Direct-to-Consumer (D2C) brands in India are hitting a growth ceiling, with most struggling to cross the Rs 150 crore revenue mark despite slick packaging and premium positioning.
Industry experts say that without expanding into traditional retail — especially kirana stores — scaling beyond niche urban consumers remains a major challenge.
"Breaking past the Rs 100–150 crore revenue mark remains a fundamental challenge for most D2C brands in India. The constraint is largely structural — these brands often cater to the top end of the consumption pyramid. While that segment is expanding, it remains relatively narrow. Once the initial wave of digitally driven demand plateaus, sustaining growth requires a fundamental shift in distribution strategy," Chirag Shah - Principal, Avendus Future Leaders Fund, told Moneycontrol.
Scaling towards Rs 500 crore or Rs 1,000 crore in revenue demands broader market access, particularly through general trade and offline channels, Shah said.
The matrix
India’s D2C space is home to more than 11,000 companies, of which only 233, or 2.1 percent, have crossed the Rs 150 crore revenue mark, data from Tracxn showed. These companies include Licious Foods, The Good Glamm Group and Bombay Shaving Company among others. The space is dominated by fashion tech, online grocery, beauty tech, and mom & baby care products, both in terms of the number of funded companies and overall funding received in the past two years, according to Tracxn.
"Over the last 12-plus months, I think most D2C brands — depending on the category, especially in beauty where advertising is intense — have come under some degree of stress in terms of improving year-on-year sales. Naturally, everyone is trying to figure out the best channel to increase their reach," said Kartik Narayan, CEO-Staffing, TeamLease Services.
"D2C companies initially tried to do everything on their own, using their own portals, only to quickly realise that customers want choice—leading them to move towards marketplaces where multiple options exist. Even that, they now realise, may not be enough. In certain markets, they’ve had to deploy people on the ground to drive growth," Narayan added.
Fuelled by the post-Covid online boom and ample funding, many D2C brands aggressively chased digital growth, paying steep customer acquisition costs. But the buzz quickly faded as they realised that traditional channels still drive the lion’s share of retail sales. "This is especially critical in the Indian context, where nearly 80 percent of FMCG and lifestyle consumption still flows through traditional retail, even as modern trade and e-commerce continue to grow. A similar pattern is visible in more mature markets like Indonesia, where per capita income is nearly twice that of India, yet traditional retail continues to account for more than half of consumer spending," Shah explained.
"The lesson is clear: digital-first may get you started, but offline distribution, especially general trade, is still very essential to scale meaningfully," he added.
Offline challenges
However, scaling offline distribution brings its own set of challenges, as young D2C brands find themselves up against legacy consumer giants with deep pockets, entrenched networks, and decades of retail dominance.
As a result, more D2C brands are becoming conscious of the need to diversify early. "Encouragingly, more D2C brands today are planning for general trade entry earlier and in a far more deliberate and structured manner, helping reduce burn while laying the foundation for scale beyond digital," Shah added.
A case in point is Honasa Consumer, the parent of Mamaearth, which expanded offline through the super stockist route—a model where a large regional stockist buys in bulk and supplies to smaller distributors. While this helps brands scale quickly across regions, it also limits their direct control over pricing, visibility, and store-level execution.
Last year, during an analyst call, chief executive officer Varun Alagh acknowledged the impact on revenue and profits due to such offline expansion. The company later switched to direct distribution, gaining better control.
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