D2C Brands and Omnichannel: A Good Fit?
As d2c brands make a beeline for our attention, we think the true growth in eCommerce will come when it helps local economies grow, and not merely trying to sell to them
Over the past several months, we have been reporting on the efforts building around government-sponsored Open Network for Digital Commerce (ONDC) protocols aimed at leveling the eCommerce playing field for the smallest of merchants operating from the tiniest of hamlets in India. Why? Because Indian eCommerce penetration remains less than 10%.
According to a new report from INC42, the next big wave of funding is happening around the omnichannel marketplace, which for the uninitiated means integrating both physical and digital marketplaces to provide users with a seamless journey and a unified customer experience. In simple words, you go to a store to choose the product, order it online and get delivery.
The report titled “State of Indian eCommerce Q1 2023” notes that the omnichannel direct to consumer (d2c) replaced the marketplace as the most funded sub-sector in 2022, raising $1.7 billion, about 43% higher than what the entire eCommerce industry garnered. This surge is in anticipation of higher digital penetration and growth of D2C brands.
A report published in INC42 argues that the D2C business model, necessitated by a shift in the consumer mindset during the Covid years seems to be fading away. The report says 19 of the 22 omnichannel D2C companies that published annual reports seven were EBITDA-positive, thus suggesting that an offline presence was critical for fuelling further growth.
Where are the challenges?
Several such brands with deep pockets are building an offline presence with the likes of Mamaearth, Pepperfry, Wakefit, boAt and Lenskart already leveraging the scale to increase margins. The report suggests a need for D2C brands to realign their business growth strategies through an omnichannel approach.
However, a closer look at some of these brands suggests that the challenge could lie elsewhere. Increasing the eCommerce penetration requires a wider footprint as even Amazon, Flipkart and JioMart aren’t truly pan-India. There is also the question of how these brands and the D2C variants sell in smaller cities and towns where disposable income is limited.
Most of the D2C brands are using the standard option of acquiring and retaining customers in big cities while ignoring local commerce that could potentially throw up quality products looking for a larger audience. Such a move provides curation opportunities with a social angle of generating local income for the artisans and business owners in smaller cities and towns.
The ONDC piece of the puzzle is missing
This is where the ONDC protocols come into play. CEO Thampi Koshy articulated it by stating that every town and village in India requires a capitalist who can fund local digital commerce initiatives. It’s like creating a local super app for a community for connecting local buyers with the local sellers directly. And if a curation layer is thrown in, select products with defined quality metrics could find their way on to a D2C brand to reach the big city audience.
This requires on ground effort and not armchair marketing plans that includes expanding consumer touchpoints like email, text messages, Whatsapp chats to social media promotions. All of this once again chases the already existing customer base in the tier-1 cities and maybe some parts of the tier-2 locations.
Include Bharat into the India story
If these tech-enabled companies seek to broaden their horizons, the first step could be to add a curation layer where they source authentic products from the countryside and make it available to a larger audience. Recently, we saw the news of Delhivery, a last-mile fulfillment company joining hands with eSamudaay, a tech-enabled hyperlocal network to deliver top quality organic honey prepared by villagers in upper Kangra of Himachal Pradesh, to buyers in Bengaluru.
“ONDC aims to bring the smallest of sellers onto the network and provides them with a level playing field. I’m delighted to see two network participants, Delhivery and eSamudaay, enable ‘Tenacious Bee Collective,’ a small company from Kangra, Himachal Pradesh on-board onto ONDC to take its products to customers across India,” Koshy had said about this effort.
Delhivery COO Ajith Pai was quite gung-ho about this experiment. “We are excited to collaborate with network enablers such as eSamudaay to open up new vistas for delivering value and creating wealth at the grassroots level using digital technologies,” he said.
“With Delhivery’s technology-enabled, fully-integrated logistics solutions, entrepreneurs and businesses from the remotest villages and settlements can serve customers across the country. India has huge demand from different tiers of the economy, and ONDC will truly unlock the growth potential of digital commerce in India,” Pai said.
Need to create a network of networks
eSamudaay CEO Anup Pai believes that the entire eCommerce ecosystem needs a double dose of decentralization in addition to the ONDC efforts to segregate functions like buying, selling, payment and delivery into separate entities. “Before we seek to expand the market into smaller towns and cities, the first step should be to create economic impact through providing local commerce with a chance to expand its footprint.
“Our efforts to do this came to fruition with the honey effort that originated from Tenacious Bee Collective, which is a community driven, self-sustaining model of economic, social, and environmental development. Another similar effort revolves around Chhota Baccha that celebrates childbirth with products created by artisans in small cities,” says Anup.
Creating local networks of digital entrepreneurs who work with the local merchants to digitise them and then organize local deliveries through a local network is the starting point on which eSamudaay is working now, having begun operations in over a dozen locations thus far. “All these are ONDC enabled,” concludes Anup.
