Direct to Consumer: A Wave like None Other

India’s e-commerce industry is projected to grow by 84% to US$ 111 billion by 2024, driven by mobile shopping. In less than a decade, fashion D2C (Direct to Consumer) brands have raised US$756 million. Brands are increasingly investing in building a robust supply chain and fulfilment network. Investments in warehouses and warehousing technology have also grown significantly. D2C brands understand that making the customer’s end-to-end experience seamless is crucial to success. The sector is thus poised to become a favourable market for fashion retailers on the back of a large young adult consumer base, increasing disposable income and relaxed FDI norms.

India is the fifth largest retail market globally, growing at 11% CAGR. The country is set to become a US$1,757 billion market by 2025. D2C brands, with their digital-first approach, have been pushing the growth momentum of the Indian economy. In fact, the last couple of years have been the hot bed for acquisitions, funding and the entry of global D2C enablers and platforms. This has further reinstated the whole aspect of D2C becoming prominent.

Apparel Segment
Driven by game-changing technology, India has become a favourable market for D2C start-ups, making a significant shift from offline to online retail not only among customers, but also among existing brands. Customisation of the product has been the driving force for fashion and apparel e-commerce. In a sector that was largely penetrated by international brands that were the key players in the market primarily due to a lack of availability of home-grown labels that could match their quality and style, India’s up-and-coming apparel brands have been major disruptors.

Trends on Watch

• LIVE SHOPPING EXPERIENCE: Indian apparel brands are increasingly investing in making the shopper’s experience as real as the one they would have at a physical store. Brands understand the need to be quick and seamless, and are heavily investing in technology that offers customers the choice of virtual trials.
• MADE TO MEASURE: Fashion has grown at a massive pace in the last decade and the double-digit growth rates are expected to last another decade, to say the least. A tailored experience with AI-based catalogue curations and recommendations that are based on what they’ve liked and shopped historically is increasingly being adapted by D2C players in the realm. Brands are continuously innovating on technology by offering customers made-to-measure garments via a virtual interface. Another shift that has shaped the industry is the increased acceptance of home-grown brands in contemporary fashion that now offer garments that are suited to the Indian body type. In keeping with their ethos of one size does not fit all, brands are diversifying into the plus-size segment as well.

• BREEZY FABRICS & COMFORTABLE FITS: In this entire duration of a prolonged WFH setup, and as we now step into a future of work where most people will be working in a hybrid setup between office and home, the concept of work-wear has changed drastically. This has led to a need to reimagine work-wear, as comfort is becoming key even in a stylish and structured formal look. There has been a marked shift from formal clothes to now mostly tees and casual bottom-wear. The lines that once defined work-wear have also blurred.
• FULFILMENT & WAREHOUSING: Brands are increasingly forecasting demand for the season based on the performance of styles and surges & dips, and accordingly managing production and maintain lean inventories for cost effectiveness. Backed by agile supply chains, they manage replenishment and production when they see demand surge for any particular style. D2C apparel brands are investing in automated warehousing, supply chain and distribution, as well as state-of-the-art CRM systems.

The COVID-19 pandemic has significantly altered the course of the industry and its individual segments, turning it on its head. While western work-wear was one of the fastest growing categories before the pandemic hit, post it, consumers have moved from formal, stiff fabrics to comfortable, season-less, skin-friendly fabrics. Subsequently, the pace of recovery for casual wear and lounge wear has been the fastest, followed by kids’ wear and innerwear, ethnic wear, denims, formal wear and lastly, occasion wear. The men’s apparel industry has been clocking an average CAGR of 12-13%. The innerwear category, too, is seeing a gradual growth in consumers as they gain more confidence in shopping online, driven by AI-powered technology. As a category, about 10% of purchases are now made online which is indicative of an apparent shift in behaviour. The ethnic wear category has also been constantly growing and is estimated to be over US$25 billion by 2025.

