Will 2024 and Beyond See D2C brands Tap into the B2B Opportunity?

The total addressable D2C market in India has grown ~15x in the last decade. With a whopping 80% rise in branded websites, it shouldn’t come as a surprise that 21% of the nation’s shoppers have made purchases through direct online channels, i.e. websites. 

The year 2023, however, made d2c brands in India consider the potential of physical retail, with leading digital-first brands like Zivame and Mamaearth opening offline stores last year.

It’s true that online shopping isn’t going anywhere, but digital retail behemoths have realized that relying on it alone will not be enough for business expansion. Going offline goes beyond setting up brick-and-mortar storefronts; it’s about creating sentimentality by deepening the connection that customers feel with a brand.                      

Let’s look at the scope of opportunity from the B2B market that D2C brands can tap into, and the scenarios under which going omnichannel favors Indian D2C brands.

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Breaking down B2B Use Cases for Indian D2C Brands

The lines between business-to-business (B2B) and Direct-to-Consumer (D2C) models are blurring, with the latter expanding into the former in how they position their products and services. The evolution of Distribution Models have redefined interactions between B2B operations and retailers. 

Between 2020-present day, the landscape has witnessed Distribution 4.0, which differentiates itself from Distribution 3.0, its predecessor with the rapid surge of  B2B ecommerce, D2C, Q-Commerce and ONDC. 

In India, the B2B market for D2C brands in India will reportedly reach $60Bn by 2027,  growing at a CAGR of 40%. If you combine this number with the fact that  90% of retailers make ~50% of their sales offline, you’ll come around to the idea that connecting omni channels through a centralized order and warehouse management system is the best Route-To-Market strategy for zero-loss sales potential.

The market landscape for D2C favors the adoption of B2B strategies because 

1. India is home to several industries,from retail to FMCG, which constantly innovates to repurpose existing services and offer new products for businesses. The FMCG sector has always used traditional distribution models that transferred goods from manufacturing facilities to retailers through Clearing and Forwarding (CFA) agents, and this hasn’t changed much over the last two decades. The digital disruption, however, has made the sector rewrite its framework and experiment with digital B2B marketplaces (a.k.a eB2B) in the attempt to save costs and reach more customers. For example, Hindustan Unilever launched the Shikar app,capitalizing on the momentum from eB2B to sell directly to retailers. Dabur,Marico and Chennai-based CavinKare also followed suit by rolling out apps that simplify stock management and returns, particularly for pharmacy retailing. This supports the growth of modern trade, and in turn, the opportunity for D2C brands to foray into organized retail. 

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2. eCommerce penetration is rising, and wholesale and retail outlets can add digital touchpoints to capitalize on the omnichannel advantage. For example, Amazon Go and Decathlon have self-service kiosks and Click-n-Collect options to increase store footfall without store shoppers enduring long queues and congestion. Similarly Shoppers Stop is experimenting with endless aisles by letting customers order products online that weren’t in stock at a physical outlet. Ethnic wear brand Soch, which spent the last two decades offline, redeveloped its website with a commerce integration in 2021 to clock a phenomenal 400% sales growth. While 60% of the revenue it raked in came from metro cities, tier-2 and 3 cities made a dent too, helping the brand to earn 44Cr in FY22-23!

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3. Wholesale lets D2C brands sell in bulk to businesses that constantly replenish their goods. For example, a D2C skincare brand can supply toiletries to hotel chains, beauty parlors and spas. 

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4. D2C brands dealing with seasonal and customizable inventory such as Christmas or Diwali items can explore corporate gifting solutions in bulk to conglomerates. 

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5. White Labeling products is also an interesting B2B opportunity where D2C brands allow other businesses to sell their products as their own .

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6. A subscription-driven model can stabilize income for D2C brands. For example, Blue Tokai, a D2C coffee brand that sells coffee subscriptions through their website supplies offices with coffee deliveries through wholesale vendors like CCD and Lavaza. 

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What Advantages does the B2B space offer D2C brands?

While it’s true that offline inflates your overheads with real estate, manpower etc., a more cost-effective answer is for a DTC brand to entrust a retail trader to stock their shelves with their products. It not only takes inventory off the brand’s hands but also gives customers multiple modes of interaction, even if it’s technically less direct than had they purchased online.

