D2C model, a game-changer for many brands during the pandemic

When the pandemic first hit China and then globally, including India, brands were looking at what to do next and how to reach consumers amid the disruption in supply chain and logistics, where no brands were able to reach to end-consumers.

Brands adopting the D2C, or direct-to-consumer, model in India have been growing ever since the time pandemic the Indian market. With partial lockdown still being imposed in many parts of the country, brands have found ways to directly reach the consumers.

With many people still staying indoors, consumers are heavily dependent on ordering everything online, including basic necessities like groceries. The change in consumer behaviour has prompted many brands to adopt the D2C model.

India is one of the largest and fastest growing e-commerce markets, e-shopping got a tremendous uplift amid the pandemic.

In India, around 75 per cent of retail stores (organised and unorganized) still operate via cash-based transaction. During the pandemic, a large number of these retailers have come up with their independent e-commerce platforms or tied up with delivery platforms like Swiggy, Zomato, e-Kart, Delhivery, Dunzo, etc

And, all of a sudden, a lot of known and emerging Indian companies — like Boat, Intex, i-Ball, and Portronics in consumer electronics; Country Delight, Licious, Emami, mamaearth, and Paper Boat in FMCG; Sugar, Nykaa, Bewakoof in Fashion; and Pepperfry, Urban Ladder, SleepyCat, and Wakefit in Home Decor — have adopted the D2C route to reach to their consumers.

D2C companies not only manufacture, but also market, sell and ship their products without the help of distributors, wholesalers and retail stores. This is mainly done through the online medium. This enables the companies to earn better profits as there is no middleman.

Key merits

Below are some of the other advantages of the D2C model:

Better monitoring on product and brand: Companies can’t monitor much once their products hit the shelves of retailers. Example: how a brand is perceived by the consumer is known by the retailer and not by the manufacturer. This gap is bridged by the D2C model, wherein companies have much more control over packaging and message marketing, and a better grasp of what consumers perceive and post-purchase evaluation.

Timing is crucial : The D2C model gives a huge advantage, of reaching the product in a short period of time compared to traditional retailer which takes 10-12 months for an FMCG; approval from various stakeholders further slows down the process. Also, D2C helps companies reach out to their consumers in small quantities initially, and based on market reaction can improve quality of the products and, thereby, cut down their risk.

Builds better trust than e-commerce website: Brands are seeing a lot of consumers hopping to their official website which enables them to receive multiple information under one roof — from knowing the various products that company has to offer to information about prices, reviews and offers.

This is providing a great opportunity for the brands to connect better by providing seamless user interface user experience and building trust and leveraging into more profitability.

The demerits

However, with the pros come some cons as well:

Huge switching cost for existing companies: Companies trying to shift from existing traditional model to D2C should have clarity as to why they are switching in first place. Or, are they willing to go for a hybrid model (traditional plus D2C), where lot of money would be required in training of employees, changing and adapting to the new process from the current one and making sure that the D2C is right model in terms of efficiency, effectiveness and delivering better profit.

Double-edged sword : Companies need to understand the risk of taking complete ownership and responsibility of their customer experience along with mutually profitable agreement with retail stores.

Overall, companies need to look into their resources, analyse their business model and see the fitment that suits their requirement, and is there a need to change and adapt the D2C model for long-term sustainability in this ever changing dynamic environment.

The writer is Professor at VES Institute of Management Studies and Research, Mumbai

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