As India deepens its digital footprints, the retail landscape is expected to witness some significant shifts. The Direct to Consumer (D2C) segment has witnessed tremendous growth, especially during the pandemic. As per Inc 42’s recently released report – India’s D2C market is estimated to reach $100 Bn by 2025. As the D2C market strengthens its presence within the daily life of the Indian consumer, we expect to see some key emerging trends, spanning across all areas including digital media, tech-enabled logistics and delivery, and product value.

As the ecommerce market in India matures, the consumer expectations also continue to evolve with regards to service, especially delivery. There is no ‘one size fits all’ mantra for ecommerce any more.

Three popular service models have emerged. These include the 2-day assured delivery experience akin to the one offered by Amazon Prime or Flipkart; slot based or next day delivery experience offered by brands such as Big Basket, Grofers and Supermart and the instant hyperlocal delivery (45mins- 2hrs) experience offered by Instamart or Dunzo. Each of these models lend themselves to various product categories and aim to offer a distinct convenience that would encourage sale conversions and increased customer delight. Thus, leading to better Net Promoter Score (NPS) and loyalty.

The pandemic saw an upsurge in e-commerce as orders volume increased by 36% in the last quarter of 2020 and a lot of this increase was from tier 2 and tier 3 cities. Amazon Pantry, saw twice the increase in demand from Tier-2 & 3 cities such as Ambala, Ananthapur, Bijapur etc. leading the charge.

Logistic aggregators like Easyship, ShipRocket and VamaShip strive to add further value to the brands as they help segment consumers to provide differentiated delivery services. For loyal customers or customers with a high basket value, brands can often choose from the three services resulting in better allocation of cost and a tailor made approach.

Besides ensuring prompt delivery, D2C brands also struggle with creating unit economics that are able to take consumers along with their requirements of COD & returns. Fake orders is a bane of the industry and this is an ongoing optimisation. Logistic partners are now offering services that help address this concern. Third Watch (acquired by Razorpay), ShipRocket, Delhivery, Gokwik etc. have services that flag suspicious delivery addresses. These solutions are still nascent, but also a glimpse of what the industry can offer in terms of value to D2C brands in creating a more effective and efficient ecosystem.

Third party delivery providers have played a large role in allowing brands to deliver to almost 27,000 pin-codes in India, with the help of API integration. However, warehousing remains a significant challenge and over the past few years has lured multiple start ups to venture into this space. Just last year, India added 27 million square feet of warehousing space. To put it in perspective, this is equivalent of adding 2 football fields every-day in to warehousing capacity, which stood at 238 million square feet at the end of 2020. These facilities range from large warehouses near the city to micro-warehouses deep inside the city. Even Delhivery, which is a large e-commerce logistics player, has launched a service called Flash which allows brands to fulfil orders faster through multi-warehouse product placement.

As the demand from tier 2 and 3 cities continue to grow, the need for more such integrated tech-enabled warehousing facilities will only continue to increase across India. From better storage facilities, easier and quicker dispatch options to better connectivity, warehouse providers will need to continue to innovate and evolve to offer seamless high-quality service to the brands as well as the end consumer.

Along with the delivery models, payments models have also seen a significant shift in the past few years. Unified Payments Interface (UPI)and Buy Now Pay Later (BNPL) have emerged as game changers, reducing overheads with lower reliance on Cash on Delivery (COD) orders and lower failed delivery transactions. As per the NPCI data, the number of UPI transactions in April 2021 touched a record 2.6 billion, a 2.5X jump compared to April 2020. With the overall transaction values over INR 5 trillion, UPI owns 73% of the digital payments market in 2021, up from 9% in 2018.

The economic uncertainty that followed the pandemic, has also placed BNPL as a preferred payment option. With claims such as 0% transaction failure rate, nearly a 20% increase in basket sizes, almost 2x increase in frequency of purchases, as well as easy real-time refunds, BNPL has emerged as a lucrative proposition for D2C brands. While it is only 3% of the market at present, it is projected to increase to 9% by 2024.

Along with this, the new age online consumer also expects a much more streamlined browsing experience. Artificial intelligence (AI) led merchandising has been rapidly gaining traction, as it helps personalise individual consumer journeys, thus, improving conversion rate for brands. Consumers seek the same convenience of walking into a physical store and asking the manager to streamline the collection based on their preferences of size, colour, price etc. With AI powered technology, brands are now trying to predict and recommend what the consumer might like based on variables like their prior purchasing history, overall browsing activities & ad campaign data, thus creating a hyper personalised consumer experience. Global companies like Segment, Qubit (used by over 1,500 ecommerce companies), Evergage (which has been acquired by Evergage) and Adobe Target have emerged as early leaders, helping large brands like DVF derive almost 11% of their revenue through personalization. Among Indian companies, Mad Street Den has been pioneering this segment. There is a lot of activity here with other players like Babel, Factors.ai, Saras etc. emerging as key players. This trend of creating a “customer segment of one” has only just begun and will soon emerge as an integral element for creating a more intimate consumer relationships leading to strong brand loyalty.

D2C brands are also looking at new age marketing channels and influencer marketing is proving to be a more cost effective and sustainable medium as opposed to the traditional channels. Creator economy is well established and thriving with a global market size of $1.75 billion, according to digital marketing agency AdLift. The influencer market at $ 75-150 million a year, is still at a nascent stage in India, but is rapidly gaining traction and acceptance. The evolved Indian consumer – urban and Tier 2 and 3 – seek validation from influencer and are jumping on the trend with local regional influencers enjoying more credibility than national counterparts within their targeted audience base. D2C brands thrive on connect and credibility as they strive to bring in new users as well as create a community of brand loyalists. Thus, creating a flourishing influencer marketing ecosystem. While the creator economy continues to grow exponentially, demand for experts and aggregators who can harness the power of the various social media platforms in the most cost effective will also continue to rise. Targeted influencer marketing, with hyper local segmentation through better data analytics and insights will lead the way for the future.

D2C brands understand the importance of larger presence across channels in order to build awareness and maximise reach. Omni-channel presence can sometimes be extremely costly for a new brand especially as it tries to foray into the offline space. New age distributors are now aggregating brands and providing them a shared plug and play S&D service, resulting in cost savings; better return and expiry management; access to relevant outlets in each geography; transparent scheme management and increased throughput. There are multiple horizontal players emerging here like Udaan, Storeking, Jumbo tail etc.. In addition, new age category specific distribution plays like Anka Summor, Dropshop etc. are emerging to plug this gap.

Technology will continue to pave the way ahead for the D2C brands as they become an integral part of the retail universe. A new and unique ecosystem is building around these brands and this omnichannel ecosystem will only continue to grow with innovative solutions being offered across various functions. The ability to identify gaps in the current retail experience; the ingenuity to offer customised solutions that are cost effective and more efficient; and the creativity to deliver value that is appreciated and rewarded by the target audience will define the leading supply chain players, supporting and elevating the D2C brands of the future.

(The author is a partner at Fireside Ventures. Views expressed are personal)