In-depth: What's making traditional brands strengthen their D2C arms

With changing times, especially with the pandemic giving a boost to digital mediums, many traditional brands took a leap and strengthened their bond with consumers by taking the direct-to-consumer (D2C) route in order to connect better with them and understand their needs closely.

Brand consultants believe that while shifting more sales to D2C has widely been touted as a positive strategy for various traditional brands, moving forward, D2C brands will need to figure out the importance of physical presence in their category for a better consumer experience.

BestMediaInfo.com reached out to some experts and brands to get a better insight into how legacy brands are strengthening their D2C arm and in what ways it will change the D2C landscape going forward.

Increasing trend of traditional brands strengthening their D2C arm

Nisha Sampath

According to Nisha Sampath, Brand Consultant and Founder, Bright Angles Consulting, D2C brands and start-ups focused on the niche audience – the creamy layer - which could be precisely targeted online and made a convincing case that there is a market in the niche.

“Now the traditional brands also want to leverage this audience. Audiences who buy directly from the brand website/app are younger, more affluent and hence more valuable to brands. By going the D2C route, brands can target their more premium offerings to such consumers, increasing their value share and revenue," Sampath said. 

She went on to state that furthermore, by targeting them directly, the traditional brands can own the customer and directly have conversations with them. Unlike earlier, where the retailer owned the customer and the brand lacked data on who they were.

Lloyd Mathias

According to Lloyd Mathias, Business Strategist and Angel Investor, during the first two months of lockdown in 2020, many traditional brands were caught off-guard, especially those that were entirely physical in terms of distribution. They clearly saw that loads of digital brands took the leap whether it was Big Basket or Swiggy and Zomato.

"A lot of brands realised that going forward they need to have an omnichannel strategy. So, many brands hurriedly started going the D2C way in 2020," Mathias added.

Furthermore, he went on to say, "Some brands also chose the route of acquisition, like Tata has acquired 1MG and Reliance acquired Milkbasket. So, a lot of brands are recognising that it's important to have a D2C arm despite having a strong legacy status."

Ramanujam Sridhar

According to Ramanujam Sridhar, Founder and CEO, Brand-Comm PR, in some brand categories growth have been phenomenal.

“During Covid-19 when we didn't have an option of going to the store and buying products, we suddenly realised that we had no option but to shop online. With the convenience of being able to return products people started looking at online options,” Sridhar added. 

In his view, being technologically savvy, which used to be a barrier earlier, is not a barrier anymore as younger people buy products online for their parents, in-laws, etc.

How will it change the e-commerce and D2C landscape going forward?

Sampath said that we will see better consumer experiences being designed by brands. For example, same-day delivery, bundling of offerings and gifting experience will be more seamless and easier.

In her opinion, brands will try to build their own websites/shops and lure consumers through better experiences, offers etc. They will also seek to add value. Brands can also build communities around their platforms, encouraging consumers to interact with each other and with the brand.

Ambika Sharma

Ambika Sharma, Founder and MD, Pulp Strategy, said that as brands invest more in customer experience and technology on their brand-owned store online, one will also see marketplaces creating better customer engagement and experience opportunities to retain brand spending.

As per Mathias, at e-commerce marketplaces, consumers will increasingly be looking at comparing prices and service offerings between aggregators like Amazon and Flipkart and D2C brands.

Can D2C brands be a competition for traditional brands?

"We have seen many categories where D2C brands are competing with traditional brands – sanitary napkins, beauty and wellness. While the D2C brands focus on hyper-segmented niche audiences, nonetheless they can take away these high potential consumers," Sampath said.

She also went on to state that these brands compete for image and share of mind amongst the younger audience, which is definitely an area of concern for traditional brands. They own emergent value associations like ‘organic’ or ‘sustainable’ which will become more important in the future.

On the other hand, Mathias believes that moving forward many legacy brands will acquire existing D2C brands to solidify their already strong consumer-brand channel. 

"In certain categories, D2C brands could be a competition for traditional brands. Moving forward, some of the large legacy brands will acquire existing D2C brands and they will also look at putting their own offerings. So, I suspect that not all the D2C brands will continue as they might merge with larger legacy brands," Mathias stated.

According to Pulp Strategy’s Sharma, "D2C is no longer only for new brands, traditional brands like HUL, Marico, Adidas and others are making serious efforts to attain success in the D2C space. The space is fragmented and competitive. Large organisations have deeper pockets which amongst other things allows for long-term investment and better technology.” 

Things to be ensured to offer seamless consumer experiences on D2C platforms

Sampath said that traditional brands, especially FMCG brands, have not had to extend very high levels of customer service as the retailer took care of servicing the customer. Going forward, a strong customer interface and building relationships with individual customers will become very important.