Some of the benefits of deploying B2B strategies are

Sensory experience

Offline stores through retail partnerships boost a brand’s credibility, especially in segments like food,cosmetics,fashion and footwear where touch-and-feel are essential to the customer experience. Prospective buyers can compare labels under one roof and make informed decisions in person. 

Demographic expansion

Brands can cater to mainstream residents belonging to tier-3 towns where eCommerce penetration is lower. Offline retail helps brands to penetrate rural markets and Tier 3-6 towns. 

BigBasket, for example, launched its flagship supermarket in Hyderabad in January 2023, which sources its vegetables and fruits directly from over 30K farmers. Despite clocking an impressive INR 74Bn in FY2023 from online sales, the Tata-backed grocery giant has announced that it will expand stores to 450 locations in its pursuit of profitability. 

Affordable Last-mile Delivery

Offline distribution networks shift some of the last-mile logistics onto the customer end, which when compared to pure eCommerce that relies heavily on Amazon multi-channel fulfillment (MCF) or Fulfillment by Flipkart (FBF) works out to be more affordable.

Brand identity

D2C brands can use the B2B space to stand out from the competition by establishing a strong brand identity offline. They can set up flagship stores that convert one-off purchases into repeat accounts that elicit visitor information and invite them to subscribe for loyalty memberships. Such members are clued in when the store is running a sale where they can use up their loyalty points. 

Direct Consumer Insights

Buying behavior, wishlisted preferences etc. provide D2C brands with a wealth of information that helps them to stock offline stores with recommended products that will interest and attract customers. Considering the upfront capital required to be invested into a store, having the optimal assortment of curated products sees to it that the business won’t be forced to shut down in an economic downturn. 

Challenges and Considerations

1. Before forming a partnership with modern trade channels and subsequently upscaling, D2C brands should do beta testing in select stores to track and gauge product performances. SKU performance reports that are available on enablement platforms like EasyEcom are key to determining stock replenishment and setting up reorder points against order-level performance.
2. The merging of B2B and D2C can fuel competition, given that manufacturers who sold to distributors are now competing directly with them.
3. Distributors will need to invest in technology and train their staff to use payment and checkout terminals. 
4. Given that B2B transactions involve bulk orders, it’s down to D2C brands to develop a smart pricing strategy that lets them edge ahead in profitability. 

D2C Brands Integrating B2B Strategies into the Growth Stack

There is a fierce competition amongst Direct-to-Consumer brands for the same resource pool. If you think about it, social media, celebrity-label launches, UGC (User-generated content) and influencer collaborations can sink smaller, native D2C brands on account of popularity, marketing spend and visibility. Recognizing the threat of being eclipsed, several Indian Direct-to-Consumer (D2C) brands have gone offline and are teaming up with traditional retailers and distributors in addition to growing native website and marketplace sales. And what’s helping to keep all these touchpoints central is an omnichannel eCommerce automation enabler. 

Here are a few notable D2C brands that are weaving offline and eCommerce into their B2B strategy:

boAt

Launched in 2016 by Shark Aman Gupta and Sameer Mehta, boAt is a direct-to-consumer brand that sells a plethora of audio devices such as earphones,speakers etc through its dedicated website as well as eCommerce marketplaces. boAt products are now available on retailers such as SGH tech (Kerala), Gizmo Zone (Tamil Nadu) and Asian Gadgets (Telangana) in addition to official outlets in Sonipat and Meerut.  

boAt is funded by Warburg Pincus, Malabar Investments and Fireside Ventures, and has delayed its IPO plans to strategize its most-recently obtained funding.

The Sleep Company

The Sleep Company is the first domestic D2C brand  that uses Japanese engineering in its smart bedding and chairs, boosting comfort and restful sleep. The brand was founded by Harshil Salot and  Priyanka Goyal ~ 4 years ago and features products 

Through the EasyEcom system, the brand fulfills orders using FBA (Fulfillment by Amazon) and Amazon Flex. In automating order management workflows, the brand succeeded in enabling barcoding capabilities into every warehouse to track outwarding movements to its offline outlets. As a result of having a single panel for omnichannel fulfillment,the brand amplified sales growth by 1.2x for the SmartLuxe and SmartOrtho product lines.

