Fuelled by the sharp focus of the government on nurturing startups and ready adoption by the middle class, D2C has introduced a slew of digital-first brands into the lives of Indians
In 2022, there were an estimated 2,000 D2C brands in India doing business worth $12 Bn. The number is expected to go up to 10,000 with a business size of $60 Bn in the next five years alone. And that’s just in India.
What happens if some of these brands go further than Indian shores? What if a significant number of these 10,000 manage to go global?
733. That’s the number of startups recognised by the DPIIT in 2016. Now compare that to the 84,012 startups DPIIT has recognised as of 2022-end and you realise just how entrepreneurial the Indian landscape is today. Entrepreneurship is now a pan-Indian phenomenon, with startups being founded in ‘emerging hubs.’ Last year, it was reported that 555 districts in India had at least one new startup last year. Today’s founders don’t just come from Coimbatore, Jaipur, Surat, Kanpur, Indore, Ahmedabad, and Erode; they also run their businesses from those cities.
India already has the third largest startup ecosystem in the world, having accelerated sharply on the back of growing internet penetration, rise in smartphone adoption, innovation in mobile technologies, and increased adoption of digital payments. Ecommerce, in particular, is growing at an estimated 18% annually, according to a Worldpay FIS report, and it forms the backdrop against which the current crop of D2C brands stands tall.
The D2C Formula
Fuelled by the sharp focus of the government on nurturing startups and incentivising innovation, being readily adopted by a rapidly growing, technology-savvy middle class with high disposable incomes and equally high acceptance of ecommerce, D2C has introduced a slew of digital-first brands into the lives of Indians. In the past few years, the founders of these brands have seized the digital opportunity to do more with them — build communities, introduce new products, expand into new geographies, explore adjacencies, test and refine, and use data to develop insights and better understanding.
Ecommerce platforms, with their plug-and-play tools and advanced logistics, have enabled entrepreneurs to launch, market, ship, and distribute their products more efficiently than ever before. Their deep consumer and marketplace insights arm D2C founders to navigate crowded categories and even address complex spaces such as payments and compliance. Today, an entrepreneur can potentially create and launch a new brand in a matter of days.
The D2C Opportunity
Hundreds of D2C brands across categories are notching up millions of dollars in annual run rates, with tens of them enjoying multibillion-dollar valuations. In 2022, there were an estimated 2,000 D2C brands in India doing business worth $12 Bn. The number is expected to go up to 10,000 with a business size of $60 Bn in the next five years alone. And that’s just in India.
What happens if some of these brands go further than Indian shores? What if a significant number of these 10,000 manage to go global? Maybe a dozen of them? Perhaps a hundred? Or even more? Industry reports value the global ecommerce market at $17 Tn in 2022. That number is projected to grow at a 27% CAGR, reaching $71 Tn by 2028. Clearly, there’s no dearth of opportunity.
The D2C Reality
At Amazon, there is clear evidence that Indian D2C brands are making their presence felt across the world, whether in categories like toys, home décor, jewellery, or kitchenware. Entrepreneurs who are part of the Amazon exports program are benefiting from the surge in demand in these categories.
‘Make in India’ toys, whether handcrafted and non-toxic or STEM-themed, stand to play a significant part in the global toys market, which is projected to grow from $141 Bn in 2021 to $230 Bn by 2028. India’s toy exports crossed $120 Mn in the period of April-December 2022. Even Prime Minister Narendra Modi has called upon startups and entrepreneurs to “team up for toys.”
The Next Horizon For D2C
The magic of ecommerce and platforms like Amazon is that they open several doors at the same time. A D2C brand today enjoys a simplified, fast-tracked road to exports, serving not only conventional markets like the US, but also other destinations with a high demand for ‘Make in India’ products like the UAE, Australia, Europe, and Japan. Several of these geographies have significantly large Indian populations, and they can well become breakout zones for the Indian D2C wave.
So, it is natural for D2C founders to look at ways to evolve their brands to expand internationally and engage with global customers. This evolution, however, will need better technology, deeper insights, and quite possibly, funding, as emerging brands require extensive support in fine-tuning their brand or product proposition, understanding the overseas customer, and access to capital and mentors to make the move to a global position.
There’s No Better Time
We have seen India script a global success story with UPI. We are already the world’s third largest startup hub, after the US and China. In its latest World Economic Outlook Growth Projections, the IMF said, “India remains a bright spot.”
The government and industry stakeholders are working together to build a conducive ecosystem for innovation across the country through initiatives such as District as Export Hubs. Today, there is far greater access to capital, affordable technology, pay-per-use logistics and shipping solutions, compliance and cross-border payments support than ever before, so that founders and brands can make that leap across the seven seas. At which point this format should be rechristened D2-7Cs!