Apparel Brands Pivoting a Change

FabAlley: ‘Necessity is the mother of invention’ goes the adage that perfectly describes the ideation and launch of FabAlley. Under the aegis of its parent company – High Street Essentials – FabAlley sought to revolutionise the way the urban Indian woman viewed western wear. Even initial hiccups in the journey did not dampen the team’s spirit and today, the brand is a name to reckon with among Indian women that seek affordable and stylish clothing that delivers a promise of quality. In terms of operations, FabAlley is working towards making its supply chain more agile by in-housing key production processes, thus enabling a 30-day mind-to-market production turnaround that is comparable to global fashion leaders. The parent company is also nurturing a new sub-brand under Indya called Earthen that will offer contemporary daywear in skin-friendly fabrics, and is looking to introduce new categories such as home furnishing and décor. Today, with a thriving online business and 500+ offline retail touchpoints, High Street Essentials is one of India’s leading omnichannel fashion houses.

FableStreet: Since its inception in 2016, premium work wear brand FableStreet has been re-defining women’s fashion at the office, creating pieces of a style and fit that match the sensibilities of the modern-day working Indian woman. In the five+ years of its journey, the brand has continuously adapted its collection to meet the needs of its discerning customers, making them look comfortably stylish in the workplace or when working from home.
FableStreet has collated more than 200,000 body measurements to build an in-depth algorithm on sizing. Its standard sizing is said to be 60% better than the market. The low-burn, well-funded business is now looking at hyper growth of 10x in the next 12-18 months.

JaipurKurti.com: Established in 2012, JaipurKurti.com (under the aegis of parent company Nandani Creation Limited) has become a fashion brand to reckon with. Its massive range of ethnic apparel has many a takers among Indian women who seek stylish and comfortable pieces of fast ethnic fashion, backed by an equally progressive fulfilment apparatus that efficiently manages both order deliveries and returns, ensuring the customers’ end-to- end journey is worthwhile and keeps them coming back for more. JaipurKurti.com was one of the first brands in the D2C space to introduce the pack-of-two concept in the ethnic wear category. In the first year since its inception in 2012, the company clocked a turnover of Rs59 lakh. Today, its turnover has crossed Rs46 crore and it looks to be a Rs100 crore company by 2023. Nandani Creation Limited got listed on NSE’s SME platform in 2016, just four years after inception. On September 2, 2021, it migrated to the Main Board of NSE.

Footwear Segment
India is the second largest footwear manufacturer in the world and yet 60-70% of its consumption is met via imports, mainly from China, which means that there is a lot more consumption happening and not enough ‘Made in India’ supply. The leather, footwear, and accessories sector in India contributes about 2% to the country’s overall GDP and is a major job provider. This sector is one of the top employment generators in the country and employs two million workers. The apparel and footwear category is dominating the D2C fashion market, and is expected to continue the dominance with a contribution of around 77.1% by 2025.

Trends on Watch

• INCREASING AFFINITY TOWARDS ATHLEISURE: The altering consumer lifestyle alongside increasing consciousness towards fitness is pushing the demand for athleisure footwear to greater altitudes. The global athleisure footwear market is valued at US$114.8 billion by 2022, growing at a CAGR of 2.1 per cent during the forecast period 2016-2022. This affinity towards athleisure is creating a big opportunity for new home-grown brands to innovate with their footwear and capture the audience with something out of the box.
• DECREASING DEPENDENCY ON LEATHER: With sustainability and environmental causes at the heart of every conversation, leather is being consistently replaced by non- leathers material. The lowering of usage of leather creates a big opportunity for brands looking to use varied materials for making their footwear range.
• GROWTH OF PRODUCTION UNITS: Due to awareness of global warming and better scope of designs in the non-leather footwear category, India is aggressively changing its preferences from leather to synthetic. Major production centres for footwear in India have been established from the existing leather cluster ecosystem in the country. This is getting boosted via the vast D2C ecosystem.
• E-COMMERCE BOLSTERING GROWTH: The Indian e-commerce industry, especially, has been on an upward growth trajectory. By 2026, it is expected to reach US$200 billion. This has been a boon for the fashion and footwear segment. Especially for the D2C ecosystem, this has helped democratise the market and without much of a barrier, India’s small sellers in this segment are breaking the ceiling and growing towards becoming insurgent footwear brands.
  Factors that make India so attractive within the footwear category, especially in the D2C space, are the rising shift towards casual footwear and the consistent growth of a large middle class that currently has over 600 million people. Added to this is urbanisation, rising household incomes, connected rural consumers and increasing consumer spending. What’s striking is that the brands are looking to tap the emerging opportunities available in Tier-II and III markets. Already a pandemic-led penetration has been possible via the online channels.

