are growing at a Compound Annual Growth Rate (CAGR) of 40 per cent and the combined revenue of D2C brands is expected to hit $60 billion by FY27 from $12 billion in FY22.

While digital channels remain a great enabler for these brands, now that many of them have captured the online market, they are focusing on an offline expansion, with omnichannel being the next frontier. They are also moving beyond cities and towns beyond metros.

Thus, an effective location strategy has become crucial for D2C players.

While various factors determine the success of any D2C brand, be it offline or online, finding the right location is an often-ignored but crucial factor in finding offline success. This is particularly important for the India market, considering the population, diversity and traffic congestion across cities. "Attracting & retaining customers and employees, increasing productivity, and other factors all must be considered when deciding where to locate your brick-and-mortar stores. Setting up your store in the right place at the right time, as well as creating brand awareness, will help your brand grow and improve your customer's experience," said Vineeta Singh, co-founder and CEO, SUGAR Cosmetics.

SUGAR Cosmetics has 140+ brand-owned stores with 45,000+ retail touchpoints in over 550+ cities. It is also expanding into international markets such as the United States, the United Arab Emirates, Russia, and Nepal.

"A good location strategy will enable a brand to obtain optimal shelf space in retail stores that are aligned with the organization's needs and objectives, bringing them closer to their consumers. In the long run, this will allow the brand to maximize opportunity while minimizing costs and risks. This was extremely beneficial to us and played a significant role in SUGAR's offline expansion journey," added Singh.

In terms of location, the brand is looking at tapping into the smallest Tier II and III cities to set its own stores. It claims to have received a good response from its stores in Tier 2 cities like Siliguri, Karnal and Bathinda, to name a few. Keeping this in mind, the startup is looking forward to opening more of its own stores in these Tier II and III markets. Currently, about 55 per cent of SUGAR's sales come from its retail stores across the length and breadth of the country, compared to a pre-pandemic 35 per cent.

Another determinant of retail store viability is the rent-to-sales ratio and location strategy is largely about optimizing it. "The strategy should be making store unit economics work and driving awareness, consideration and trials by being present at the right locations. As D2C brands make the move from online to offline amidst a tight funding situation where unit economics can make or break the business, it's perhaps the most important thing to get right for D2C brands," said Shankar Prasad, founder and CEO, Plum.

Some of the things that go into location mapping for Plum are store unit economics, a cohort of brands around the store, overall beauty products consumption propensity of the catchment/micro-market and presence of colleges or large office blocks in the vicinity that can help the brand drive awareness. "Sometimes brands tend to take up location only because of the visibility, but I believe that too many of these "prestige outlets" early in the retail journey is not necessarily good, because fundamentally we need to establish the viability of the model before looking for locations whose sole purpose is image boosting," added Prasad.

D2C brands say that being visible offline, where the consumer is, is as important as being visible online. "A robust location strategy ensures that your brand gains consumer attention as soon as they enter the space you're located in. It includes taking into consideration the top 2 or 3 brands within the same category and making sure that your brand gets primary placements in order to outperform the peers. Secondary placements in activation spaces close to top-performing brands and alongside brands that come with a certain legacy further help with the positioning of MyGlamm as an alternative new-age beauty brand. What are the things you look into on your offline expansion journey, in terms of finding the right location?," said Sukhleen Aneja, CEO, The Good Brands Co, The Good Glamm Group.

The brand is of the opinion that in metro cities, it helps to be located in a popular neighborhood in a significant way. For instance, its flagship MyGlamm store occupies 3,000 square feet in the heart of Juhu, Mumbai. "A location that is centralized and runs consistently will always help in gaining feedback from different demographics," added Aneja.

S Shanthi

Entrepreneur Staff

Former Senior Assistant Editor

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. 

 

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