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    HomeNewsBusinessStartupDirect-to-consumer brands could be a $100 billion market in 5-7 years, new report finds

    Direct-to-consumer brands could be a $100 billion market in 5-7 years, new report finds

    The COVID-19 pandemic has also served as a catalyst to this space, as consumers were forced to ditch offline stores and order most things online. Indian D2C brands have raised about $1.5 billion in capital, with valuations of $12-15 billion in total.

    M. Sriram
    October 21, 2020 / 15:51 IST
    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.These brands are different from traditional brands or retailers for a number of reasons. They identify customer need using data and feedback-led products, use digital marketing and storytelling to form an emotional connect and often attract the right customers to ensure higher repeatability. They operate efficiently by using third party providers and cutting out the middleman, and use state of the art technology for control over demand forecasting, cost optimisation, quality control and traceability.The COVID-19 pandemic has also served as a catalyst to this space, as consumers were forced to ditch offline stores and order most things online. This habit formation may help with consumer reorders.According to the Avendus report, the sector in India will see fewer large deals, but a slew of mergers and acquisitions are expected in the next three to five years as incumbents -- traditional retail giants and offline distribution-heavy players -- will look to acquire smaller but nimbler rivals, or build out a new segment.Looking to raise the first round of funding for your startup? Moneycontrol, in partnership with Inflection Point Ventures brings you Pitch Right. Apply here to get funded by marquee investors:  https://forms.gle/y4a7ohs4A56LKAkB7 . Hurry! Deadline for entries is November 8, 2020. 
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    M. Sriram
    M. Sriram
    first published: Oct 21, 2020 03:50 pm

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