Footwear Brands Pivoting a Change

Monrow: Young and eccentric footwear brand Monrow aims to transform the category by walking down an untrodden path in crafting contemporary, bold products that are not shy of challenging norms and making their own mark. The brand goes a step further by offering its customers the service of its in-house shoe stylists who attend to their needs and help answer queries, thus making the entire experience more enjoyable. Monrow’s customer base has quadrupled since its inception at a steady pace, and has become 4x since the second wave of the pandemic. The brand has also witnessed its revenue double year-on-year, as it touched Rs15-20 crore in annual earnings. Early in 2021, the footwear brand secured a Pre Series-A funding and since then, has escalated its game. It hopes to soon be a Rs100 crore business, within the next 24-36 months.

PAIO: Footwear brand PAIO was founded in 2016 with the objective of introducing cruelty-free, sustainable vegan materials in the manufacturing process. In doing so, however, it unknowingly took up the herculean task of convincing consumers to make a shift from animal hide-based leather to its environment-friendly alternatives. Gradually, the discerning Indian consumer warmed up to the idea, and the bootstrapped, family-funded business has been growing ever since. PAIO’s marketing strategy has pivoted from retail expansion to D2C e-commerce growth. Its marketing spends have also increased in the last one year to build this further. The brand is presently available across major marketplaces in India like Amazon, Nykaa Fashion, Myntra, Pernia’s Pop-Up Shop, Ajio, Tata Cliq and Jaypore. It is also present across smaller marketplaces that have their own niche audiences. PAIO is currently witnessing a year-on-year revenue growth of 50%. Its customer base has also increased significantly throughout both Tier-I and II cities in India, as well as some international destinations.

Solethreads: An oft-ignored segment in the footwear category, flip-flops have been trudging on sans innovation. But, one company sought to turn the tables in its favour and give consumers a product that understood their needs of comfort and style at a price they would love. Thus was born Solethreads that led the segment with its design aesthetic and superior functionality. Today, its in-depth understanding of the market has made it a game changer in the business. Available across marketplaces such as Amazon, Myntra and Flipkart, Solethreads has grown over three-fold in comparison to pre-COVID numbers. Early in 2021, the youth-centric footwear brand completed its Rs13 crore Series-A round of funding that saw participation from DSG Consumer Partners and Saama Capital. Later, it raised Rs2.5 crore in venture debt funding from Alteria Capital to broaden its research & development, product portfolio, and to meet the growing demand for flip flops in the country.

Accessories Segment
The market value of accessories across India was approximately Rs280 billion before the pandemic and estimated to reach Rs850 billion in 2023. The segment market, until recently, was mostly unorganised, but with the rapid rate at which fashion trends have evolved, the sector has transitioned into an organised one. A sub-category of accessories, jewellery has seen a growing movement to de-gender fashion. Indian consumers are now more willing to take risks and sport items that traditionally belonged to other genders. The lines between what belongs to who are not only being blurred in fashion magazines, but also in real life. The trend has fuelled innovation among D2C jewellery brands in India, inspiring them to invest more in creative designs that defy the age-old norms of genders.

Trends on Watch

• THE FITNESS REVOLUTION: Fitness accessories grew remarkably during the COVID-19 pandemic as people, confined to their homes and caught amidst a pandemic, were realising the growing importance of keeping fit. With gyms shut, there was bound to be a surge in demand for home fitness accessories such as yoga mats. Still at a nascent stage, the market hasn’t even ‘begun’ in India compared to global counterparts. The pandemic may have acted as its catalyst, but many in the segment believe that the best is yet to come.
• BEING INDIAN: A melting pot of cultures, colours and art, India has much to offer to both the domestic and global audience. Indian fashion accessory manufacturers, be it jewellery or handbags, are thus increasingly incorporating the country’s tribal art, crafts and fabrics in their designs and products. Fusing the traditional with the modern, today’s urban generation does not only own one or two bags, but wishes to have one for every occasion and every need. This, indeed, has been a revelation and showcases the potential of this category.
• DIGITAL INNOVATION: Artificial Intelligence (AI) and Machine Learning are increasingly being employed to communicate with the right target audience. It helps brands gain valuable insights not only for better product development but also in understanding changing consumer preferences. Simultaneously, brands are investing in supply chain abilities and reducing delivery times.
• PARTICIPATIVE ENGAGEMENT: The use of Social Media to create a community for like-minded customers and involve content creators who align with company goals to improve customer engagement are the focus of D2C brands today. Creating a 360-degree touchpoint to allow customers to interact with the brand and its ethos at any given point has become crucial. Thus, brands are driving not only engagement with themselves, but also among their family of consumers to have them more involved in the process.
• CONSCIOUS SOURCING: Fashion accessory brands are maintaining a policy to be transparent about how they ethically source raw materials and believe that it is important to speak about these polices and give back to society in the best way possible. Having identified a big gap in the arena, they entered the market with proudly Indian, cruelty-free products.

