D2C adoption in India has grown by leaps and bounds, profitability still a concern, says report

The D2C (direct-to-consumer) story has gained significant traction over the last few years and shows no signs of abating. A recent report put out by MMA Global India and Publicis Commerce titled, “D2C Advantage – Guide to Maximise RoI of e-commerce investments” puts out a few interesting findings based on conversations with the senior management at large companies.

In terms of numbers, the Indian e-commerce market is projected to grow at a compounded annual growth rate of 19% between 2022-2030, while the D2C share of e-commerce funding in India for the same period is estimated to be 49%, this is according to data sourced from Kantar Internet.

MMA Global and Publicis’ toolkit says over 80% of D2C ventures are yet to achieve profitability, with the primary reasons being attributed to high customer acquisition costs, operational complexities and unclear returns on investments.

A statement put out by the two organisations mentions that while many traditional businesses have ventured into D2C, standalone D2C revenue remains modest, “comprising less than 5% of overall ecommerce revenue for 50% of respondents.”

For companies, the D2C route helps in cutting through the challenge of fighting for shelf space and also cut back on costs on a product launch. Understandably, the growth of e-commerce business is an encouraging sign. Kantar estimates that to be at $100 billion today and to increase by 4x to $400 billion by 2030.

The proportion of spends across categories too will change on a larger pie. For instance, fashion and apparel from 20% will move to 28% and food and FMCG will increase from 11% to 17%. Smartphones will see a drop to 18% from 33% as will electronic and home appliances from 20% to 17%.

These are still early days for D2C and while many traditional businesses have ventured into it, standalone D2C revenue remains modest at less than 5% of overall e-commerce revenue for 50% of the respondents. The statement clearly outlines that the successful D2C businesses have got it right on areas such as the clarity of proposition, developing consumer insights through data enrichment and utilisation and analytics and reporting.

“While the path to profitability of D2C business is quite challenging when viewed independently, the true value of D2C investment is unlocked when insights from the businesses are connected to the overall e-commerce business. In a conservative estimate, when done right, D2C businesses have potential to deliver 8%+ operating margin consistently,” the statement said.

Anupriya Acharya, South Asia CEO, Publicis Groupe says “D2C enables real, direct, and very personal connections with consumers, driving brand loyalty and long-term relationships.” The overall e-commerce landscape, she maintains, is evolving at a rapid speed “and within that, D2C channels are a goldmine opportunity for companies to better manage the way they sell to consumers, comprehend consumer interests and preferences through valuable data and insights.”

Moneka Khurana, Country Head & Board Member, MMA Global India says building a strong D2C platform feeds into enabling insights/learnings for decision-making for the larger eCommerce market. “D2C is here for the long haul and will propel hyper growth, brand building, and opportunities to drive content-driven commerce.”