Why is it the right time to build Direct to consumer brands in India?
India is going thru a massive urbanisation with over 30% population living in metros and Tier 1/2 cities. Urbanisation is leading to a higher per capita income & aspiration to move up to the next level in terms of lifestyle & consumption. Rise of nuclear families with both the individuals working is leading to a higher disposable income.
Changes in demographics has given a boost to India’s consumption story. Consumers, especially in tier 2 & 3 cities with higher disposable income are looking to catch up with their countrymen in major metros. Unfortunately Organised retail in India hasn’t really evolved to catch up with this pace. As a result, E-commerce has managed to disrupt the offline retail & distribution by catering to this large population using technology & last mile logistics network.
Faster internet penetration and popularity of social networks like Facebook, youtube & Instagram has made it easier & cost effective to build a brand. Today one doesn’t need to spend millions on TV advertising or hoarding to build a brand. If the brand is speaking the language that millennials understand & is being authentic, chances are that it will get traction. It’s much easier to get the evangelists who are willing to share your story with their friends on social media if they strongly associate with your brand. Consumers today are a lot more aware & experimental and they are looking to spend on brands that offer great quality even if at a slightly higher price.
New age brands need to be focussed when it comes to their distribution strategy. Direct to consumer approach gives an opportunity to know your customers well. It’s immensely valuable to be able to interact with each of your customers to serve them better. DTC brands usually start online thru their own e-commerce & then get into selected offline retail either thru experiential pop-up stores or partnerships with modern trade players. These brands are also known as ‘Digitally native vertical brands.’ Whereas traditional FMCG companies may have thousands of people in sales, DTC brands are highly efficient and are focussed on channels that offer them a tighter control on customer experience. eg- The Man Company — leading new age grooming brand for men offers it’s services and products at 300 premium salons across India, in addition to their own e-commerce.
Unlike west, where new age brands are disrupting the price point. The opportunity in India lies in premiumisation across categories as consumers now are willing to spend more on clean labels (no harmful chemicals), natural & effective products. This trend has really caught up in CPG category like snacks, beverages & Men’s grooming. Some of the brands leading the trend are Bira (Craft beer), Raw pressery (Juices), Epigamia (greek yoghurt), The Man Company (Men’s grooming) etc. All these companies are focussing on offering good quality products in premium packaging at a slightly higher price point than the mass market players.
Unlike traditional brands with millions in advertising budget, new age brands rely heavily on sharing their brand story thru engaging content on social media. They engage with social media influencers to get them the reach. Since, they understand their customers’ set well, they do a lot of data mining to segment the users and target them with customised ads, leading to higher efficiency.
It typically used to take 15 years to build a Rs.100 cr brand in consumer space in India. Now, it may take 4–5 years to do so & that too very efficiently.