While the startup ecosystem in India managed to keep up the overall growth momentum during the pandemic, global headwinds and the onset of a harsh funding winter in 2022 posed many challenges to young businesses. As for the 800+ homegrown direct-to-consumer (D2C) brands, it is nothing short of a struggle for existence. Growth at any cost is no longer an option for brands keen to expand their customer base. Instead, they need to scale up (grow quickly but efficiently without too much cash burn) to ensure sustainable operations for the long term.
The challenges of scaling up are many, as experts point out. From adopting the right technology to building a team with the right skill sets, retaining and reaching out to more customers and balancing costs with finance/fund flow, things tend to get complicated in volatile times like now.
To help D2C brands operate efficiently and stand out, Inc42 and Simpl, a fintech startup enhancing payments and consumer experience for ecommerce companies, recently held a panel discussion titled Unlocking Growth: A Practical Playbook For D2C Brands To Scale From 0 To 100
The session explored many critical areas such as:
- Understanding the essentials that drive a successful product-market fit
- Key strategies to address customer acquisition costs (CAC), customer retention and unit economics at different stages of a business
- How D2C founders can build and maintain consumer trust
Moderated by Nitya Sharma, cofounder and CEO of Bengaluru-based Simpl, the discussion included Shreyans Jain and Mohit Yadav. Jain is the founder of Nutrabay, an online store specialising in sports nutrition and other supplements. Yadav is the cofounder and CEO of Minimalist, a skincare brand.
Exploring The D2C Journey: The Beginning, The Middle And The Scale
Although digital-first D2C startups are comparatively new, a couple of differentiators set them apart from traditional ecommerce or the broader retail industry. To begin with, they have done away with the ‘intermediaries’ across the supply chain, thus establishing a direct connection with target customers, controlling marketing and distribution and ensuring price advantage as they don’t have to pay commissions to the ‘middlemen’ of the supply chain.
Their personalised offerings (due to data-driven insights), tech-powered execution, all-out focus on reach (through omnichannel expansion) and sustainable business strategy made them the most-funded sub-sector under ecommerce.
Unsurprisingly, D2C accounted for 41% of the total funding raised by ecommerce startups in 2022. The market is estimated to reach $302 Bn by 2030 compared to the entire ecommerce market value of $400 Bn.
In spite of optimistic estimates, scaling a startup from initial stages to the point where founders must tackle growth challenges, retention and unit economics can be overwhelming.
To scale a D2C brand (or any business, for that matter), finding the right product-market fit is crucial. This involves choosing the right niche, weighing market gaps versus existing demand and evaluating factors for success.
“Say, in 2017, there was a huge [demand-supply] gap in sports nutrition. People did not find many online stores they could trust because we only had marketplaces where third-party vendors were selling their products. That’s where we came into the picture,” said Jain of Nutrabay.
“Every product starts from a marketing story. What is trending? What is popular? And what will become popular? Around that, you can kind of start figuring out how to incorporate all this into a product,” said Yadav of Minimalist.
Simply put, finding the ideal product-market fit involves choosing between the two paths – going for the popular trend or identifying and targeting a niche market. However, success will depend on a business’s ability to adapt and pivot as necessary.
If a brand thriving in 2015 is here in 2023, it will surely struggle to navigate the current state of customer expectations. Transitioning from organic growth to marketing, CAC monitoring and adapting to evolving user expectations are crucial to scale up a D2C brand. Delivering an optimised user experience is challenging. But it is needed to gain a competitive edge and build brand loyalty.
“The most difficult thing is to standardise things at scale and hand over responsibilities to the team. But it is an important step that founders must take,” said Jain.
The panel also discussed how D2C entrepreneurs could gain and retain their customers’ trust.
To dive deeper into the topic and explore effective strategies to scale up D2C startups, watch the panel discussion titled Unlocking Growth: A Practical Playbook For D2C Brands To Scale From 0 To 100.
