Holidays = festive sales.
It’s that time of year, and everyone joins the online sales party.
As every year, the e-commerce giantsand announced the dates for their annual sales, Great Indian Shopping Festival and Big Billion Days respectively. , Ajio and are among the other major markets driving sales.
But how are the many small local brands that have emerged over the past two years preparing to serve customers during India’s great shopping mela?
SMBStory spoke to owners of various local brands in Tier I and Tier II metros and cities and found that many have decided to go the D2C route instead of relying on e-commerce marketplaces.
According to them, the focus on exclusive products and special offers will entice customers to shop on their websites or social media pages.
Take the D2C route
E-commerce has grown exponentially in India over the past decade.
The pandemic has changed business dynamics and every brand, big or small, has turned to online business models. However, it didn’t take long for brands to realize the “side effects” of finding customers in online marketplaces.
“The benefit of selling through e-commerce portals is the exposure a brand gets, but you’re also competing against hundreds of brands across all price ranges. Your own website means a captive audience and the ability to engage it much more than can be done on an e-commerce platform,” says Chinu Kala, founder of Rubans, a jewelry brand that sells on Myntra.
Large e-commerce marketplaces help brands gain visibility and discovery, a problem that many new businesses face.
Siddhant Agarwal, managing director of the hair care brandfeels small, emerging companies should use e-commerce as an “advertising medium” that can play an important role in brand building.
He says Avimee Herbal started as a D2C business in 2021, selling products through social media and its website. Until July, the brand had achieved sales of Rs 13 crore without any e-commerce presence or external funding. It was only in the last quarter that the Surat-based brand got listed on Amazon and is now among the top 10 selling hair oil brands.
“But you see, the challenge is in the markets. Despite being one of the top 10 selling hair oil brands, our brand never shows up with searches by keywords like “amla oil”. These are the big brands that have covered this space. Now that e-commerce is a discount-focused platform, the most discounted items are listed at the top. So where will small businesses like us go with no money to burn? »
“Buying fake reviews, a practice adopted by many big brands, adds to the woes of small sellers,” adds Siddhant.
D2C is still in its infancy in India, but Statista says it is expected to grow more than 15 times between 2015 and 2025.
By 2025, the total addressable D2C market is expected to nearly triple to $100 billion. On the other hand, the e-commerce market, which is more than ten years old, is expected to reach around $96 billion by 2024.
Mandeep Arora, founder of the smart accessories brandreveals another reason why smaller brands are going the D2C route: “price wars.”
“E-commerce platforms do not allow us to run our business on our own terms. We do not have the power to set our own prices; we have to stay on their margins,” he says.
UBON grew 5% in FY21 and is expected to grow 10% by the end of 2022.
SMBStory also spoke to e-commerce experts to understand the market split.
A conversation with Chirag Taneja, co-founder of Gokwik, a leading e-commerce company, revealed that the maturity of e-commerce markets leads to higher commissions, which prevents brands from continuing to do business with them. .
Chirag gives the example of boAt, a brand of audio devices and accessories. “BoAt generates 85% of its sales through e-commerce. They are kind of market dependent, but now the brand plans to solve this problem via deeper penetration into D2C. In a world where consumers are buying more and more, owning data is useful for a myriad of reasons. »
Festivals: the best time to attract customers
August to December is the peak time for sales in India as the many festivals across the country attract customers. This makes it the best time for all home and local brands to focus on their D2C space penetration strategies.
Speaking of customer acquisition, Sarita Rawat Singh of fast fashion brand Deebaco, says she sees e-commerce as a barometer to form different ideas and better understand market trends.
Deebaco is planning several influencer matchups for promotions during the upcoming holiday season. It runs social media campaigns where a new line of products can be seen being launched mostly on its website.
Ribbons has also curated a special festive catalog exclusive to its website, and will target people shopping for jewelry for Diwali and the wedding season that follows.
“We have special diets for our customers, especially for the holiday season. The goal is to convert people who visit our website into customers,” explains Chinu de Rubans.
UBON, meanwhile, plans to launch new products with discounts and package deals, and create affordable product combinations with additional benefits.
In a nutshell, exclusive products and offers are what help a brand stand out in the D2C segment.
“When marketplaces were created, they were a supply gap area where all brands were doing well, supported by discounts, free logistics, etc. As these marketplaces evolve, the opportunities for a brand to compete indiscriminately fade. So a new brand in an established category will need to communicate its brand promise outside of marketplaces – primarily through its D2C channels,” says Chirag.
More margins, more business
While the benefits of having a presence in e-commerce marketplaces cannot be ignored, many brands have seen steady growth in their D2C channels by trying out different customer acquisition strategies.
Sharing numbers, Rubans claims to have grown by 400% over the last fiscal year. Deebaco claims to have seen a whopping 500% growth in D2C business from FY21.
Avimee Herbals, a year-old brand, sees a 5% increase in sales month over month.
The positives that brands have witnessed by selling through D2C rather than e-commerce marketplaces are many. They include full control over the business, easy cost management, better understanding of customer preferences and reduced marketing costs.
Chinu emphasizes that “serious brand building” can happen through the brand’s own channel as it provides the freedom to engage with the customer on different levels.
“In the early years, the brand must invest in marketing because acquisition costs are high. Over a period of time, these costs decrease as the brand also begins to develop organic visibility and a decent percentage of month-to-month sales occur through repeat customers. The logistics cost in D2C or e-commerce is almost the same,” Chinu explains, talking about the difference in margin between e-commerce and D2C.
Mandeep says UBON was able to increase its profits by cutting out middlemen.
“A middleman who sells something for us only allows us to profit from the reduction in the cost of the item. D2C, on the other hand, allows us to earn money directly from the customer, thereby increasing revenue and building customer loyalty. »
D2C may have advantages, but it has disadvantages.
Sarita emphasizes that a brand should only deal with operations when working with online marketplaces. Taking the D2C route means the startup must take “everything into consideration”.
“This includes website design, logistics, customer support and many other things as we need to build our brand identity. But it might yield better results in the longer term. expensive to invest in developing your own website, but in the long run, the profit margin from sales will be higher than through a marketplace,” says Sarita.