Direct-to-consumer (D2c) brands could be a market worth $100 billion in the next five to seven years, as online buying has shot up during the pandemic and customers get interested in more niche segments, according to a report from investment banking firm Avendus Capital.
D2C brands are defined as companies which start out by selling from their website directly, and are assisted by e-commerce marketplaces such as Flipkart and Amazon. These brands usually start out online, are more nimble than offline retailers, have higher margins and when online growth is slowing down, can transition offline to run an omni-channel model.
The $100 billion D2C market is expected to be led by organised retail accounting for a larger part of overall retail in the coming years, and online retail becoming a larger portion of all retail. As per the report, 31 percent of retail should be organised by 2025 (compared to 17 percent currently) while online retail should account for 11 percent of all retail by 2025, compared to 4 percent currently.
Indian D2C brands have raised about $1.5 billion in capital, with valuations of $12-15 billion in total, and include one unicorn — eyewear retailer Lenskart — so far.Globally, D2C brands have raised $31 billion in funding and there are over 20 unicorns — privately held firms valued at over a billion dollars — including Warby Parker, Dollar Shave Club and Peloton.As per the report, the sectors most lucrative for D2C brands are beauty and personal care, food and beverage (F&B) and fashion. A high growth in the millennial population and a shift in dietary preferences towards organic and plant-based products have led to F&B brands using D2C globally. Incumbents such as Beyond Meat, Nestle, Pepsi, and Coca-Cola are also adding a direct-to-consumer model to their distribution channels.
In India too, D2C brands have been able to get to Rs 100 crore in revenue within two and five years of operation, in sectors such as F&B, beauty and personal care, fashion, and electronics. Brands with over Rs 100 crore revenue include meat delivery firm Licious, lingerie retailer Zivame, ceiling fan retailer Atomberg and earphones brand boAt.