SUGAR Cosmetics

Pre-2022, Sugar Cosmetics had launched 30,000 stores across the country, with plans to launch another 60K by 2024. According to Vineeta Singh, CEO and Co-Founder, ~65% of SUGAR's sales come from offline retail which as a channel will pick up in the next decade in tandem with online platforms for brand discovery.  Interestingly, as other d2c brands embraced digital and ramped down on retail, SUGAR added shelf space, reporting that ~60% of its business comes from Tier-2 and beyond, indicating consistently positive sentiment from mainstream audiences.

Mamaearth

Launched in 2016, Mamaearth is a popular skincare DTC brand by parents Varun and Ghazal Alagh that distributes its products through retail chains. At 70%,Mamaearth sales are predominantly online through Amazon, Flipkart, Nykaa.it also has an omnichannel presence through partnering with offline stores such as Greens (Kerala), with revenue from offline sales climbing to 36.14% in FY2023. 

The Moms Co./ The Good Glam Group

In an INR500Cr-deal back in 2021, Moms Co was acquired by the Good Glam Group, the nation’s biggest D2C content-to-commerce platform with 5-6 other acquisitions. Since the acquisition, the Group came onboard EasyEcom to boost picking efficiency and reduce order picking time and search efforts. With autobatching, the Group succeeded in prioritizing orders, distinguishing batches from regular orders and streamlined order management processes with the WMS. Moms Co products are now available at pharmacy outlets and retail chains via modern trade. 

BlissClub

BlissClub is an activewear D2C brand for women founded in 2020 by Minu Margeret. The brand opened up its offline stores after initially accepting online orders through Shopify. It is exploring the hybrid sales route, with 70 B2B orders processed daily for its Maharashtra and Delhi offline stores. BlissClub has grown its sales by 25x since 2022, and has secured a total funding of $17.5B Mn as of May 2024. 

Through EasyEcom’s automated inventory management, Bliss Club manages both online and offline orders for retail outlets. It processes in-store purchases through Point-of-Sale integrations which is then synchronized onto the system for inventory adjustments and listing updation.

Redtape

Redtape is a footwear category leader that was founded almost 3 decades ago, in 1996. It is headed by Rashid Ahmed Mirza, who currently serves as the outlet’s Chairman and Managing Director. Redtape’s largest warehouse is in Unnao with other centers in Hyderabad, Delhi and Maharashtra all of which are serialized. 

The group processes ~ 70+ B2B orders daily through automated warehouse management systems and has equipped every facility with Handheld terminals (HHTs) for efficient inventory management. RedTape shoes are also available on eCommerce marketplaces such as Myntra and Flipkart. 

Wakefit.Co

In 2022, Wakefit expanded into offline retail and launched ~ 80 stores. The brand examined post-pandemic consumer trends and used intelligent predictive analytics to track delivery channels and plan out the pipeline. They use a hub-and-spoke model to efficiently manage inventory. Chaitanya Ramalingegowda, who serves as Wakefit’s director has reported that the overall growth of the company has risen after foraying offline.

Snitch

Snitch starts out as a digital-first brand but has experienced success offline by being able to connect with a larger audience in person. According to their CMO, Chetan Siyal, Snitch’s offline stores are equipped with the technology to collect customer insights such as preferences and general feedback which goes towards improving product ranges. On one hand, the brand is also driving footfall to their stores by using geo targeted ads that advertise events and collections. And on the other, in-store dwell time and in person visits are encouraging an increase in online interactions. In other words,a near-perfect synergy between offline and online channels!

The takeaway

Offline expansion is on a bullish run, complementing eB2B and eCommerce efforts.With the need to reach and tap into an audience that prefers the tactile experience in-store shopping offers,companies like Snitch are investing more capital into offline store launches without ramping down on online operations.The reason being, that a gap between demand and untouched mainstream markets continues to exist on account of geographic diversity, low buy-in to eCommerce in tier-3 and beyond, and logistics challenges. The time to unify and structure the retailing landscape is yet to be determined, but also implies that tapping into the B2B space can enable D2C and regional brands to gross $100bn from B2B sales by 2027.

Online is here to stay. But having nailed online retail already, D2C brands should consider scaling offline channels by studying data-driven consumer insights from online behavior, which continues to influence 90% of offline sales. By 2030, scores of India’s middle class will have access to the brand universe, with the mentality shifting from “saving” to “experiencing-it-all-once”. This broadens the scope of consumer discovery for D2C brands, placing them at the right place at the right time.

Are you looking for a platform to spark D2C brand growth while maximizing B2B success? Get a demo of the EasyEcom platform to go the omnichannel way.

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