The retail market in India is poised to be a $2.2 trillion opportunity by 2030 and 90 percent of the market will be delivered offline. Even as physical stores remain the dominant part of the ecosystem, a significant portion of the purchases are expected to be influenced online, pushing consumer brands to adopt an omnichannel approach, as per a report jointly published by Accel, Fireside Ventures and Redseer.
In a sit down with Moneycontrol, Prashanth Prakash, Partner, Accel and Kanwaljit Singh, Founder and Managing Partner, Fireside Ventures said that there are not enough consumer brands and what we have currently is only the tip of the iceberg. Be it cookies, ketchup, snacks or personal care and beauty products, most people can recall just 5-6 names but are unable to think of companies beyond that.
Those comments come even as the two admit that consumption patterns are changing. People are moving from unorganised to organised, from regional brands to national brands and from incumbent players to new age challengers. In the past 5-7 years, while digital infrastructure drove these changes, omnichannel is what will enhance the trend further.
The playbook, titled Decoding Omnichannel: Strategies for D2C Brands, aims to help consumer brands select the right strategy as they chart out their offline plans.
Edited excerpts.
Can you please take us through the report and the thought process behind it? Also is there a tipping point now for omnichannel?
Prashanth Prakash: We are seeing a tipping point in the number of brands that are getting started. And that is going to be a strong story for the next decade where there are enough platforms, both online and offline, where these brands can scale, and scale fast. Brands should reach customers in a wise and profitable way, which is also important in the new narrative.
Kanwaljit Singh: This is very much the tipping point. You have a large consuming market, very young India. The economy is doing well, you know, a lot of hope and aspirations. Across strata in terms of demographics, geographies, and the infrastructure which is allowing new age brands to address this opportunity.
Does this mean there is a realisation that you cannot be an Instagram-only brand or an app-only brand? Because in a sense, omnichannel means companies are going back to the basics, right? With the whole brick-and-mortar store setup coming back? Singh: You can still be an Instagram-only brand. Depends on what you're building for and why. You have to have a lot of confidence that you can continue to differentiate and create that consumer connect. But in order to grow from there is when this omnichannel strategy becomes relevant. So this is at the centre of that desire of building large, sustainable, long term brands.
We’ve been talking about the omnichannel strategy for at least 18 months, so is it too late for an established digital brand to adopt the omnichannel approach now?
Singh: There’s no problem in starting right now. If a brand is a pure online brand, and they believe that they have got product market fit, they understand consumers, and need to now start looking at creating a large offline footprint, this is a great time. But the strategy of how you do it, the timing, the steps you follow, those are the things we are trying to address in this report.
We’ve seen a lot of regional brands dominate several categories but are not well known in other parts of the country, how do you view that?
Prakash: That is the amazing thing about India. We are not China, we are not the US, nor are we Europe. India is like 10-15 different countries in terms of dynamics. To get an idea, one will have to just take the brands seen in urban India and multiply it by 10 and even then they will only scratch the surface because there are just so many brands.
India is crazy. So you will see localisation and a lot of regional brands. But we also keep talking about why shouldn't some of our brands, like Lenskart has demonstrated to some extent, go global? There needs to be at least 10-20 Indian brands that go global in the next 4-5 years.
From that pool of 10-20 brands, how many do you think will IPO? Lenskart, FirstCry. BlueStone, are some companies prepping for a public market debut, but what else? Singh: We are saying, is there a pathway to Rs 1,000 crore and maybe double digit profitability? I think that visibility is becoming much higher in a time frame which is becoming much more reasonable. So, I am just taking that simple benchmark of saying Rs 1,000 crore brand, or $100 million roughly revenue business, with a double digit profitability is a listable company.
India is also seeing this premiumisation trend, but are luxury brands going to be big enough to IPO in the foreseeable future?
Prakash: Probably not, because I don’t think the market is that big. But can you build a profitable brand? Probably, yes. But they should also have an exit path for investors.
Singh: Why can't a Sabyasachi, with Indian sensibility, with all the goodness, world-class design, become a global brand in 10 years? See, that's the ambition. And I think that is what excites us the most. The other thing that excites us is the brand-building journey where brands have not been created, and new areas where a category can go from unorganised-to-organised hence creating net new opportunities.
Are we in a funding spring of sorts after a very long winter? A lot of deals are being announced, including a few growth-stage deals.
Prakash: There is definitely a different investor mindset in terms of being able to discern the quality of a company and its entrepreneur. So, I think investors are not just buying a lot of future hyperbole, and that’s the right thing. For companies that deserve funding, we're getting to a point where it's not easy anymore. I still see companies having to really make a case and to get the right valuation and convince the right investors. But there are enough investors out there for the right company.
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