The future looks bright for the direct-to-consumer or DTC model in India as savvy consumers flock online to have their need gaps addressed by enthusiastic brands. In this Spotlight India series, WARC India Editor Biprorshee Das looks at how DTC brands are changing the way shopping is taking place across the subcontinent.
This article is part of a Spotlight series on the Direct-to-Consumer (DTC) model in India. Read more
Why are we talking about direct-to-consumer (DTC) brands now? But then, why shouldn’t we? Yes, they have been around for a while but you only noticed when a flurry of them began appearing on your social media feeds. Oh, those annoying ads, right? But you did take notice and clicked on those ads; you liked a fun t-shirt, the freshest, safest food, a funky piece of jewellery, cosmetics that caught your fancy and you bought them! You heard directly from the brand and you bought directly from the brand. Easy as it gets, the simplest explanation of the DTC concept perhaps. But surely there must be more. Enter the first India Spotlight of the year where we take a closer look at why the DTC movement in India is growing in significance now and what the future holds for it.
Blame it on COVID-19
We have spoken enough about how the Indian consumer went online to shop for just about everything during the lockdown as e-commerce and social commerce boomed like never before. And a lot of entrepreneurs and marketers saw the potential in talking to and transacting with the consumer directly. If there was a demand, there was a brand ready to meet it by dealing directly with the customer.
For example, the pandemic saw people taking their health very seriously and several health-related brands took centrestage. Similarly for various other categories like fashion, electronics, food, FMCG etc. Our GWI report with this Spotlight edition reveals how fashion and FMCG are leading the growing DTC space.
The time of the woke consumer
It is the age of the woke consumer, who wants the best and wants it at his or her convenience. DTC brands seem best-suited to attend to this. Cutting out the middleman and passing on the benefits to the consumer are just some of the reasons why they have found favour. The recent Google’s Year in Search report states that 2021 saw 533% growth in search interest for DTC brands. This one figure says it all about how the consumer has warmed up to the DTC model. The report further says more people are searching for the best brands to consider and they are also interested to know if there are official stores.
Both insights reveal how particular the consumer is becoming about brand preferences. What is this if not an opportunity for DTC brands to make the most of it? As hinted by Satyajit Hange, co-founder of Two Brothers Organic Farm in his interview with us, transparent communication with the consumer is critical for brands to shine. Add to that consumer interest and you probably have a winner.
Hange clearly is very passionate about farming, and it shows as he shared the story of Two Brothers Organic Farm with us. Having met with success in the last few years, he seems rather excited about the ones to come for brands like his. Technology, he said is a great leveller.
“With technology, a small startup like ours can get access to the features that, for instance, Amazon has at a fraction of the money the big players spend. Technology has been a great leveller.
Making products with the great passion, accountability, quality, transparency of a DTC brand, I can easily compete with the likes of Amazon if I had the money to burn in advertising”, he said.
We also spoke to FreshToHome, a digital-first brand that is quickly gaining in prominence in the unorganised fish, meat and chicken market in India. Like Hange, Vanda Ferrao, FreshToHome’s head of marketing, agrees that the pandemic has done the brand a lot of good.
Interestingly, while Hange doesn’t seem to care much about the traditional advertising medium, Ferrao still bets on it. Not particularly surprising considering the two brands’ different audiences. The GWI report also reveals how ads on TV remain the leading source of information for consumers. But then, they are very closely followed by search engines and social media ads. Of course, one would consider the cost and value both brands find in the medium of choice.
“As we have grown bigger, we have realised how to reach the next million – we would have to go to a far larger canvas. So we got TV into the mix. It has helped because TV gives you credibility, breaks clutter and reaches far more people. The family watches TV”, Ferrao said.
Brand strategist Kunal Sinha in his paper shares how one can also attribute the DTC boom to the fact that the entry barriers for businesses have never been lower. Entrepreneurs no longer have to worry about building an entire ecosystem before establishing a business, thus paving the way for more players to get a piece of the pie.
“The COVID experience has also shown that market entry barriers have been lowered dramatically. From home chefs to DIY enthusiasts and Zumba instructors, people leveraged social media and content platforms to promote and deliver their offerings, often competing with established players”, he noted.
Sinha added: “No longer did these businesses have to create an entire ecosystem to fulfill demand. Distribution could be handled by Wefast, payments were fulfilled by GPay or Paytm. And as businesses scaled up, third party logistics and warehousing players such as Emiza were right there to store products and ship them as soon as orders were placed.”
Among the other important points he made, Sinha also suggested that there is a level of personalisation DTC brands can afford to provide that is the envy of large legacy brands. At your own peril, think that the established players are not watching this space with interest. Recent acquisitions by the likes of the Tata Group and ITC should suggest there is a lot more action to be seen here.
Like like Sinha, VMLY&R India’s chief executive officer, Anil K Nair, also touched on the point of personalisation. He also noted how scaling remains a concern for DTC brands.
He said: “Scale and the act of scaling remain one of the biggest barriers for DTC brands. DTC brands built on customisation, personalisation, attention to detail and delightful experiences find that rapid scaling goes against some of their core values and prefer to stay niche and focused.”
Arun Raman, Grey India’s chief intelligence officer, also shared his thoughts on the subject by pointing out the key guiding principles for DTC brands. A critical one was the supply chain and the attention it demands.
“Success in DTC e-commerce is entirely dependent on supply chain effectiveness. Once a customer order comes in, the speed with which you are able to deliver the order is the only thing to be obsessed with because when you are all about changing his/her behaviour, delivering a bad experience is a surefire way of shooting yourself in the foot”, cautioned Raman.
Narayan Devanathan, chief client officer of dentsu International, India, elaborated on another important point in his paper - the opportunity of an ESG strategy for DTC brands.
He said: “Eliminating supply chain intermediaries doesn’t necessarily eliminate or reduce DTC brands’ ecological footprint. Catering to consumers’ real or imagined impatience with unrealistic (and maybe even unasked for) delivery times means DTC brands are literally burning up more carbon than ever in ensuring their supply chain is a well-oiled machine end-to-end. The sustainability of such a strategy in the face of the stress that people in the delivery chain face is quite a large one too.”
Independent strategist Shraddha Ganesh explained how DTC brands have a unique opportunity to approach branding differently – through storytelling.
“Brand storytelling is using a powerful narrative to connect your brand to customers, with a focus on linking what you stand for to the values you share with your customers”, said Ganesh. “And why is storytelling at the heart of DTC branding? Because it survives on one-on-one connections and thrives on its ability to form relations – to succeed, there is no better mechanism than storytelling.”
Shibani Mitra from Leo Burnett India pointed out the need for an omnichannel strategy, something that FreshtoHome’s Ferrao also spoke about. Both stressed how critical the customer experience is and that just being digital might not serve the purpose.
Mitra said: “For DTC, physical retail is more than just another channel to scale in the long term. Even for early-stage DTC brands, physical retail can be a great space to allow new consumers to tangibly experience the product, no matter where they are in their decision-making journey.”
Last month, an article caught my attention as I read how 2021 saw a sharp decline in the number of new DTC companies (77 against over 200 in 2019 and 2020). Interesting, I thought. Did we overestimate our interest in this space? But the article also pointed out that funding in the sector has gone up significantly. I smiled. We are still good.