In recent years, direct-to-consumer (D2C) brands had disrupted traditional retail models, leveraging the power of e-commerce and digital marketing to build direct relationships with customers. However, as the landscape of online retail continues to evolve, a growing number of D2C brands such as Sugar Mamaearth, Lenskart are making headlines with their decision to open physical, brick-and-mortar stores.
The D2C model skyrocketed over the past decade, offering brands a way to bypass the middleman (i.e., traditional retailers) and connect directly with consumers. In India, the D2C market is valued at over $80 billion in 2024, with online D2C sales accounting for 75% of the total sales. However, despite the vast population of India, only 3% of the population earn more than Rs. 5 lakhs annually. This segment of higher-income individuals forms the target audience for niche D2C brands. While this is a relatively small percentage of the population, which represents a significant opportunity for D2C brands to tap into a well-defined market.
The rise of D2C in India was initially driven by the growth of e-commerce platforms and changing consumer behaviours. Brands like Mamaearth, Boat lifestyle, licious, Wakefit Innovations epitomized this model, proving that online D2C brands could achieve massive success. The ease of online shopping, along with the allure of convenience and personalized experiences, made it clear that D2C was here to stay.
The Challenges of Going 100% Online
- Customer acquisition costs (CAC) have increased due to the reliance on paid advertising to drive traffic to online platforms, and many D2C brands have struggled with the cost of maintaining visibility and brand awareness in a crowded digital space.
- Fierce competition and saturation of the e-commerce market In India, the growth of online D2C sales has largely been driven by marketplaces like Amazon and Flipkart, which account for 64% of online sales. Brand-owned platforms contribute to about 21% of online D2C sales, while offline sales still account for 15% of the market.
Evolution in consumer behaviour
- On average, customers are now spending 60% more per order and expanding their shopping baskets, indicating a significant shift in purchasing habits. Frequent visits and higher footfall recorded in stores rather than online websites.
- This increase in spending is reflective of a broader pattern where consumers are not just purchasing more items, but are also willing to invest in higher-priced, premium products.
- There has been a marked increase in foot traffic to brick-and-mortar locations, surpassing the volume of visits to online websites. This suggests a growing preference for the in-person shopping experience, where customers can directly interact with products.
- The in-person shopping experience also offers an emotional connection that cannot always be replicated online, whether it’s the thrill of discovering new products or the immediate gratification of taking something home right away. Making them willing to splurge on high priced items.
The Return of Brick-and-Mortar: WhyD2C Brands Are Reopening Physical Stores?
- The increased spend on digital ads and the higher CACs similar to paying rent for a store and leads to having better returns.
- An omnichannel strategy where online and offline experiences are seamlessly integrated is key to creating a strong customer journey. This flexibility improves customer satisfaction and allows brands to offer services like “buy online, pick up in-store,” which drives foot traffic while maintaining the convenience of online shopping.
- With physical stores, brands can gather valuable in-person insights about consumer behavior. This data can inform online marketing strategies and product offerings, helping brands refine their product lines and improve personalization.
From Startup to Scale: Enhancing Engagement in Early Expansion
Brands that quickly gain traction online and raise substantial funding often enter omnichannel strategies early. These companies see physical stores as an opportunity to enhance customer experience and brand credibility.
Sugar Cosmetics: Sugar started as a D2C cosmetic brand in 2015 but quickly expanded into retail stores and kiosks to provide customers with an in-person experience in 2017, where they found out 95% of their customers are offline yet being listed on various websites. Running successfully by accounting 50% of their sales are from the offline channels.
The Evolution of Engagement: How Legacy Brands Stay Relevant
Well-established D2C brands refine their omnichannel presence by integrating advanced technologies such as AR shopping, AI-driven recommendations, and seamless online-offline integration.
Lenskart: Lenskart, originally an online eyewear retailer, has successfully implemented an omnichannel strategy with its vast network of offline stores, enabling eye checkups, try-before-you-buy options, and seamless integration with its digital platform. It helped them expand their customer base and maintain good customer engagement with increased sales.
Conclusion
The rise of D2C brands was a game-changer for the retail industry, but like any model, it comes with its own set of challenges. Rather than abandoning online channels, many brands are adapting by blending the best of both worlds: digital and physical retail.
Despite the return of physical stores by some D2C brands, the model itself is far from obsolete. Instead, it’s becoming more sophisticated and adaptable, offering a seamless blend of digital and tangible experiences that enrich the customer journey.
However, D2C brands are realizing the value in combining their online presence with physical retail spaces. The move isn’t a step backward but a thoughtful strategy to offer a more well-rounded and accessible customer experience.
Reference Links
https://www.mordorintelligence.com/industry-reports/india-d2c-ecommerce-market
https://www.shopify.com/blog/social-commerce
https://www.irecwire.com/article/retail-people/pushing-both-offline-online-frontiers.a7708
