D2C market is growing heavily. The exponential expansion of D2C brands over the past few years has been attributed to the ever-growing acceptability of e-commerce and online purchasing.
According to CII data, the Indian direct-to-consumer market is expanding at a CAGR of 40% (FY22-27P). By FY27, D2C brands’ combined revenue is anticipated to increase from $12 billion to $60 billion. The FMCG market is growing steadily, but COVID has made it possible for people’s preference to shift on something which makes them feel like a part of community or something which is worth the value of purchase. So, what are the reasons for this shift?
Reasons for consumer preference’s shift
The shift in consumer demand from established FMCG (Fast Moving Consumer Goods) to Direct-to-Consumer (D2C) businesses can be attributed to several factors:
Convenience: D2C businesses offer consumers the convenience of shopping from the comfort of their homes. With just a few clicks, consumers can access a wide range of products and have them delivered directly to their doorstep. This eliminates the need to visit physical stores, saving time and effort. Although through quick commerce apps, FMCG brands are also catching up on the trend, but D2C brands has always been a step ahead in simplifying the consumer journey.
Personalized Experience: D2C brands often prioritize personalized experiences and tailor their products and services to individual consumer preferences. By collecting and analysing customer data, these companies can offer customized recommendations, personalized marketing messages, and unique product offerings that resonate with consumers on a more personal level.
Transparency and Trust: Many consumers are increasingly seeking transparency and authenticity in the products they purchase. D2C businesses often promote their supply chain transparency, product sourcing, and manufacturing processes, which can help build trust and loyalty among consumers who value knowing where their products come from.
Competitive Pricing: By eliminating intermediaries like retailers and distributors, D2C brands can offer products at competitive prices. This direct relationship between the manufacturer and the consumer allows for reduced costs, as the company does not have to factor in the margins of middlemen. Consumers appreciate the cost savings and are willing to switch to D2C brands for affordable yet high-quality products.
Unique Product Offerings: D2C businesses often focus on niche markets or unique product categories that may not be readily available through traditional FMCG channels. These brands differentiate themselves by offering innovative, specialized, or customized products that cater to specific consumer needs and preferences.
Digital and Social Media Influence: The rise of social media platforms and digital marketing has played a significant role in promoting D2C brands. These platforms provide an opportunity for D2C businesses to directly engage with their target audience, build brand awareness, and cultivate a loyal customer base. Social media influencers and online reviews also play a role in spreading awareness and driving consumer interest in D2C brands.
While established FMCG companies still hold significant market share, the growth of D2C businesses showcases a shift in consumer behaviour and preferences towards convenience, personalization, transparency, competitive pricing, and unique product offerings.
While these are some of the reasons on why the demand preference is shifting towards D2C for almost the entire world, the notion is different for the Indian consumers. Indian consumers are known to be highly price sensitive and D2C business almost operates on a business model which is different from what the Indian consumer demands. The question is- why is still the demand for D2C business so high in India. Let’s look at some points.
The demand for D2C businesses in India exhibits some unique characteristics and considerations compared to other markets. Here are a few ways in which the demand for D2C differs for Indian consumers:
Increasing Internet Penetration: India has witnessed significant growth in internet penetration, especially with the proliferation of affordable smartphones and affordable data plans. This has opened up opportunities for D2C brands to reach a broader consumer base and cater to the growing number of digitally savvy Indian consumers.
Price Sensitivity: Price sensitivity is a crucial factor for Indian consumers. While affordability is important globally, it holds even greater significance in India, where a large portion of the population falls into lower or middle-income brackets. D2C brands that offer cost-effective products and competitive pricing can attract Indian consumers who are value-conscious.
Regional Diversity: India is a diverse country with various languages, cultures, and regional preferences. D2C brands need to understand and cater to the specific needs and preferences of different regions to effectively target Indian consumers. Localization efforts, such as offering regional language support and understanding local tastes, can be crucial for success.
Trust and Reliability: Trust is a critical factor for Indian consumers, particularly when purchasing products online. D2C brands need to establish trust and credibility by ensuring secure transactions, reliable delivery, and responsive customer support. Providing easy return policies and guaranteeing product authenticity are also crucial to gain the trust of Indian consumers.
Value-added Services: Indian consumers often look for value-added services, such as cash-on-delivery options, flexible payment plans, and after-sales support. D2C brands that can accommodate these preferences and provide additional benefits like hassle-free returns or warranties may have an advantage in the Indian market.
