When the pandemic upended offline retail, shockwaves were felt throughout the retail industry. Amid supply chain disruptions and multiple lockdowns, ecommerce emerged as the lone bright spot, helping businesses stay afloat. While many assumed that online shopping would take a back seat once the pandemic settled and brick-and-mortar retail resumed, we know now that this has not been the case. 

With more than 190 Mn digital shoppers, India has the third-largest online shopping base in the world, after the US and China. The growing appetite of Indian consumers for innovation and waning loyalty towards traditional giants have paved the way for modern retail, built on the back of new-age D2C brands.

These brands are leaving no stones unturned to win over their customers with spot-on digital experiences and hassle-free shopping processes. Hence, it is hardly surprising that D2C is the largest and the most lucrative sector in India’s burgeoning ecommerce domain. 

To commemorate this leading sector’s brightest and fastest-growing players, we at Inc42 recently unveiled the FAST42 2023 list. Curated in collaboration with Shiprocket, the FAST42 list featured 42 D2C brands that have successfully proven their potential to disrupt the market.

The road to discovering the FAST42 brands was filled with many insights and lessons. For the first round, we received more than 1,000 applications, which got narrowed down to 500 applicants after multiple reviews. Further, 140 brands qualified for the second round of interviews. After rigorous reviews of business pitches and models, we finally shortlisted 42 brands. 

Our three-month-long quest gave us a peek into where the D2C industry is heading and what trends might shape its next phase of growth. 

Here is a snapshot of our primary insights: 

The Hottest Sectors In D2C

At 28.6%, the majority of applicants of FAST42 came from the beauty and personal care sector. This was followed by food and beverage at 27% and fashion at 25%.

The revelations coincide with the current industry trends. According to an Inc42 report, beauty and personal care will remain the fastest-growing D2C segment between 2022 and 2030, growing at a CAGR of 27%. This will be followed by food at 25% and fashion at 24%. Interestingly, the three sectors are also among the top five sectors with the largest ecommerce market share.

The Big Beauty Business 

Despite stiff competition from legacy players like Lotus, Lakme and L’Oreal India, D2C beauty brands are thriving. Cashing on trends such as personalised experiences and toxin-free products, brands like mCaffeine, Mamaearth and Minimalist have been climbing the ladder of success. Many of these brands are outshining their traditional counterparts by tapping new business models such as quick commerce and making beauty care as accessible as daily essentials.  

While analysing the winning FAST42 beauty and personal care brands, we even found a few characteristics common in their scaling strategy. New-age brands have shifted their focus from persuasive hard-selling tactics to consumer awareness and transparency. Brands today want their customers to tell them what they want. This is usually done by taking regular feedback and conducting surveys to understand consumers’ buying behaviour, demands and needs. 

Creating a customer-focussed marketing strategy has helped many new-age beauty brands create their place in the hearts of consumers. Our analysis shows that beauty and personal care startups in the growth category posted the highest median revenue in FY22, compared to all other segments.

A similar trend can be witnessed in the food and beverage, and fashion segments. Although they face tough competition from traditional behemoths, the D2C sector has given them an opportunity to reach out to new customers and areas beyond the metros. 

How Bharat Is Fueling The Growth Of New-Age Brands 

Even though the startup wave is growing rapidly across the country, most startups that applied for FAST42 are headquartered in India’s top startup hubs, including Delhi NCR, Mumbai and Bengaluru. This is because the big metropolitans are equipped with modern infrastructure and offer startups a flourishing business climate. 

However, investors are now showing confidence in entrepreneurs beyond the metros, which could fuel the growth of startups beyond metros. According to an Inc42 report, ecommerce startup investment in cities beyond Delhi-NCR, Mumbai and Bengaluru grew at a 52% CAGR between 2016 and 2021.

Industry experts also believe that D2C’s next phase of growth will be led by tier 2 and 3 regions and beyond, the real India or Bharat. According to a Unicommerce report, India’s tier 2 and 3 cities together accounted for nearly 63% of online orders across multiple categories like fashion, electronics and FMCG segments in 2022, indicating a massive opportunity for D2C to grow beyond big cities. 

Beyond the ‘big three’ startup hubs, many startups that applied for FAST42 came from cities such as Pune, Chennai and Hyderabad. With internet adoption spreading rather rapidly and evenly throughout India, and models like social commerce gaining widespread popularity beyond the metros, we may see many D2C brands shifting their focus to areas beyond metros to expand their customer base. 

Omnichannel Retail Is The Future 

Customers today are spoiled for choices and are ready to jump the brand ship in no time. This is why reaching customers at their preferred channel has become crucial for businesses to succeed. Now that the doors to offline stores have opened again after the pandemic, D2C brands must evolve if they wish to stay relevant. 

Omnichannel retail strategies, which in simple words is retail across online and offline channels, can help brands in this. Native D2C brands like Mamaearth, Sugar Cosmetics and Licious have perfected their omnichannel strategy over the last few years, setting precedence for new brands to follow. Quite a few brands featured in the FAST42 list have already turned to, or are planning, the phygital way in 2023.

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