The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce

The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce


Coronavirus has made people more conscious of the journey of a product ordered online and the supply chain

Even when the lockdown opens, consumer brands are expected to focus heavily on creating value through direct distribution

Founders and VCs believe the next few months will see many digital consumer brands in various verticals

Even before the coronavirus lockdown, ecommerce was steadily becoming an inherent part of Indian households. Although what the pandemic did is to make ecommerce an essential service. And even when lockdown opens, there’s still ambiguity on whether consumers will feel comfortable in visiting offline stores. 

As Siddharth Talwar, partner at Lightbox Ventures said, “the biggest question is when will consumers feel safe enough to venture out to retail spaces such as malls, markets and restaurants again. Recession or no recession, the fear will linger long after Covid-19.”

According to Capgemini research of consumer sentiment, most of the Indian consumers’ appetite for online shopping is expected to increase from 46% in the current scenario to 64% over the next six to nine months.

“In the next 6-9 months Indian consumers would decrease their shopping at physical retail stores and over 46% of Indian will shop at physical retail stores compared to 59% of Indian consumers who shopped at physical retail stores before the pandemic,” the report added.   

Supply Chain Visibility Will Change The Game 

The lingering fear of Covid-19 is further expected to increase the need for supply chain visibility in ecommerce deliveries. 75% of Indian consumers who participated in Capgemini research said they will purchase with retailers adopting safety practices in stores. 

Adding to this, Aditya Ruia, founder of Beco, said that the ecofriendly brand has been tackling this problem for the past week. Multiple customers have refused deliveries citing that the delivery person was not clean or that they felt the products have not been stored properly, he added. 

So, elements that most never thought that the Indian consumers will ever care about, have become of prime importance to them. Beco’s clientele falls under the A and B socioeconomic classification (SEC) groups, so money is not a factor, but it’s about getting the right experience from the delivery and getting the right product at the right time.

According to Orios Venture Partners’ managing partner Rehan Yar Khan, the online-to-offline ecommerce chain will see a lot more activity in the months to come, and those brands or companies able to manage this in the most efficient way will actually come out on top even in a recessionary market. Orios’ portfolio includes direct-to-consumer dairy brand Country Delight, which Khan said has seen positives from the lockdown and the focus on digital platforms for essential services and products. 

Khan is of the belief that instead of single brands dominating every kind of vertical, the Indian market will see a mushrooming of digital brands with specialisations and vertical focus, highlighting how even ecommerce marketplaces such as Amazon and Flipkart have found it difficult to make an impact in certain categories such as pharmaceuticals or niche premium products. 

Such a shift would position startups and brands that own the whole value chain in an advantageous position. Ideally, in such a scenario a brand would want to control the end-to-end shopping experience for its customers. This would mean owning the first-mile, last-mile, and long-haul logistics. However, setting up the infrastructure for these three aspects is highly resource and capital intensive. Most ecommerce players might not have the wherewithal to set up their own fleets for all three segments. 

“They would be better off piggybacking on specialist logistics players who optimise for better capacity utilisation of their fleets. If these logistics companies are technology-first and are able to bring in both efficiencies in operations and superior delivery experience for the customer, they can successfully ride the growing demand for these services,” said Akash Hegde, cofounder and MD of B2B ecommerce platform ShakeDeal.

An example of such a model is Paytm Mall which was already operating on such partnerships with logistics players like GATI, Ecom express, Delhivery, Bluedart, and FedEx. Also, going forward the company plans to double down on more strategic partnerships with hyperlocal logistics companies.

Will All Brands Go Direct To Consumer?

“All large brands and medium brands have to shift to a direct-to-consumer approach in the post-Covid world. There will be a lot more competition in DTC brands. It’s not going to be offline vs online play anymore. Now everyone is online and can you compete in that environment,” — Siddharth Talwar.

Ruia also noted that in the past month a few brands have asked them to either help in setting up a D2C channel or list their products on Beco’s website. He added that brands are now going to go directly to the customer and skip this entire channel of going to a distributor or retailer, they just want to have one clean chain communication, the customer to the brand, and brand delivering to the customer. 

As per DataLabs analysis, the average revenue surge of the top 11 D2C brands in India between 2018 and 2019 was 213%, whereas the expense surge during the same period was 151%. The demand for essential goods is quite high in the direct-to-consumer space. Wakefit, the new-age Indian mattress manufacturer, is already profitable which is a rarity among Indian startups. In the financial year 2019, the gross profit margin for the company stood at 41.2% compared to 38.5% in the previous financial year.

Apart from having a great product-market fit, the mattress startup has also experimented with their advertising campaigns. The highlight among them being the sleep internship guerilla marketing campaign carried out by the company with compensation worth INR 1 lakh. Innovating on the advertising front is another important factor which enhances the success factor for D2C brands as this improves brand visibility.

Recently in Mumbai, a pharmacy chain saw a huge drop in customers because one of their cashiers tested Covid-19 positive. Similarly, the restaurant delivery agent who tested positive in Delhi, and who processed a few orders for Zomato customers, also brought the limelight on delivery safety. This has changed the consumer perception and the buying decision is now driven not by discounts, but by safety, convenience and transparency. 

Similarly, Paytm’s chief Vijay Shekhar Sharma called this the ‘ecommerce 2.0’ moment for India in a recent interaction with Inc42. The Paytm founder said he is hopeful that many stores and brands will move online once the lockdown ends as people will be more concerned about their safety. He said the psychological factor and the fears which has in the backdrop of the coronavirus pandemic will lead this digital transformation of nearby shops.

“If they feel safe paying online, they will use digital transactions. Similarly, if they feel shopping online is safe, they’ll buy only from ecommerce stores,” – Vijay Shekhar Sharma.

In other words, consumers are going to look beyond the price tag and the marketplace discounts. The decision making of ecommerce consumers in the next few months could very well be defined by the story behind the brands, the point of sale, the distribution and delivery and the journey of the product. 

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

Unlock 60% OFF
Cancel Anytime
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce-Inc42 Media
The Reset: Covid-19 Highlights Direct-To-Consumer Potential For Indian Ecommerce-Inc42 Media
You’re in Good company