In 2016, new parents Ghazal and Varun Alagh launched Asia’s first MadeSafe baby care brand. Cut to less than five years later. MamaEarth is now a leading personal care brand with 120 products and a business size of over Rs 500 cr per year. Its recent fundraise saw the direct-to-consumer (D2C) company valued at about Rs 5,400 crores. This, in an intensely competitive market, where global giants like L’Oréal, Unilever, and P&G play.
Is MamaEarth an outlier? Or does it herald many more runaway D2C successes that India will see, more unicorns in the making? To understand what the answer could be, we have to go back in time a little to see how the Indian economy has changed structurally and how these changes have come together to create a potent cocktail.
The Democratisation of Choice, Content and Commerce
How low can you go?
Even before the pandemic, India was home to the lowest mobile data rates in the world. Covid saw these rock-bottom rates plunge by another 65%, to about Rs 6 per GB. To fully appreciate this, you should know that mobile data in the second-placed US costs around Rs 595 per GB.
How inexpensive can it get?
We are now one of the largest smartphone markets in the world with over 30 brands in play, and entry models priced as low as Rs 4,000.
How many languages can you speak?
Translation tools, language keyboards, and voice search and chat have made the internet accessible to all, whether in urban India, or in Bharat. Data suggests that in the next decade itself, half of all Indians will access the net in regional languages.
How easily can you pay?
Even before demonetisation struck, the NPCI introduced the mobile-based payment platform, UPI. No credit or debit cards, no risky storage of user information, no elaborate infrastructure – just simple, secure, seamless payments whenever you wished to make them.
How far can you deliver?
Even as Flipkart and Amazon delivered to more and more locations with each passing year, the logistics and delivery ecosystem evolved to keep pace with the growth in e-commerce. Today, you can have your package delivered to 28,000 PIN codes across India – widening The Addressable Market (TAM) well beyond metros and mini-metros.
How well can you connect?
India’s content creators are moving on to international celebrity interviews, Netflix specials of their own, and of course, funding. The creator economy itself is poised to grow 4x in the next three years.
Inexpensive data, affordable smartphones, multilingual access, seamless payment gateways, an expanded delivery network, and a content creation industry have combined to create an e-commerce ecosystem custom-built to serve India’s 600 million mobile phone users. In fact, each of these areas are only racing forward to make shopping more tempting, and more frictionless. For instance, Buy-Now-Pay-Later (BNPL) services are set to reach almost 10% in the next few years. Internationally, websites like Thingtesting are an online shopping aisle for D2C brands, enabling discovery, sharing and reviews. Fireside Ventures’ latest investment, Smytten, too, helps consumers discover products, while delivering an on-brand pre-purchase experience. Several technology enablers like Haptik, Limechat, and WareIQ are making the customer journey more helpful, more trackable, and more delightful.
In a structural and fundamental way, India has democratised access:
- for Indians everywhere to Choice, Content and Commerce, and
- for small companies with not much capital to Consumer, Communication and Communities
On the back of these tectonic shifts, many more great D2C brands that consumers love will be born, challenging the might of the large legacy brands. This army of ants has just started marching, and I believe that the D2C business in India is just entering the steep part of the J Curve.
3 founders on why they picked D2C.
"D2C and going digital has enabled us to reach our customer and know them to a degree in a way that an ad campaign simply would not allow us to do."
Shauravi Malik, co-founder, Slurrp Farm
"D2C is a tool to get closer to the consumer - the ability to get quicker, completely direct consumer feedback. In terms of product development, talking to the consumer and building a brand with the consumer is super helpful. For us, D2C in and of itself is important but what’s exciting about D2C is that it can help us create a broader ecosystem - whether advice, or content, - and that helps us build a consumer-centric channel. Ayurveda is a high-curiosity, high-interest, high-question category. D2C as a format enables those conversations to happen in a rich way."