Localization and Cultural Sensitivity: Indian consumers appreciate brands that acknowledge and respect their cultural nuances. D2C businesses need to adapt their marketing strategies and product offerings to align with Indian cultural values, festivals, and traditions. Localizing content, incorporating regional festivals, and understanding local norms can help build a strong connection with Indian consumers.
Emerging Market Opportunities: India’s growing middle class and rising disposable incomes present significant market opportunities for D2C brands. Targeting niche segments and tapping into untapped markets can lead to rapid growth and success in the Indian market.
These factors shape the demand for D2C businesses in India, emphasizing the need for affordability, trust, localization, value-added services, and cultural sensitivity. Successful D2C brands in India understand and cater to these unique requirements to effectively capture the attention and loyalty of Indian consumers.
After looking at what makes the Indian market different to that of the world, let’s look at some points on how can a new D2C business be successful and capture the market in India?
How to be a successful D2C business in India?
Yes, Indian consumers may exhibit a different psychology when purchasing Direct-to-Consumer (D2C) products. Here’s how you can be a successful D2C business in India:
Value for Money: Indian consumers are often value-conscious and seek products that provide maximum value for their money. They assess the benefits, features, and quality of the product in relation to its price. D2C brands that can demonstrate the value proposition of their products, such as cost-effectiveness, durability, and functionality, are more likely to resonate with Indian consumers.
Product Knowledge and Research: Indian consumers tend to be diligent researchers when it comes to purchasing decisions. They often invest time and effort in gathering information about the product, comparing prices and reviews, and seeking recommendations from friends, family, or online sources. D2C brands need to provide detailed product descriptions, specifications, and informative content to facilitate the research process and address consumer queries.
Bargaining Culture: Bargaining or negotiating prices is deeply ingrained in Indian consumer culture, particularly in traditional retail settings. While D2C transactions are generally fixed-price, consumers may still seek deals, discounts, or promotional offers. D2C brands can appeal to Indian consumers by occasionally offering limited-time discounts, bundle deals, or loyalty rewards, which tap into the consumer desire for a good bargain.
Social Proof and Word-of-Mouth: Indian consumers often rely on social proof and word-of-mouth recommendations when making purchasing decisions. They value the opinions and experiences of others, including friends, family, and online reviews. D2C brands can leverage this by encouraging customer reviews, testimonials, and user-generated content to showcase positive experiences, thereby influencing the psychology of Indian consumers.
Emotional and Aspirational Factors: Like consumers elsewhere, Indian consumers are also influenced by emotional and aspirational factors when buying D2C products. They may seek products that align with their aspirations, social status, or personal values. D2C brands that can tap into these emotional and aspirational elements through effective branding, storytelling, and positioning are more likely to resonate with Indian consumers.
Supply Chain Efficiency and Logistics: Establish a robust and efficient supply chain to ensure timely and reliable product delivery. Partner with reliable logistics providers who can handle the diverse geographical challenges in India. Communicate shipping timelines clearly to manage customer expectations and provide real-time tracking updates to enhance the overall customer experience.
Customer Reviews and Testimonials: Encourage customers to provide reviews and testimonials about their experience with your products. Positive reviews can help build trust and credibility among potential customers. Display customer testimonials prominently on your website and leverage them in your marketing efforts.
Continuous Innovation and Adaptation: Stay abreast of changing consumer trends and preferences in the Indian market. Continuously innovate your products and services to meet evolving customer needs. Be open to feedback and adapt your offerings based on customer insights and market dynamics.
Understanding and catering to these factors can help D2C brands establish stronger connections with Indian consumers. By implementing these strategies, D2C businesses can increase their chances of success in India’s competitive market and build a strong presence among Indian consumers.
As a Growth Marketing and Key Accounts Manager at Flipkart, Pranjal leads the mattress vertical of the Furniture business in the consumer goods sector. With more than 4 years of experience in brand marketing, E-commerce, and Growth Management, her career journey spans across various industries such as FMCG, Fashion, and E-commerce domains. She has also helped a lot of small businesses and startups in their marketing strategy, with one of them getting funded on Shark Tank India. She has shown consistency in guiding businesses across various industries. She has also worked in both Indian and International environments and holds expertise in consumer behavior across various target groups and countries.