It was January that we first heard about the coronavirus, and in the months since, this microscopic organism has completely transformed the world around us. One of the results has been that that our thesis of investing in digital-first consumer brands has grown in relevance.
In response to the external threat of an unknown, incurable virus, people across the world have hunkered down to “nest,” staying home, and emerging only when strictly necessary: work, exercise, and the like. These consumers are making decisions based on and around safety: remote working, healthier grocery choices, more responsible shopping, and other choices of what a recent McKinsey article called “the careful economy.” A recent Euromonitor study maps an acceleration of trends such as the rise of online, click & collect, frictionless retail, and DTC (Direct-To-Consumer).
Reports from China, which did not have any restrictions on e-commerce during lockdown, reveal that not only did e-commerce grow, it also engaged previously reluctant shoppers like older consumers and those from smaller towns online. In the US, Forbes reported that consumers were “more motivated than ever to stay home and shop online.”
India could well follow suit, with a recent Deloitte study discovering consumer intent to use digital services on the rise. 44% said they were very likely to use it for groceries, 27% for virtual doctor appointments, 36% for exercise programmes, 52% for video conferencing with family and friends, 47% for streaming entertainment, and 53% for payment apps or services.
E-commerce addresses the aspects of convenience and contactless delivery admirably, but “the careful economy” needs more than that. These consumers seek transparency, so they can trust the brands they support. And that’s probably why e-commerce alone isn’t the answer.
DTC brands, by their very nature, use an insightful, high-touch approach to build highly-engaged audiences for their products. This can give them an advantage over larger, mass-market brands when it comes to trust. From our portfolio, brands like MamaEarth and Magic Crate enjoy a degree of trust and support from parents that has been built over time and on a great deal of understanding. Similarly, Yogabars has been “clean label” since inception, and its consumers know that well. Vahdam Teas has earned its reputation for freshness by directly sourcing high-quality teas from tea estates.
In fact, homegrown DTC brands also tick another post-COVID consumer box, Vocal For Local, or the support for made-in-India brands.
What will be interesting to see is how DTC brands in India will leverage this advantage. In the US, jewellery brand, Kendra Scott unveiled Virtual Try-On, using AR and ML techniques to allow shoppers to preview jewellery as if they were in an actual store. In China, several brick-and-mortar retailers joined Taobao Live to livestream their products. Closer home, several restaurants began offering DIY meal kits to replicate dining experiences at home.
What next? At Fireside, we’re keenly watching the millennial consumer. Our portfolio brands are already addressing key themes like wellness, health/ hygiene, “clean label,” social responsibility, fitness, and productivity that are only growing in relevance. India’s online shoppers were predicted to grow from 75 million in 2017, to over 220 million in 2025. Perhaps the pandemic will bring that number forward.