Why India’s D2C Brigade Must Prepare For A Marketing Battle With The FMCG Giants
New direct to consumer (D2C) brands will find customer adoption much more difficult as competition intensifies in India, said Swagat Sarangi, co-founder and CEO of Smytten, during day five of TechSparks 2021, India’s most influential startup conference, hosted by Your story.
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The big brands of the FMCG giants HUL and Procter & Gamble are increasing their digital marketing budgets, Swagat pointed out during a panel discussion on “Activation and Scaling Up of India’s Brands” Friday.
As spending levels increase over auction-based advertising platforms, CAC (customer acquisition cost) has already exploded for D2C players, said Swagat Sarangi, CEO of Smytten, India’s largest luxury testing and discovery platform.
While FMCG companies spend up to 9% of their sales on marketing, D2C brands spend between 30% and 35% of their sales on marketing, he noted.
“Everyone’s in market grabbing mode right now, but somewhere the balance will be established in a few years,” he added.
TechSparks panel discussion, moderated by Sindhu Kashyap, Associate Editor, YourStory, Featured Swagat, Bhavna Suresh, co-founder and CEO of 10Club, that acquires, operates and develops businesses focused on e-commerce, Rajat Agarwal, Managing Director of Matrix Partners India, a leading venture capital company, Ankit Agarwal, partner at McKinsey & Company, a management consulting company and Kapil Makhija, CEO of Unicommerce, a supply chain software platform.
Over the past 18 months, D2C brands have grown exponentially in India. There is more than 650 fast growing D2C brands operating in segments such as fashion, cosmetics and personal care.
Their adoption has been accelerated by the lockdowns induced by the pandemic, which has pushed more buyers to transact online. Industry estimates the number of online shoppers must be at least 100 million in 2021, compared to 20 million in 2016.
Bhavna Suresh of 10Club pointed out that D2C brands have so far developed using market platforms, like Facebook and Amazon. “A D2C game requires complete control of end-to-end consumer data“She noted.” When brands start selling largely in online marketplaces, they don’t have this complete information. “
Unicommerce’s Kapil Makhija said that the post-purchase experience is also an important factor for D2C brands to ensure repeat orders and customer loyalty. “Error rates need to be monitored,” he added.
“Technology at every step of the supply chain, from the warehouse to last mile delivery, will help reduce the additional costs that brands must incur to make the unit economy viable,” said Unicommerce’s Kapil .
In a highly competitive environment, D2C brands must focus on increase the average basket size, and improving the post-purchase experience to counter the increase in ACC, he said.
McKinsey & Company’s Ankit Agarwal said India could produce D2C global brands in electronics, due to government production incentive programs. Likewise, the Indian textile industry has the potential to produce global brands due to the attention paid by state governments to this sector.
“Thinking globally, think of mature areas where policies are already in place, and there is a natural competitive advantage for India, ”he said.
“We have to think about the areas where India has the right to play and the right to win, and then evolve to win,” said Ankit of McKinsey & Company.
Bhavna agreed with this view, saying India needs to find its hooks on what matters, and is unique to India – and amplify that. “All the infrastructure is in place. Now is the time”, she added.
Kapil said that after India, the D2C brands will most likely expand into West Asia and Southeast Asia, before focusing on developed markets. Look for markets that have a large Indian diaspora, added Bhavna.
So far, the D2C market in India itself is exciting, asserted Rajat Agarwal of Matrix Partners India. “If you choose any category, there is always a shortage of brands, compared to China, the United States or any other western market.
“This industry is really buzzing in India,” he said, adding that four out of five D2C startups contacting Matrix Partners to raise capital focus on inner growth.
The question of what is unique and authentic in India will get a response, as D2C brands grow into big, healthy companies, Rajat said. “As more and more brands learn about the playbook, we will see this happen across all categories. As long as manufacturing is competitive, India will produce D2C brands for the world.”
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