Companies

Direct-to-consumer brands expected to lead the next decade of shopping

Our Bureau New Delhi | Updated on October 21, 2020 Published on October 21, 2020

$100 b addressable opportunity by 2025, high level of fund raising activity expected: Avendus Capital report

With the pandemic accelerating the adoption of digital platforms for purchases by Indian consumers, Direct-to-Consumer (D2C) brands have been growing exponentially. A report by Avendus Capital on Wednesday said that D2C segment is expected to have a $100-billion addressable market by 2025 and will lead the next decade of shopping.

D2C brands such as Lenskart, Licious, Zivame, Boat, Wow Skin Science, Healthkart, Mamaearth, MyGlamm, Sugar, Incnut, Country Delight, Atomberg and Lifelong among others, are occupying niches, and creating aspirational brands and extraordinary value in their respective sectors, the report said.

As physical stores face temporary closure and consumers remain wary about venturing out, leading D2C brands in personal care and food space witnessed over 100 per cent growth in scale with respect to pre-Covid levels. Over 600 D2C start-up brands have been launched in the country since 2016 and have raised over $1.6 billion in funding and the report stated that with over 200 million online shoppers expected to be added by 2025 in India, the D2C space is at an inflection point of growth, the report added.

Rising number of under served new-age customers, emergence of white spaces in terms of products and prices, consumers seeking quick solution and personal connect through higher social media engagements are some of the key factors that are aiding the growth of D2C brands in the country.

Pankaj Naik, Co-Head of the Digital & Technology Investment Banking practice at Avendus Capital, said, “The internet ecosystem and evolving consumer needs have made new business models viable and have led to the emergence of the direct-to-consumer (D2C) distribution channels. D2C brands with their agile DNA, innovative marketing, efficient operational processes, and effective use of technology are able to leverage consumption insights, work on a feedback-led model and rapidly develop products to ensure that the evolving customer needs are addressed. D2C companies will lead the next decade of shopping for the brand-starved Indian consumers, with their unique and relevant playbook.”

In the food and beverage segment, over 100 D2C brands in the meat, dairy, healthy snacks and beverage segments are targeting a large set of new age customers unaddressed by the traditional food and beverage companies by offering high quality and nutrient rich products.

Fashion market

Similarly, the over $100 billion fashion market that is highly unorganised is offering a huge headroom for growth for new brands in this sector. Over 80 D2C brands are capitalising on product and price white spaces across personal care, cosmetics and men’s grooming segments and focusing their efforts on customer interaction, social media engagement and influencers, the report added.

Neeraj Shrimali, Executive Director, Digital & Technology Investment Banking practice at Avendus Capital, said, “We expect high levels of funding activity in this space, increasing with passage of time, as more successful D2C outcomes will validate the hypothesis for newer capital deployment. There will be elevated investor interest in high quality companies with good growth and focus on capital efficiency. We anticipate robust consolidation activity in the next 3-4 years, either as roll-ups or incumbents buying new-age D2C companies. Our estimate is that IPO timelines may be 3-5 years away in this sector.”

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Published on October 21, 2020
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