Furthermore, she said, "Delivery logistics need to be good. Amazon and Flipkart have set the bar really high and new-age platforms like Zepto have made consumers expect a speedy delivery. Also, as brands gain deeper consumer understanding, it will also be important to personalise the consumer journey. For example, if I am vegan, I should be shown the relevant products/range."

According to Mathias, some of the critical things in terms of consumer experiences include, firstly, being very easily accessible to the consumer. Second would be the whole fulfilment mechanism - one is the ease of payment and another returns, reporting of complaints and having service issues sorted out.

As per Pulp Strategy’s Sharma, a non-glitchy website, using content to market to consumers, a strong search presence on Google and a long-term influencer strategy are some of the important things for a brand to ensure a seamless consumer experience.

Promising D2C segments expected to benefit in the coming year

According to Sampath, fintech, health and wellness are some of the promising D2C segments going forward.

Striking a similar tone, Mathias said that healthcare seems to be a promising D2C segment among others, like edtech, fintech and home accessories. 

What is in store for D2C brands in 2023?

Sampath said, "After the pandemic, to a large extent, Indians have gone back to traditional brick-and-mortar stores. D2C brands will need to figure out the importance of physical presence in their category. Either it can be through a retail presence or through identifying relevant touch points to engage with consumers.” 

As per Mathias, the focus is going to be more in terms of customer experience which is going to be the biggest driver of growth of D2C in 2023. The second is going to be the range of services being offered by brands.

As per Sridhar, brands have to benchmark themselves not only with their competitors but with the best in class in service and technology and that is going to be a big challenge. Brands constantly need to see what consumers want and whether they are in a position to meet those expectations.

Chirag Taneja

Chirag Taneja, Co-Founder and CEO of GoKwik, believes that many D2C brands in India today are witnessing better growth. As per him, they’re clocking more conversions, connecting with customers on ground zero and building products that they need, personalising their buying experience and solving many other issues.

"Many traditional brands are now taking this route to expand their customer base and cater to ever-changing customer preferences. HUL has expanded its footprint into this space with strategic investments in digital-first brands like OZiva and Wellbeing Nutrition," Taneja added.

Furthermore, he went on to say that brands like Panasonic, Wipro, and Dabur are also entering this space with major investments in other digital-first brands and creating their own independent D2C channels.

"Many digital-first brands have made their mark in this industry. In 2022 alone, over 800 D2C brands were introduced in India. As a result, legacy brands are constantly expanding their arena by going the digital route and building a customer base, enhancing customer loyalty and ensuring personalised experience through first-hand data accumulation," Taneja stated.

Insights that have let brands strengthen D2C arm

Apoorva Kumar

As per Apoorva Kumar, Vice-President and Business Head - Nutraceuticals, Patanjali Foods, India has moved forward at least a decade in terms of digital and social penetration and acceptability of online buying and D2C is now spearheading the next phase of growth in India.

"For Patanjali Foods, D2C is a growing addressable market that has a strong affinity to our Nutraceutical categories, especially sports nutrition and vitamins, minerals and supplements (VMS) and we expect this to become a major source of new customer acquisition and revenue," Kumar added. 

Akshay Khirodwala

Talking about the steps taken by FirstSight to strengthen its D2C arm, Founder and CEO Akshay Khirodwala said, "Identifying the right markets versus the top internet-dominating geographical locations is very important. The most common challenge, and yet revenue-fruitful insight, is to find acceptance of a product across the nation and then scaling it from thereon, instead of tapping all internet dominated cities - which leads to wastage of ad spends."

According to Patanjali Foods' Kumar, the company is in the process of revamping its existing D2C platform infrastructure and is partnering with a large Indian tech company to revamp and relaunch the website.

"This will be backed by the strong distribution capabilities of Patanjali to ensure a seamless last-mile delivery experience for our consumers. We will also be investing in performance and social marketing to drive higher consumer engagement across India," Kumar stated. 

"Our focus is on three aspects of the consumer experience – an easy and intuitive user interface, a highly aesthetic user experience and a seamless ordering, payment and delivery experience. Our plan is to keep the customer journey short and simple and back it up with world-class delivery experiences," he added.

According to FirstSight’s Khirodwala, reviewing and acknowledging consumers with a concise call to action and a solution makes their experience more fluid and puts them at ease. New D2C brands foraying into this realm tend to only focus their energy on the acquisition with a complete disregard for product feedback on digital platforms.

Talking about sales, Patanjali Foods' Kumar said, "We have an omnichannel strategy with a very robust presence in multiple channels of distribution and we expect the strengthening of our D2C platform would further enhance our customer reach and help drive growth across channels." 

Furthermore, he went on to state, "We expect D2C will play a major role in our sales and marketing strategy to maximise growth and increase the size of the total business."

In the views of FirstSight’s Khirodwala, there is no denying that omnichannel presence matters. Focusing only on one or two channels to drive business when the consumer itself is platform agnostic is one of the basic approaches that new D2C brands fail to understand in the initial days of business.

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