Even as funding has dried up for start-ups in general, investments in the direct-to-consumer (D2C) sector continue to flow in the first five months of this fiscal. D2C brands received a $253.8 million investment during this period which is already 30 per cent of the total funding bagged in the whole of FY22.

According to data sourced by BusinessLine from Tracxn, a market intelligence and analytics platform, D2C brands received $796.8 million in investment in FY22 and $363.3 million in FY21.

Reasons for jump

As per Tracxn, the fashion segment has the highest number of D2C brands, accounting for nearly half of the overall D2C landscape, followed by beauty and personal care which has a 12 per cent share. The growth of the D2C brands can be attributed to an increase in e-commerce and internet penetration, faster last-mile logistics, and a jump in consumer tech awareness.

“Today, it is easier to start a D2C business and scale it up with the help of digital marketing tools, and the presence of social media has helped build trust among consumers,” said Dhianu Das, Founder, Agility Ventures. “We expect to reap benefits out of this massive growth.”

Neha Singh, Co-founder of Tracxn, said, “Popular legacy brands such as Revlon and Lotus took around 20 years to reach the ₹100 crore revenue mark, but new-age brands like Mamaearth and Sugar just took 3-5 years to reach the same milestone.”

Future growth numbers

Further, Tracxn estimated that the D2C market will be at $12 billion in 2022 and is expected to reach $60 billion by 2027, growing at a CAGR of 40 per cent. Currently, the D2C market accounts for about 5 per cent of the overall FMCG, home, and consumer accessories market, meaning that there is tremendous growth potential .E-commerce enablers believe the growth of the D2C companies has been due to the consumption spike seen in tier-2, -3, and -4 cities.

Chirag Taneja, Co-founder, GoKwik, said, “There has been a significant shift in online shopping preferences with over 140 million online shoppers, making India the third largest base after the US and China, and consumption is especially driven by tier-2, -3, and -4 cities who had the pocket but lacked brand choices.”