Having carved out a niche in the online space, direct-to-consumer or D2C brands in FMCG, retail, cosmetics, personal care, personal care and hygiene, among others, are entering quickly in the physical space of stores. The idea behind this decision is to tap into a wider consumer base, as people always want to touch and feel a product before buying it.
In doing so, these new-era companies know they will face competition from larger, established players in the industry. These incumbents already have a grip on distribution channels and points of sale, but D2C brands are always up for the challenge.
Entrepreneurs and executives of some of the D2C brands told FE that the main differentiator between them and traditional companies is that their product offerings are different and consumer interest in their products is high, even in the most remote regions. most remote parts of the country.
In addition, the physical presence in the physical space gives them greater visibility, which is sometimes diluted in a multitude of brands present in an online market.
Iffat Haider Jivan, business owner of Ed-a-Mamma, which was founded by actor Alia Bhatt, told FE: “People have to see the brand physically and experience it if you really want to. create a presence. Today, if you have to establish a brand, you wouldn’t want it to be known as a market brand, because there are so many of them. You can keep selling, but our idea is to build and grow the brand, and expanding into the offline space is a natural progression.
Ed-a-Mamma, which is a sustainable children’s clothing brand, sold 900,000 units in FY22, compared to 100,000 to 150,000 units sold in the five months of operation since its launch in late October. of the previous year. The company plans to add new product lines and enter multiple categories in the current year and reach 60 stores across India, while exploring options to expand the brand to India. global scale.
Varun Alagh, CEO and co-founder of Honasa Consumer, owner of Mamaearth, said that while the company has ventured into the brand-exclusive format on a trial basis, over the past 18 months the offline space has grown tremendously in terms of scale. and income.
“Every brand needs to sell in places where their consumers buy, so offline will continue to grow in the coming year,” he said.
Mamaearth, a personal care brand that uses natural ingredients, recorded revenue of `465 crore in FY21. Alagh estimates revenue doubled in FY22.
With multinationals and offline retailers also entering the D2C market, competition is also intensifying in the online space.
However, native D2C players say the online market is different and does not shy away from competition.
Chaitanya Ramalingegowda, co-founder of Wakefit, said, “What traditional incumbents focus on and what we focus on are very different. For large enterprises built on the physical distribution model, D2C is one more transactional channel to generate revenue. For digital native D2C companies like ours, it is a way to know our customers’ personality, preferences, pain points and also to provide value-added services.
The company, which specializes in sleep and home solutions, closed FY22 with revenue of 630 crore, growing 53% from 410 crore a year earlier. Wakefit is also expanding its offline presence as there is more business. “Offline order values are 2x the value of orders in the online space,” Ramalingegowda said.
Vineeta Singh, co-founder and CEO of SUGAR Cosmetics, which was digital-only until 2017, said: “We always knew that to build a great business, we had to play a significant role in retail at some point. given. We now intend to strengthen our commercial footprint by improving the retail marketing and visual merchandising experience.
Launched as a brand with Indian skin tones in mind, SUGAR aims to be one of the top makeup brands in India and is considering a public listing. The company recorded operating revenue of more than 126 crore in the fiscal year ended March 2021, compared to more than 103 crore in fiscal 2020. Singh said the current annualized revenue rate of the company is around 500 crore and is expected to grow to 2,000 crore in the next 24-36 months.
Men’s grooming brand, The Man Company, launched its first exclusive outlet in 2019 and has more than 52 exclusive outlets and more than 5,000 offline touchpoints, said founder Hitesh Dhingra. “About 90% of our revenue in the personal care category comes from the offline market, and we believe it’s equally critical to scale the business through offline mediums.”
Native D2C brands are also adjusting their product offerings to accommodate offline gaming in terms of price and cost. Menstrual hygiene brand, The Woman’s Company, for example, entered the offline space in January with a new line of its biodegradable sanitary napkins aimed at the B2B customer segment.
Anika Parashar, Founder and CEO of The Woman’s Company, said, “These are also organic cotton biodegradable pads, but they may not have the same premium cotton as our premium products, and the packaging may not be not be the same. Thus, we are able to cut some costs and with this slight gap, these pads are neck and neck in price with the popular mass brands present offline. However, it’s not that we’re compromising our core values and what the brand promises.
Since January, the company has recorded over 115% monthly growth in offline sales with presence in Mumbai, Bengaluru, Hyderabad, Kolkata, Delhi & NCR and Jaipur. It also partners with a number of distributors and modern businesses to develop further.
As offline gains prominence with D2C players, companies say it’s not that they’re abandoning their core base as they continue to grow the online business through innovation, investments, sales of holdings and strategic mergers.
Puru Gupta, co-founder and CEO of True Elements, which sold 54% of the company’s sake to Marico in May 2022, said, “We wanted a partner who understands the FMCG industry very well and also believes in the way to feed it. scores as much as we do. We are fully aligned on core values and principles, thus our strategic alliance has been realized. Other than that, business is business as usual – no tactical calls to brand building or changing operations have been made. »
According to Ankur Bisen, Senior Partner and Head (Retail, Consumer Products and Food) at Technopak, offline presence is key for digital-first brands to grow.
India currently has 600 D2C companies and the current market size is $2 billion, which is expected to reach $20 billion by 2025, according to an estimate by Technopak.
