Is India The New Mecca For D2C Startups?

Which of these sectors do you believe is the most promising for investment in 2024: IT, Renewable Energy, Financial Services, Healthcare, or Automobiles (particularly Electric Vehicles)?

While each of these sectors has had a breakout performance in the last few years and is highly recommended in FoxAndAngel’s 2024 List, one sector that surprised me was the Direct-to-Customer (D2C).

What makes this sector so extraordinary and forward-thinking? Let's find out.

D2C Market Growth

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From a nascent market, D2C witnessed high growth post the COVID-19 pandemic. Driven by the shift towards digital, this sector has captured the attention of the younger audience —mainly the Gen-Z and millennials, who are more adept at technology.

Given the rising dependence on digital and increasing penetration of the internet even in the remotest parts of India, the industry is expected to reach $100 billion by 2025, which is why it is top on my radar.

Shift in VC Investments

Global funding has stagnated since the big jump we witnessed in 2021. As per this Crunchbase report, 2023 saw the lowest venture funding since 2018, down from the $462 billion investment that we saw in 2022 to just $285 billion being invested in startups in 2023.?

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Venture capital has continued to prioritize AI, tech, and D2C sectors amidst the global economic slowdown, pouring substantial funds into these areas. The reasons for this shift can be due to rapid expansion to profitability and unit economics.?

Investors became more cautious, demanding clear revenue models and sustainable growth paths. The era of hyper-growth gave way to a more measured approach, with startups prioritizing operational efficiency and cost control.

While the funding winter has presented challenges, it has also led to a consolidation of the D2C space. Weaker players have been forced to exit or pivot, while stronger brands have emerged as market leaders.

Thus, even traditional brands are re-branding to become new-age D2C brands to cater to this trend, prioritizing operational efficiency, tech-based selling, and cost control to win the new-age customers.

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In the Indian ecosystem, $141 billion has been pumped into startups between 2014 and H1 2023, with key investors like Sequoia Capital, Accel Partners, and Tiger Global increasingly backing promising D2C players, highlighting the immense potential of this sector.

eCommerce Support System is Getting Stronger

Gone are the days when starting an eCommerce brand meant hiring consultants, understanding market forces, and struggling with logistics and technology updates.

Today, the D2C sector is powered by a robust ecosystem, starting with eCommerce platforms like?Shopify, WooCommerce, and BigCommerce. These platforms have democratized online store creation, allowing D2C brands to launch their businesses with minimal technical expertise.

Plus, logistics is now increasingly easy, thanks to the rise of shipping and delivery partners like Delhivery, Ecom Express, Shiprocket, and others. The emergence of these warehousing and fulfillment centers helps D2C brands manage their inventory efficiently, taking away the common pain points in building an online brand.

Moreover, the rise of fintech has provided D2C brands with access to innovative payment solutions. Digital wallets, UPI, Buy Now Pay Later options, and embedded finance have made it easy for a diverse range of customers to buy online, something that was unthinkable a few years ago.

India's Consumer Economy is Going Digital

India is home to over 190 million digital shoppers and is already the world’s third-largest online shopping base. As more consumers adopt the digital ecosystem, the market could grow further.

Take the example of Revlon and Lotus, which took 20 years to reach the?Rs. 100 crore revenue mark. New-age D2C brands like Mamaearth, Sugar, Cartlane, and Nua did it in just 4-5 years!

Surge in India’s Startup Ecosystem

According to the Economic Times Report, startups in India will likely add $1 trillion to the economy by 2030, creating 50 million new jobs. D2C brands will be one of the major players in this growth.

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The growth isn't uniform. Sectors like beauty & wellness, fashion, and personal care are gaining popularity, fueled by a rising middle class and increased internet penetration. The fashion and beauty sector alone can reach $43.2 billion by 2025.

D2C Is Leading The Way In 2024 And Beyond!

The future looks bright. With increasing internet and smartphone adoption and?rising disposable incomes, the D2C market is poised for continued exponential growth. Founders, are you ready to ride the wave? I am!?

What are your thoughts on the D2C landscape in India? Share your experiences and predictions in the comments!

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