The D2C market witnessed a surge in growth during the pandemic. The growth of the Indian D2C market was aided by the ready availability of digital infrastructure and a mature e-commerce ecosystem.

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The discussion on the growth of the D2C market in India, expected to grow to $100 billion by 2025, was moderated by Shereen Bhan, Managing Editor, CNBC-TV 18. The panel of speakers for the discussion comprised:

Pankaj Makkar, Managing Director, Bertelsmann India Investments

Ambareesh Murthy, CEO, and Co-founder, Pepperfry

Vivek Gupta, Co-founder, Licious

Commenting on the growth of the e-commerce market and specifically the D2C market over the last 18 months, Murthy attributed the growth to more customers getting online, during the pandemic, driven by necessity. This enabled the existing big D2C brands to get bigger and also helped a slew of newer D2C brands to emerge. This period also made it important for brands to partner with their customers to deliver value to grow the business.

Vivek Gupta, the co-founder of Licious - a D2C brand that gained accelerated prominence in the last 18 months, attributed the emergence and rapid growth of new brands, such as Licious, to the increased emphasis on quality by customers. The customer focus on value for money, he felt, was true across sectors but more so for the food business. The customers are now willing to pay a premium for a quality product and quality customer experience.

Pankaj Makkar elaborated on the theme and said that Bertelsmann’s investments in the D2C space in India were driven by greater customer spending power as India transitions to being a middle-income economy. Greater disposable income is driving greater customer demand for quality products - be it furniture or food. He foresees that in the next 10 years, the demand for more brands will increase, and the ecosystem will also simultaneously expand to be able to support multiple brands to co-exist.

Speaking on Pepperfry’s strategy to further grow the business and retain customers, Murthy said that the firm plans to strengthen its supply chain, increase its omnichannel presence, and also build technology such that the distinction between online and offline ceases to exist. He said that firms can only build a strong brand by delivering a clear value proposition to their customers, and by keeping an open feedback loop that enables improvements to the business.

Licious enjoys 90% repeat business. Vivek Gupta said that there was no secret to their success in retaining customers. He said that Licious, right at the start, ditched the baggage of conventional ‘wisdom’ associated with the meat business and focused on delivering a world-class product. To this end, they made an early decision to own the complete end-to-end supply chain and also the cold chain.

Elaborating on Bertelsmann’s reasons for investments in D2C businesses, Pankaj Makkar highlighted that they recognized that 95% of the D2C market was still unorganized and fragmented. Bertelsmann believes that there is enormous potential to take the business online and in helping create strong brands.

Talking about Pepperfry’s plans for scaling the business, Murthy said that if any business is to scale, then every business decision should be backed up by a deep conviction in the business. Exceptional customer experience and flawless execution are other key factors for scaling up. Murthy said that he believes that for long-term success, “execution trumps strategy.”

Licious has a unique approach to outsourcing. Commenting on the same, Gupta brought out that after an initial unsatisfactory experiment with outsourcing, the firm decided to do all activities in-house to maintain quality. This included customer service, supply chain, cold chain, and even last-mile delivery. For scaling up, he said that Licious believes, as a rule, in first going deep, mastering execution, and then scaling up. Licious first launched only in Bangalore and only after all the execution glitches had been ironed out, did they expand to other cities.

Makkar, speaking on the investment goals for Bertelsmann, said that the fund looks to build dominant brands in different sectors and build long-term relationships with their portfolio companies. He said that the fund encourages startups to target billion-dollar revenues rather than just targeting billion-dollar valuations.

Commenting on Licious’s expansion plans, Gupta said that the firm plans to grow an omnichannel presence, grow the market to 20 more Indian cities in the next 6 months, and explore the Middle East market in 2022. Licious also plans to introduce a range of ready-to-cook and ready-to-eat products.

Pepperfry too has ambitious growth plans. The firm plans to ramp up its omnichannel presence and in the next 5 years is targeting one studio for every 100,000 potential customers.

Bertelsmann, on its part, will continue to support its portfolio companies by pumping in more investments and at the same time look to invest in more companies in the D2C space.

This is a Partnered Post

First Published:Dec 18, 2021 2:13 PM IST