Over the last few years, the world has seen a significant surge in online dependency. Whether it’s daily groceries or pet food, there’s little to nothing that cannot be found online. With the pandemic further shrinking opportunities for personal interaction, “add to cart” has become the new “heading to the store”.
Customers prefer the ease and accessibility of online transactions. They are comfortable with this modern convenience, with a wide range of choices, attractive selling points, and global accessibility - all from the comfort of their screens.
Direct-to-consumer (D2C) brands are riding this wave of e-commerce success by taking their products straight to the buyer without any middlemen.
Observing the growth and acceleration of D2C brands, we are excited to double down on our interest in the space. Adding on to our early investments in Teabox, Fingerlix, Bluestone, we are now expanding into the beauty and personal care space with our more recent investment in Lafz and MyGlamm. This is just the beginning, and we are keeping our eyes peeled for more.
BPC and the Indian Market
The tryst between beauty brands and the Indian consumer has not always been as romantic. Historically, exposure and access to BPC products was confined to the larger metropolitan cities, with the rest of the demographic restricted to the staple products available. This meant that the penetration of BPC brands into the Indian market was fairly low and limited to those with robust offline distribution networks.
The advent of accessible internet coupled with the modern age of the influencer has exposed consumers to products they were once unaware of, creating a new and urgent demand for them. This has paved the way for this segment to grow rapidly.
What once used to be a mundane chore of selecting from sparse offerings within limited categories has now burgeoned into a multi-dimensional, multi-offering market. Consumers today are also not satisfied by the one-size-fits-all concept; they want to see products evolve to meet thier needs.
For us at Accel, this highlighted the need for a new age, digital-first, content-led beauty and personal care (BPC) brand and that’s where our alliance with MyGlamm entered the picture. With this venture we were presented with the opportunity to study key trends that are emerging among BPC brands in the Indian market, and we would like to share some of these learnings with you.
Knowing your target audience isn’t enough
You have to keep up with audience.
Customer behavior is ever-changing. Add to this the fabric of the market which must evolve in order to survive, brands are tasked with the important job of constantly tracking, adapting, and addressing specific audience needs.
A survey of D2C BPC consumers showed that there are distinct consumer personas within this segment.
Going one step further from these recognized segments, we also identify and acknowledge the importance of serving specific need-based users. As seen with Lafz, a sharp strategy of targeting Halal-compliant consumers has allowed rapid organic growth.
Every product and marketing strategy here revolves around this foundation of knowing your customers deeply.
The challenging curveball here is that your customers also want to know you.
Staying on top of the game - engaging your customers
With the internet offering such depth and a variety of products, the customers’ demand for information has also grown exponentially. Consumers are looking into the finer details more keenly than ever - suitability for skin type, body type, ingredients used, promised outcomes, and much more.
Here’s where your content, marketing, and engagement strategy comes into play. Brands today have to be conscious about how they are presenting themselves to the consumer. Everything from product information, social media marketing, product sampling, influencer marketing and more, comes under scrutiny.
Content plays a critical role in helping brands actively engage with their consumer base across different platforms. This is what ultimately leads to conversion, retention and the most coveted of all -- loyalty.
For example, MyGlamm gained the loyalty of an engaged audience with their recent acquisition of POPxo, a content-commerce-community destination for women in India. This move brought them tremendous growth at reduced customer acquisition costs.
Building an experience through your platform
Thanks to the internet wave, brands are more connected to their customers digitally than it was ever possible offline. While this connection helps D2C businesses establish a personal voice across different target groups and engage with them, building customer loyalty and longevity becomes the challenge.
The demand and consumption levels in the BPC segment are growing, with consumers displaying a propensity to explore newer products and categories within the same mother brand. Our recent survey indicated that 33% of consumers would purchase another brand from the same platform if their preferred brand was unavailable online, thus demonstrating platform loyalty.
In the digital era, your brand's platform is the Holy Grail; the biggest advocate for your product. Customers not only expect an easy-to-use interface, they expect efficiency and education. This is heightened by the customers’ predisposition to buy multiple products and brands from the same platform.
Your D2C business must host a platform that can comprehensively deliver against growing consumer needs, and do so in a unified manner; through engaging content, best-in-class product mix, and a seamless commerce experience.
Master of all trades -- building a house of brands
A key takeaway from the above, is that once you have gained their trust in your platform and brand, you must constantly build upon it. Especially in the BPC space, where the opportunity is ripe and promising for establishing multi-product brands.
Take the case of MyGlamm, which has launched multiple sub-categories within their umbrella brand, catering to different segments of its audience. For example, the ‘Lit’ range of cosmetics caters to the everyday user while an exclusive line designed by Manish Malhotra caters to the luxury or semi-luxury segment.
We firmly believe that the D2C model, especially in the BPC space, lends itself to a house of brands approach. This approach is able to deliver a comprehensive value proposition to its consumer through an assortment of products and a seamless customer experience. Not to mention it does so while adhering to the four pillars that govern a good D2C business model, namely;
It is clear that being a multi-product, multi-brand business model that drives engagement through a single, cohesive platform, awards you an edge in this space.
Furthermore, a portfolio of brands catering to the same consumer also enables multiple operational efficiencies thereby improving profitability. This approach bears merit in the larger D2C ecosystem as well, as envisioned by another one of our portfolio companies – Mensa, which is building a D2C house of brands.
The future is D2C and it’s here to stay
The D2C economy in India is on the cusp of some exciting growth and progress. The market is blooming, and brands are ambitious with their products and services.
Our recent investments in this space are only the tip of the iceberg when it comes to Accel's D2C interests. We foresee large opportunities in multiple consumer segments spanning BPC, food & beverages, health, consumer durables, apparel, and pet care, amongst others.
There is definitely hope and a lot of potential in the air!
Note: This was written in collaboration with Anand Daniel and Rachit Parekh, with inputs and research by Rahul Nadkarni.