The COVID-19 pandemic accelerated consumption among customers, and the internet changed the way we do business. It created a new opportunity for brands wanting to reach consumers directly.
With markets shutting down during the lockdown, the internet provided an opportunity for both producers and consumers to connect, and both were quick to see the opportunity it offers. Brands were able to understand customers better who, in turn, were able to choose from a wide range of products and pricing options by shopping online.
In the past two years, this trend has grown by leaps and bounds. Today, India stands at the threshold of a Direct-to-Consumer (D2C) revolution.
According to a joint report by Shiprocket with CII and Praxis Global Alliance, the D2C space is expected to grow 40% between FY22-FY27, reaching a $60 billion market size in 2027.
If you are planning to grow or diversify your business, take advantage of this emerging market trend and plunge into the D2C space.
D2C is here to stay
At the outset, we need to understand whether the D2C revolution is a mere bubble caused by the pandemic or a long-term trend here to stay.
While it is true that the D2C growth was first experienced during the lockdown when the movement of retailers was restricted, its advantages were obvious.
Direct interaction with customers gave brands a better understanding of what they want, and by responding to their feedback, brands could diversify and launch new products in no time.
They could price the products affordably as they are done away with overhead costs. In short, it was a low-hanging fruit waiting to be exploited.
While D2C as a business segment has always existed in some form or another, the restrictions on movement imposed during the pandemic gave brands and customers the opportunity to deep dive into this market.
As a result, D2C acquired an all-new dimension by becoming the norm rather than another buying option for customers. No wonder, many brands decided to go for a digital-first strategy, marking the beginning of what we now refer to as the D2C revolution.
Brands were also quick to realise that D2C helps to minimise risk and improve margins as they could sell at a retail price rather than wholesale. It offered them new opportunities to understand and engage with the customer, gave them greater control over their stock, opened up new revenue streams, created platforms for data-driven decision-making, an opportunity to better time the market, and improved marketing strategies.
Additionally, D2C gives brands better control over messaging and reputation. It enables them to create a seamless experience for customers across various selling platforms, including brick-and-mortar stores, app-based options, and online platforms.
Starting with an online-first strategy, brands could go omnichannel, targeting online and offline consumers.
Ripe funding environment
With the rapid expansion of the D2C space, venture capitalists and angel investors have already turned their attention to seed fund startups venturing into this space.
The ecosystem is growing stronger by the day, and the consumer landscape is not dominated by corporates or MNCs anymore.
According to a report by Bain and Company, 2021 was a launchpad for the digital-first aggregation model in India, with a spate of D2C aggregators receiving funding.
VC investment in D2C startups increased from $40 million in 2020 to $1187 million in 2021. The report also pointed out that increasing depth in online consumer purchasing preferences, supported by the growing ease of building an online presence or channels for the brand, is driving the D2C revolution in India.
Why you should consider raising funding
It is essential to understand the true purpose of raising funds. Raising from an institutional investor is not just about the money. A good venture capitalist can ensure exponential growth in your networks and find you relevant connections for any business needs. It opens access to an entire ecosystem, often difficult to reach for bootstrapped founders.
Additionally, founders tend to take bolder decisions and more risks when the money on the line is not completely theirs. Since the risk will be divided between multiple parties, the stress of making a wrong move is substantially reduced.
A lot of business decisions also lead to delayed cash inflows. For example, branding activities or signing on a brand ambassador. Raising external funding could come in handy for situations like these.
Today, while running a business is comparatively easier, having a true partner on your side—who has seen multiple businesses grow, succeed, and even fail—can immensely benefit any entrepreneur.
Every business is different, and the right time to raise funding could vary massively based on several different factors. Thinking deeply about the goals behind raising funding, and considering not just the financial needs but all needs of your startup, is extremely important to assess when you should raise funding.
And, of course, to make the most out of the deal, make sure your business fundamentals are strong.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