Fitness companies are also bridging the gap in the lack of standardisation in the market and working to increase accessibility. They are increasingly penetrating smaller markets and remote sectors of the country where there is significant growth in the number of health-conscious consumers who want to partake in fitness, but are uninspired due to the unavailability of even basic gear. D2C brands in the segment are thus not only manufacturing good-quality products at reasonable prices, but are also expanding their distribution and reach. This is a significant driver for the fitness accessories category.

Accessories Brands Pivoting a Change

Boldfit: The lack of standardisation, affordability and accessibility in the category of fitness accessories led to the founding of Boldfit. Its winning formula has since led to the establishment of its range of health supplements. It continues to build a community of health-conscious people in the remotest corners of the country. Boldfit manages warehouses in over 12 states in India. It has the capacity to make products available to customers in just over a day in top metros, and within two days in most other cities. The brand has piqued the interest of investors and may soon announce a fundraise. Its business has grown 10x since the first wave of COVID.

DailyObjects: DailyObjects envisioned itself as a brand that delivered carefully crafted accessories to the urban Indian populace. And in realising that vision, it became a game changer in the space. Today, as the brand continues to ensure its quality and value-driven products cater to the design sensibilities of millennials, it aims to fuel its growth and expand its product line by listening intently to customers and knowing them better. DailyObjects has invested heavily in its own logistics facilities to take more control of the quality of packaging and a faster turnaround time. It has made technology investments of as much as Rs5 million in its fulfilment centre, Apps and online store. The brand is projected to grow 3x in its key categories, fuelled by its state-of-the- art facility in Gurugram and investment in strategic acquisition channels like Android and iOS Apps. DailyObjects recently announced that Roots Ventures, an early-stage Venture Capital firm, has invested US$2 million in the brand. The company’s statement also highlighted that a significant part of the funding will be used for building a stronger design team and customer experiences.

Zouk: Zouk entered the online market for bags and accessories with the aim to incorporate colourful Indian handicrafts into daily life. It sought to give consumers a reason to diverge from Western-looking accessories to handbags and wallets that were PeTA-approved and cruelty-free, and were an ode to ethnic Indian crafts and motifs, defining the very essence of the country’s rich traditions. The brand has already made quite a splash online. Zouk currently serves over 60,000 customers across India. Its Instagram handle has also crossed the benchmark of 100,000 followers. The brand is also eyeing an expansion into the offline market with a larger bouquet of products in the lifestyle and fashion space. With its products available across several marketplaces, some even bestsellers, the brand’s revenue has grown four-fold year-on-year. Its spend on marketing has also surged significantly since debuting online.

D2C is Here to Stay
India’s digital retail transformation is scripting a new and interesting story, courtesy affordable internet connection and cheap smartphones. E-commerce is also gaining popularity in Tier-II and III towns. This is a paradigm shift and a big growing horizon for D2C. The swifter and seamless the brand’s reach, the quicker it will be able to serve its growing loyal customer base. Today, India has approximately 90 million shoppers, of whom many are first-timers. And many of them are within the 18-35 age bracket. So, brands have a big onus to use the digital space and their own channels, alongside the marketplaces, to continue catering to this huge population. From WhatsApp-based selling and taking orders via Google forms, brands are setting up their own online storefronts to connect with customers – a trend all set to continue for some time.

With shoppers shifting online mostly, large established brands are also beginning to shift gears to start selling online. Even if this was not on their priority list earlier, they are now delving deep into the marketplace domain to expand their selling corpus. Post-COVID, they are compelled to sell online. This has made brands re-look at their behind-the-scenes strategy and make manufacturing, supply chain, marketing and branding all focused towards building up their D2C channel. With sales driving up, the D2C landscape will keep reviewing and tightening its grip over logistics and other functions, so that it can efficiently cater to customers.