New Delhi: Direct-to-consumer (D2C) brands are leading the next wave of value generation in the consumer space, a new report by Avendus Capital said. The report noted Indian brands such as Lenskart, Licious, Zivame, Boat, Wow Skin Sciences, Healthkart, Mamaearth, MyGlamm and Sugar among those which have seen “increasing funding activity and creating brands with extraordinary value”.
The report projects that the direct-to-consumer segment could have a US $100 billion addressable market by 2025. “India is one of the largest retail markets in the world, projected to surpass US $1.7 trillion by 2025; India has added 80 million online shoppers in the last three years alone to reach 130 million,” the report by the financial services firm said
“The internet ecosystem and evolving consumer needs have made new business models viable and have led to the emergence of the direct-to-consumer (D2C) distribution channels. D2C companies will lead the next decade of shopping for Indian consumers,” Pankaj Naik, co-head of the digital technology investment banking practice at Avendus Capital, said.
The report said the e-tail market in India will lead the shift to organised retail in the next five years.
“While the macro tailwinds have set the stage well for D2C brands in India, Covid-19 has further accelerated online adoption amidst the temporary closure of physical retail stores and the growing wariness for public places,” it said.
Online spending in India is expected to grow at a CAGR of over 35% from US $39 billion in 2019 to US $200 billion over the next five years, supported by internet and payment infrastructure developments, Avendus said in the report.
On one hand, consumption trends are evolving, and large pockets of product and price white spaces remain untapped. On the other hand, a strong supporting ecosystem has emerged with horizontal and vertical ecommerce players, social media marketing, plug-and-play supply chain and logistics options.
Neeraj Shrimali, executive director, digital technology investment banking practice at Avendus Capital, said: “We expect high levels of funding activity in this space; there will be elevated investor interest in high quality companies with good growth and focus on capital efficiency.”