How are D2C mavens navigating the traditional retail terrain of India?

In the past few years, Direct-to-Consumer (D2C) business models have undeniably gained momentum in Indian retail, heralding a new era of consumer engagement and market accessibility. Yet, amid the burgeoning success stories of online startups and digital entrepreneurs, the traditional and offline retail market continues to stand as the unassailable giant, commanding the lion's share of India's consumer economy.

India, a country rich in diverse cultures and traditions, has long cherished the experience of physical shopping. While the digital wave has certainly made significant inroads, the majority of consumers still find comfort in the tangible, personal touch of traditional retail. The bustling bazaars, local markets, and family-run shops remain integral to the fabric of Indian society.

In a panel discussion, held at the Startup Brands Summit 2023, hosted by afaqs!, industry experts dissected the dichotomy of Indian retail, between going beyond D2C and tapping into the larger portion of offline tapestry. The speakers on the panel included Deepti Karthik, who is the fractional CMO of Sleepyhead, Gaurav Dhawan, who is the Chief Revenue Officer at Times Network, Harini Sivakumar, Founder and CEO at Earth Rhythm, and Jennifer Pandya, VP of marketing, CaratLane.

Jennifer Pandya shared insightful details about the company's strategy to balance its online presence with the expansion of its offline business.

The panel discussion saw Pandya explain the initial advantage of CaratLane's online model. "Because we did not have offline stores, we could provide the jewellery at a lesser rate and we did offer it at 30% less than the market rates," she said. However, she pointed out the challenges faced in scaling the business, especially in the jewellery industry where customers prefer a tactile experience before making a purchase.

"The average price point that customers buy online is about 20,000, and if you want to increase that price point and you want people to try your jewellery before they buy, which is a significant factor in jewellery purchase decisions, you need to give them some touch and feel," Pandya explained.

CaratLane initiated its offline foray with experience stores where a selection of jewellery was displayed, and customers could continue to browse the catalogue online and try out a few pieces. However, this approach proved ineffective. Pandya stated, "When customers walk into the store, they're expecting to see the jewellery, not sit in the store and browse online."

Sleepyhead’s Deepti Karthik shed some light on the essence of innovation and the shifting dynamics between offline and online marketing strategies.

Karthik underscored the pivotal role of originality and nuance in the D2C sector. "The core of D2C is innovation. If you have a unique product derived from either a stated consumer need or a latent one that you can identify, that becomes the driving force behind successful D2C businesses," she remarked. Karthik pointed to Sleepyhead's inception, highlighting the brand's introduction of the 'mattress in a box' concept, a unique solution to cater to consumers unable to visit physical stores during the pandemic.

She elaborated on the transformative journey of consumers, starting with the purchase of a mattress online. "Once you experience the quality of our product, you naturally explore other offerings such as furniture and home decor, evolving into a loyal customer or at least someone considering us for future purchases," Karthik explained, emphasising the importance of understanding consumer behaviour and needs.

Karthik also delved into the nuanced differences between offline and online marketing strategies. Drawing from her extensive experience in traditional retail, she highlighted the contrast in approaches when transitioning from offline to online marketing. "In offline marketing, you're geared towards 70% of business happening offline. Even digital efforts are geared towards supporting this offline presence," she stated.

Harini Sivakumar of Earth Rhythm revealed the brand's strategic approach to offline expansion, shedding light on the challenges faced in a highly competitive market.

Sivakumar highlighted Earth Rhythm's successful foray into tier 2 and tier 3 cities, leveraging the aspirational nature of consumers in these regions. "In tier 2 and tier 3 cities, consumers are more aspirational, wanting to match up to the standards of metros," she stated. Earth Rhythm established 14 kiosks pan India this year, primarily in these regions, capitalising on the consumer's desire for quality products in areas where access to premium brands might be limited.

However, Sivakumar candidly acknowledged the challenges faced in metro areas, citing the significant expenses associated with establishing a physical presence. "Going offline is a risky venture, especially for a smaller brand like Earth Rhythm. Brand recall and brand loyalty require substantial investments in marketing, something larger brands in metros can afford," she commented.

The CEO explained that Earth Rhythm's cautious entry into offline spaces, marked by the establishment of kiosks, served as a testing ground. The brand aimed to gauge consumer perception and interest before heavily investing in traditional marketing methods. "We wanted to understand how consumers perceive Earth Rhythm in the market, whether they are willing to engage with the brand, learn about it, and make purchases," she added.

The challenges faced by Earth Rhythm mirror the complexities of the personal and beauty care industry. The sector demands not only quality products but also a strong brand presence, making the balance between online convenience and offline engagement crucial.

Speaking on the conversations startup brands generally have with investors and marketing agencies, Gaurav Dhawan of Times Group pointed out the solutions provided by the company to startup brands, especially in terms of finances. The media conglomerate’s strategic investment arm Brand Capital, leverages brand-led growth and value creation via investment models and programmes.

He acknowledged the hesitancy among some startup owners to part with equity, emphasising that the Times Group's collaborative model allows startups to maintain their focus on their expertise—product and service creation.

"The needs of startups evolve," Dhawan remarked, detailing how the Times Network provides tailored solutions to startups' varying needs as they progress. From the initial year's focus on recognition, building dealer franchises, and garnering investor confidence to later stages' nuanced requirements, the Times Group adapts its assistance to match the specific needs of each startup.

He further elucidated the comprehensive support provided, spanning from conventional advertising and branding to content solutions. Recognising that many startups introduce niche products with limited initial appeal, Dhawan highlighted the Group's role in creating demand and awareness around these offerings.

Watch the full panel discussion below: