- D2C a.k.a. Direct-to-consumer brands. Majority of their revenue or customer acquisition comes from direct-to-consumer online channels or started with an online first distribution channel before going omni-channel. For example, Lens kart.
- Brand awareness is at an all time high and brand loyalty is at an all-time low.
- Building a retail store requires huge investment and it is capitalized in the balance sheet (expensed gradually over its useful life) whereas in Online space the cost of developing an app is relatively less expensive but incentivizing users to download the app is very high. Incentivizing cost is expensed on P&L. That is why most of the internet-based companies suffer huge losses in Initial years.
- Journey of D2C brand:
Early stage: Focuses on digital distribution, mix of omni channel, Creating customer database from their own platform.
Mid/ Growth stage: Scaling offline for gaining more traction, Enables touch-feel factor.
Expansion stage: Increase basket size and target audience, Omni channel expansion and international expansion.
- Key metrics to measure D2C success as a brand:
Average order value.
Customer Repeat ratio.
- Value chain difference:
Normal retailers: Manufacturing brand > Wholesaler > Retailer > Customer
Traditional business: Spend a lot in terms of promotions and offers to general trade and to wholesale channels.
D2C brands: Tend to spend a major portion on digital marketing (Instagram/ Influencers / Bloggers, Facebook, Google AdWords’).
- Selling (Marketplace V/s Website)
When you sell your product on a website the major cost for that company is IT cost (In house IT team or through 3rd party) and logistics costs takes around 15% of the order value whereas when you sell your product in market it takes around 40% for logistics cost, inventory management and payment gateways.
- Major sub-segments in D2C space:
Beauty & personal care
Home & Furnishing. Below is the chart used in the presentation giving key details about these sub-segments.
- Success stories: Nykaa, Firstcry.com, boat, mamaearth. Some failure stories: D:FY (Sports brand). There has been one fantastic book written by the founder of D:FY addressing what went wrong in their business named “The Biography of a failed venture”.