D2C brands: 2022 year it was and 2023 future it holds

The pandemic, among other economic and environmental factors, has changed the way the consumption market functions forever. The trends we saw in 2022 and the ones we will continue to see in the future are all influenced by the one event that changed our lives forever.

Direct To Consumer (D2C) brands have had an interesting year with tons of takeaways. This year cemented the fact that a brand’s story is one of the most important ways to connect with the audience and make them part of the family. Consumer retention went beyond conventional sales techniques- those who went above and beyond to make the customers feel part of a story, an experience were able to climb straight to the top. The food and beverage industry is leading the way, with unicorn brands like Licious using the channel as their primary source of sales and securing a 90% repeat customer base making up 85% of its total sales. D2C brands have had and will continue to have consistent year-on-year growth. 

Data-driven decision-making

The way brands understand consumer patterns has changed over the years. Data is at the centre of this change, and the way brands use the available data to make decisions have improved in accuracy over the years as well. With a product-centric approach, brands are trying to create the most holistic experience possible for their customers. By understanding engagement patterns and other metrics on social media, OTT and e-commerce platforms, they are able to accurately predict the type of products and services each of their customers would like. This data-driven approach to business models has paved the way for more accurate sales. It has been around for years, like how Netflix has been a data-driven brand since its inception, but it saw its place secured this year and for many years to come. 

Omnichannel approach

With the pandemic rules easing up, we saw people stepping back out for both work and pleasure. This meant that brands had to adapt to the changes in shopping patterns. An omnichannel approach was the way to go. D2C brands like Mamaearth, SUGAR Cosmetics expanded their sales approach to include offline shopping as one of their biggest pillars in the past year, while conventional brands like LG electronics expanded their business model to include the D2C sales route, by harnessing their existing local warehouses to deliver electronic appliances to the customer’s doorstep. 

Every brand sees the opportunity to be available in more than one space and is capitalising on it to ensure year-on-year growth. Just one way of communication and sales isn’t enough anymore- and brands are becoming increasingly aware of this fact.

Creating an experience for every customer

It’s not just about buying what’s available- brands have to create an entire experience for every customer. From using data to study their likes and preferences and providing them with the most accurate results to ensuring that the product or service is delivered to them in no time, the experience must result in repeat sales for the brand. Make them believe in your product and its story by being authentic, because connecting with the audience with a trace of relatability can take your brand to the next level. 

Phool Co., a biomaterials company that produces incense sticks, oils and other organic products, created a niche for itself in the market by being authentic about its story- a company that cares about where they come from and a company that is willing to go the extra mile to ensure they do their bit in keeping the environment clean. By using flowers from temples that are usually dumped in rivers as their raw material, they captured the hearts of their customers. 

Nua, a sustainable period products company, ensured huge growth in the market by using eco-friendly materials and ensuring high customisation for every single user. With their personalised auto-repeat sales plan, they have also ensured 50% customer retention this year. It’s all about creating a shared experience.

Social media trends and the vast world of the internet

Brands have all cemented their place on social media, with video marketing leading the way. Instagram Reels and YouTube Shorts reach the audience faster, and within a short period of time, making them the crux of all advertising as well as engagement. High-performing videos are also doubling up as conversion ads, and this is a trend that will continue well into 2023. 

A creator economy is forming in this system. Influencer marketing leads the way with content creators engaging with their community and pushing products and services their way. They also hop onto the video marketing bandwagon to ensure authenticity and entertainment, all in one piece of content.

Many new social media and OTT platforms are also growing, making brands diversify their content communication. Worldwide, there are studies pointing to the current generation using Tik Tok as a search engine more than Google. This is a paradigm shift in the way content is consumed and brands are taking note.

The funding ecosystem

The financial year saw strategic investments in the D2C space. Wipro invested more than $30 million in lifestyle and cosmetic brands like The Ayurveda Co., MyGlamm, Lets Shave and Ustraa, while Aditya Birla created TMRW to form a “house of brands” under its name, with the aim of acquiring more than 30 digital brands over the next couple of years, starting with major stakes in the retail brand Bewakoof. Smaller brands got the exposure and trust that their acquiring parent brands offered, and the latter found the space to venture into the world of D2C.

There was, however, considerable turbulence in the investment space as well. A PWC study notes a decline in D2C funding activity by about 36% due to worldwide economic changes. But, with continued interest from customers in the D2C space, and the push from larger companies who want to create a diverse D2C portfolio along with institutional investors globally, the numbers will soon bounce back in the coming years. 

What does 2023 look like for D2C brands?

The times ahead look interesting for two reasons: One, with the economic slowdown, it will definitely be interesting to see how brands restructure their business model to ensure continued growth and customer retention. And two, with the competition becoming more and more fierce, niche marketing strategies will emerge to win over customers. 

D2C brands may not see a slowdown in the coming years, as purchase patterns remain somewhat stagnant so far. With over 80% of Indian pin codes being accessible to doorstep deliveries, food, clothing and cosmetics will continue to pierce into tier 2 and 3 cities as well. With regards to funding, brands can still secure finances if they show promise of good year-on-year growth and have had a strong foundation right from the start. In the future, we will most likely see Indian brands establishing a global presence. The internet has blurred borders, making it possible for companies to dream bigger. International expansion will be a key objective and more growth can be expected in that space.

The D2C sector has a unique journey ahead. For brands now, D2C is just one of the touch points in the grand scheme of things. It is a part of a 360-degree approach to how they sell their products. While conglomerates like ITC and Tata are investing in the D2C ecosystem, their foothold in the offline and retail space is still as strong as ever. Brands are recognising that to scale up and grow, the right mix of different marketing channels is important.

It is forecasted that by 2025, the market is expected to grow multi-fold and reach $100 billion, led by the fashion industry. D2C fashion brands like Nykaa, Blissclub, and Myntra are expected to take centre stage. A new year full of new possibilities lies ahead.

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