Shrey Badhani, co-founder, Kapiva
"A brand can communicate to their prospects and consumers through social handles, but you need to develop a community if you want to be high on empathy... If you want to encourage women to talk about their menstrual and reproductive problems."
Rachana Gupta, co-founder, Gynoveda
"D2C doesn't allow you to hop, skip and jump PMF and unit economics - the theory and concept continue to hold. What it allows you to do is skip the large offline investment on Day One, and it allows you to speak to your consumer."
Shauravi Malik, co-founder, Slurrp Farm
D2C commerce is designed to be one-on-one in the same way that primetime TV or billboards are designed to be one-to-many. And the one-on-one interaction brings with it a host of other benefits, whether greater loyalty, or a sense of privacy, or the joy of making your own discoveries.
The more things change, the more they stay the same.
In the world of D2C many things have changed, but many of the fundamentals of building great brands remain the same. Your focus on acquiring great consumer insights is still at the heart of keeping brands competitive; however, how you do that has changed. How you engage with your consumers has changed, but not how sharply and competitively you communicate your solution for the consumer’s problem. D2C enables you to offer a much wider product choice, but it doesn’t change the need to have great products and packaging that consumers love and want to buy again. Yes, consumers are willing to pay a higher price for products that they see as more suited to their needs, but keeping products affordable is still super critical.
The mutable world of D2C.
It’s essential to remember that your brand needs to be available where your consumer is shopping for it. D2C, or your digital channel, is just one way for your consumer to buy your brand. Many digital-first brands are now omnichannel - MamaEarth is available on their own site, on large and small e-commerce marketplaces, at e-grocers and e-pharmacies, as well as offline. Licious is available on their own app, but also on the likes of Swiggy and Dunzo. While omnichannel presence brings with it other issues like inventory management and channel conflict, the primacy of consumer delight mandates that brands figure out how to manage these issues.
Equally, we’re seeing brands build and invest in their community, rather than just grow their audience. This requires a deeper engagement, one where brand-owners collaborate with brand-users – taking their suggestions, listening to their feedback, and building enduring relationships. We’ve seen brands like Gynoveda discuss women’s health and engage with “the sisterhood” in a private Facebook Group. Cult.fit has successfully taken their in-gym chant of “We are Cult” online and in-app with their members working out online with celebrity trainers, in group training sessions, receiving diet recommendations, sharing healthy recipes, and more.
And in this internet era, the bar has been raised on honesty and transparency. What ingredients does your product use – are any of them ‘nasties’? Does the organic food you sell have traceability? Is your brand just another business or does it stand for certain values that are of interest to the consumer - what are its views on protecting the planet, how do you give back to society, diversity at work…..
In fact, transparency has taken on an even greater role, since your customer today won’t write to a magazine or Consumer Court with her product problems – she’s much more likely to tweet to you, or post on your Facebook or Instagram! At Fireside, we strongly believe that the values and principles of ESG are, if anything even more important to D2C brands than to legacy brands.
Finally, the new generation of D2C brands has started going beyond product and consumer propositions, and define and follow a larger social purpose. Vahdam India reinvests 1% of their profits from sales in their TEAch Me initiative, which educates children of tea estate workers. Similarly, Slurrp Farm invests 1% of their profits to NGOs supporting children and children’s shelters.
Mamaearth has planted over 1,10,000 trees which can be tracked by geo-location, as part of their purpose of ‘Goodness Inside.' NoNasties, too, plants trees best-suited to their location. Design Café is now upskilling their staff through their Ujjivan initiative. The list goes on.
From Product to Proposition to Purpose to…
Will Personalisation be the next frontier? Will we move from D2C to D-to-1, where consumers are not segments or cohorts but individuals; and brands will empower them to create products and solutions that are uniquely made for them? Does that seem far-fetched?
As far-fetched as the internet and mobile phones 50 years ago? Or driverless cars just 10 years earlier?
A version of this article originally appeared in Outlook Business on September 1, 2021.