D2C Today: Digging Deeper & Creating a Market


27 Sep 2022



Vinay Singh

D2C Today: <span>Digging Deeper & Creating a Market </span>

The festive season is upon us and you can’t miss the festive ads in the papers. A host of brands, both incumbents and challengers, are vying for the first page on Amazon. And Flipkart. And Nykaa. And every other marketplace there is.

With online sales set to see a “big billion” on-year surge by 28% to $11.8 billion, and Axis My India’s consumer sentiment index indicating that 48% plan to  “shop more” during this period as compared with the previous year, how will D2C businesses ensure they get a slice of this enormously attractive pie?

Today’s playing field is very crowded and extremely competitive. To give you a comparison, back in 2018, CPM rates were three times lower thus allowing for more efficient D2C unit economics. You could potentially build your business on a marketplace at 6-7X ROAS in the last decade. But today, 3-4X seems challenging especially for many undifferentiated propositions.

Image: CNBC & Adobe

Here are some approaches D2C entrepreneurs are taking through the 2022 festive season and beyond.

From Search to Research: Catch them early

At one time, there used to be “high intent” category search terms, like Best Sunscreen For Babies that were fairly uncontested and hence economically viable to bid on and acquire customers. Not anymore. Today, incumbents, big D2C brands and marketplaces already occupy that space. The point is, before a consumer types in that search, she will probably look up Good Ingredients In Baby Sunscreens or How or When To Apply/Should We Apply Sunscreen For Babies, right? So take your content further up the funnel. Engage with your consumer at the category research stage by creating meaningful content for her.

What’s more, tread lightly on the branding, since the less ‘branded’ it is, the better. For neutrality in tone and positioning, consider a separate handle from that of your brand or a partnership with KOLs. For instance, The Good Glamm Group’s doing this across their content platforms like ScoopWhoop, Tweak India and PopXO. Mamaearth is exploring similar territory with the acquisition of Momspresso.

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Performance Creatives 2.0: Deeply engage a Micro Niche

Find your niche. And even better, tap into micro-niches using multiple platforms to ensure your product is relevant to them. Niche marketplaces can now drive around 7-18% of a brand’s revenue, with future growth prospects attracting more brands.

Take the kids foods segment, for instance. How will you stand out in this extremely competitive space? Say you’re talking to three kinds of moms: Moms with kids who are fussy eaters, moms seeking healthy food choices, and moms whose kids don’t fuss over food. Come up with a catchy 10-minute video with 3 minutes of content for each type of mom. Some moms will drop off after the first 3 minutes. Retarget that segment with a video with social proof of how fussy kids also are taking to your brand. Some may still drop off because their kids are not fussy eaters. Connect with them through a video on different and easy-to-make foods, especially foods that they can make with their kids. Sub-segment and keep looking for relevance in your audience based on their reactions to your performance content.

In this new age when targeting is fairly commoditised, brands can distinguish themselves with insightful content and hence create stickiness with their micro-niche.

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Inspire Your Consumer: Sell the Benefit not the Product

What do travel portals like Thrillophilia and Make My Trip do? They create the urge to travel in the consumer through listicles such as 55 Weekend Getaways From Bangalore or Memorable Two-Day Trips From Delhi. The reader feels inspired to plan a trip, and wham!, there you have those helpful native plugs – to book a hotel, a train, a car, get travel insurance, and so on. The point is, travel portals don’t sell the platform, they're selling the benefit of their platform.

Fashion portals like Myntra do this, too, and in style. They deal with both inspiration and aspiration by presenting styles for occasions, and influencer-approved looks. The consumer gets to buy the look via the page. In fact, the inspo route could well lead brands to experiment with influencer-led live shopping.

But how will you convert this strategy into long-term success for your D2C brand? By keeping your eye on the consumer, and not the channel – which means looking beyond D2C.

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Category Creation: Disruptive Innovation

If no gap in the market exists, create it. That’s what Traya did by tackling male pattern baldness among young men. They defined their customers tightly, and found deep resonance within that segment.

Atomberg entered the fan market with a differentiated reason to believe with its BLDC motor that cut electricity use by 60-65%. Other companies followed suit soon after, but Atomberg still has the lion’s share of the BLDC market – smaller than the traditional conventional motor market, but also the fastest growing.

When you create something unique for a micro-niche of 2-3 million people, and get them to buy from you two-three times a year, at $10 a pop, that’s a good $50-100 million business. Even if that doesn't happen, it's a great market entry strategy. You get your initial critical mass and then you can expand into adjacencies.

Omni-Channel: The future is closer than you think

The D2C market in India is set to grow to $22 billion by FY25, and account for 10% of all FMCG and beauty and personal care shopping. estimates Technopak. But to keep growing, “companies will have to put products on shelves,” as this Deloitte analyst says.

With many consumers in India still preferring to go to a store, omnichannel is the way forward for many brands. As is delivery, after all, today, Blinkit promises to bring the iPhone 14 to your doorstep in just 14 minutes!

One of the key pillars to building any brand is being available where the consumer wants to shop for your category. Availability in this new connected era means how fast can you be present in the consumers’ hands from when she shops for you. So, the distribution toolkit for a brand entrepreneur has evolved to include their own website, marketplaces (both, horizontal and vertical), Q-com stores and having your own dark stores for lightning-fast deliveries – in the online world. In addition, in the offline world, speciality retail, self-service stores, and traditional retail are options to consider.

When to use offline, and where to use quick commerce or dark stores, and for which SKUs in their portfolio – founders need to wrap their heads around these questions much earlier than before. They have to turn to new tech for greater precision, focus on certain pin codes for demand, and correlate other data sources to look at where to set up dark stores.

Maybe that’s the learning – that the classic D2C approach especially in micro niches is an unparalleled way to get early traction, and build your community. But to build an enduring, all-weather business, keep expanding channels of access and keep building preference for your brand. It’s better to mean a lot to 2 Mn people than very little to 20 Mn.

The D2C party isn’t over, it’s just moving to a bigger venue.

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