What does the future holds for rollup models in India for the D2C market?
It’s been almost a decade since India’s first set of Direct-to-consumer (D2C) brands made a splash in the market. Online shopping was still nascent and people were still learning to buy from marketplaces like Amazon. However, some brands decided to reach out to the customer, all on their own.
A decade on, D2C is no longer a buzzword. In fact, customers are increasingly looking for the personalised experience that only a D2C brand can provide. Their online storefronts are designed to immerse consumers into the brand’s aura and the sales communication is in tune with the brand’s language. These brands are moving on from simple sales to building entire communities around their products.
The involvement of the customer in the buying journey has never been more. Now, in its third act, D2C brands are evolving into a mainstay of the consumer economy. According to a recent report by Praxis, D2C is a $12 billion market currently and expected to grow to $60 billion by FY27. But there’s another set of companies in the e-commerce market that are in an unique position to advance that even further.
The e-commerce rollups of India came into existence early last year, and have generated tremendous amounts of value in a short period of time. In the roll-up model, a company invests in e-commerce brands, infuses working capital and brings on an expert e-commerce team to scale their business. While rollups are known to invest in companies who primarily sell on third-party marketplaces, they’re catching up with the D2C wave and building out independent storefronts for their acquisitions.
There are a few factors that make rollup-driven D2C brands a challenging proposition
Data, Data, Data: Rollups, by virtue of their largesse, can build expansive analytics capabilities. In the long run, this can also be leveraged to build your own brands, as you begin to identify market and segment gaps.
Ability to hire experts: They’re also able to hire experts for key functions, as these resources can be shared among their acquisitions. Teams like customer support, digital marketing, design, supply chain, among others can benefit multiple brands at once, at no additional cost. This helps D2C brands to gain from expert operators, while keeping their bottom line lean.
Negotiating power: D2C brands take time to build a large base of customers. Low traffic numbers make it difficult to negotiate lucrative partnership opportunities. Clubbing multiple D2C brands also allows the rollup to negotiate better partnerships and lower the costs of business operators such as ad platforms and logistic providers. Moreover, large costs like distribution and warehousing also get averaged across brands, and better margins are negotiated compared to the ones offered to standalone D2C brands.
Learning synergies across acquisitions: Given that one centralised team works across brands, the advantage to learn from operating multiple category-leaders is significant. For example, a fitness equipment manufacturer can benefit from the insights of a shoe brand and vice-versa.
We’re just entering the second year of Indian rollup e-commerce companies, and the sector is rife with opportunities. The growing customer loyalty toward D2C brands have made it an attractive opportunity to explore, and I’m certain that we will soon see multiple rollups build out expansive D2C storefronts for their brands.
Views expressed above are the author’s own.
END OF ARTICLE
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.