boAt, Lenskart, Mamaearth, SUGAR cosmetics🤔, No! No! I am not talking about the brands by the Shark Tank India investors. What's common in these multi-million dollar startups is that they all started with the D2C business model.
Today, startups & businesses are trying to become efficient not just in terms of creating value for their customers but also in trying to improve efficiency in their internal processes.
The purchasing power of Indians is rising & the rise of e-commerce due to cheap data & Covid-19 has led to a shift in consumer behaviour. People are now open to exploring the products from new brands because of their convenience, better quality & low prices.
So before learning about the new way to start a business, let us understand the traditional way of conducting business.
The traditional way of business
The traditional way to start a business was to build a product first, maybe by manufacturing it yourself or by outsourcing & then packaging.
After that, you would have to go through the good old “wholesaler-distributor-retailer” chain so that the product would reach the final customer.
Sometimes brands started their stores in other ways with e-commerce, export market & independent retailers as a part of their omnichannel strategy. The main problem with this strategy is that it requires a high capital investment that small startups & businesses cannot afford.
Before the product reaches the customer, the manufacturer/brand owner has to go through this hectic cycle.
So to solve this whole issue, there is a new way to start a business - Direct to consumer model.
What is the D2C business model?
D2C means Direct to consumer brands. Most new-age brands are starting their businesses in the D2C way🚀.
Because of the D2C model, a startup can directly launch their product & sell directly to the customers. This removes the inefficiencies of the traditional supply chain and allowed brands to connect to the customers.
The main reason behind having direct customer contact is that they can get purchase habits data about their customers & control their experience. The highest margin exists in selling directly to the end consumer. The most important reason to follow the D2C way is to get direct customer feedback.
Most D2C companies sell products in a specific niche(or category) which creates a perception that it is a big brand & they market their products in such a way that customers perceive them as they are of high quality.
Some of the top D2C brands in India:
Mamaearth is a unicorn startup valued at more than $1 billion & started by Couplepreneurs Varun & Ghazal Alagh. Mamaearth deals in products for babies & children, but now they have rapidly grown into other categories as well.
It is hard to earn customers’ trust in this market because parents trust established brands when using products for their kids. They cracked it by directly selling to customers & built trust by also focusing on different sales channels. They have also expanded into the selling products for mothers & men under the skincare & haircare category.
boAt lifestyle is an electronic company started by Aman Gupta & Sameer Mehta in 2016.
It started by selling charger cables for iPhones & they saw an opportunity in the wearable market as Aman had previously worked with JBL as Assistant Manager.
Rather than selling offline & finding the right distributors, boAt directly started selling to customers & then they applied an omnichannel strategy. Then they also expanded their product line from wearables to Speakers, Smartwatches & Trimmers.
Country Delight started in Delhi, founded by IIM Indore graduates Chakradhar Gade and Nitin Kaushal in 2015 & it now has a valuation of more than $500 million.
They initially started by delivering MIlk to customers at home using a tech-first approach. After getting their fresh round of funding, they have also expanded into other essential item categories like bread, groceries, etc.
They source their products directly from manufacturers & farmers. They cut off the distributors/wholesalers, and sell directly to the customers.
Ambareesh Murthy & Ashish Shah started Pepperfry in Mumbai in 2011 when internet penetration was less in India. Pepperfry sells furniture products online with its website.
They have their warehouses all over the country which helps them in logistics. Eventually, they expanded & now deal in Home decor & Homeware products.
It is also a marketplace where independent sellers can also list & sell their products. They also have offline stores, which have helped them achieve growth.
Peyush Bansal, Sumeet Kapahi & Amit Chaudhary founded Lenskart in 2010. It started with the vision of “Transforming the way people see and experience the world.”
They mainly deal in eyewear & since no brand exists in this space, Lenskart saw an opportunity. Rather than finding distributors or selling to small retailers, they approached directly to customers with their website & their retail shops.
Bewakoof started from a social media meme sharing page & people wanted entertainment, so they started following the brand. Then with the meme posts, they also started sharing the images of their clothing products.
Just with the meme marketing, they have grown so much that today that the brand earned a revenue of ₹200 crores & has an active audience of 10 million.
The Coupleprenuers Vineeta Singh and Kaushik Mukherjee started Sugar Cosmetics in 2015. It deals in cosmetics & beauty products, especially for females.
It has now expanded over 2500 stores across 130 cities in India. Today, it has a valuation of more than $500 million.
In the last decade, most brands started in the D2C way. Today, many brands have built multi-million dollar businesses with the D2C model. As it requires less capital initially & we can get fast feedback, which further helps in innovation & brands can change their strategy easily.
The trend of starting a new brand with a D2C model will continue to rise in the future & India will have a few unicorns in this space. This segment has its own challenges, but with the help of technology, they are solving them rapidly.