India, a country of more than 1.3 billion people, is the world’s fifth-largest destination in the global retail space. The sector has emerged as one of the most dynamic and fast-paced industries, where every day we witness several new players with innovative offerings. 

In the last two-three years, India has seen a rise in online commerce with close to 200 million internet users now shopping online regularly. The COVID-19 pandemic played a significant role in the adoption and acceleration of online shopping in the country. We have seen the emergence of many direct-to-consumer (D2C) brands that have not only leveraged the digital distribution and medium for their business growth but also have established a strong emotional connect with this new age customer via their unique brand identity and a clear value proposition.

However the competition in the market has become intense and the long-term success of any brand would depend on its agile DNA, innovative marketing, operational efficiencies, and effective use of technology. Companies have to leverage their customer data efficiently; they need to utilize their consumer insights and feedback to develop products that are innovative and fulfill consumer desires. 

The D2C space has seen a lot of interest and increasing funding activity in the last couple of years. Many D2C brands such as Wow Skin Science, Plum, Mamaearth, MyGlamm, SUGAR, Country Delight, and Licious among others, are occupying niches, and creating an aspirational brand identity through their innovative offerings, tech-enabled insights, and customer-centricity. 

How Product Innovation will be a Key Differentiator in the Plethora of Brands

In the midst of strong competition, continuous innovation and product differentiation will keep customers loyal to any brand. One needs to identify their product’s USP and how it will add value to their customer. McKinsey's survey suggests that 25 percent of the total revenue profits of a company come from the launch of new products. At the same time, the brands need to understand, that with new launches, they must consider upgrading their existing products to meet the changing consumer preferences.

Product innovation can be categorized into three categories: 

Format & Packaging Innovation: It is very important that your product stands out among the others in the market. For example,  Dot & Key uses colored glass jar packaging that very well represents the color of the main ingredient used in the product. It also has a very uniquely shaped cap that gives its catalog a very distinctive visual imagery even in crowded marketplaces. 

Formulation Innovation: Clean beauty is the new consumer trend, brands are continuously focusing on new solutions, and most of the leading beauty brands are introducing chemical-free products with natural elements.  For example, The Mom's Co has launched a new Natural Age Control Range which uses Bakuchiol as the main ingredient as a replacement for Retinol which is most commonly used in many anti-aging products. 

Purpose-led Innovation: Sustainability should be the topmost priority for every brand, one should shift to eco-friendly packaging including the design, material, construction, and manufacturing to end distribution. It is very important for the brands to engage and educate their surroundings and consumers about sustainability practices including recycling, refills, and reuse practices to certifications. Many brands are continuously working towards shifting the mindsets of their consumers, by introducing purpose-led campaigns.
    
The D2C Shift: Customer-Centric Approach

D2C brands are disruptors and building products and categories that were never believed to have a large-scale acceptance or market. The moat for any D2C brand is its pace of innovation and customer-centricity. Brands that are not very close to the evolving customer needs and feedback, are going to be left behind. Consumers these days are attracted to a brand that is unique, transparent, flexible, and approachable. This is an opportunity for the D2C brands, as they can appeal to this demographic by directly reaching out to them with a personalized experience.

-    Every brand should focus on direct consumer engagement driven through product trials and feedback or direct selling or direct query redressal. These help the brands stay very close to the pulse of the consumer.

-    Focus on crowdsourcing and concept testing for new product ideas and innovations. Developing and co-existing together will enhance the brand’s visibility and reach. Crowdsourcing provides an excellent opportunity for the brands to receive their customers’ feedback and insights directly, and it helps the brands to innovate the product as per the market demand.

-    Every brand should understand, experience is everything! Don’t mess with it, one needs to move ahead of the traditional advertising and show your customers some real love. One should invest in storytelling that consumers will connect with and reciprocate. One must not forget that bad experiences are driving customers away, faster than one can think. So prioritize your customer’s needs and work towards providing the best customer experience. 

The Way-Forward: D2C Brands in India

No doubt, the D2C ecosystem is going to boom in India. We can expect heightened activities on funding, IPOs, and acquisitions. We can foresee many more successful D2C brands to be built in the next few years and consumers will continue to empower the sector. The three segments namely beauty and personal care, food and beverage, and fashion will conquer the fights of D2C brands in India with product innovation and tech-enablement. Brands need to focus on personalization, customer retention, and experience for competitive differentiation and sustainable business.