The two mega-developments in the e-commerce space that are about to explode are the integration of Metaverse in e-commerce and D2C brands with a successful online presence shifting to build themselves offline. Going omnichannel is not the only reason for this shift. These brands are keeping a close watch on their consumers, where they are frequently present and changing shopping behaviors influenced by tech. At ‘D2C India 2022’, a panel of esteemed D2C founders who have built and scaled businesses online as well as offline, shared their journey, USP, and more.

The panel was an ecstatic mix of owners of products, from coffee, loungewear, wearable tech, plant-based meat and dairy alternatives, healthy nutritional food, kids' wear, to a fitness brand. These brands have scaled themselves on different platforms be it social or marketplaces. 

How does a D2C Brand Define ‘Scalability’?

For Sleepy Owl Coffee, Ajai Thandi, Co-founder said, “Scaling for us would mean distribution across platforms - online as well as offline. Online would mean leveraging technology to reach our customers at reduced costs and increased speed, through aggregators like ShipRocket and tech platforms like Wigzo that help us retain our customers, distribution through our hiring mechanisms where they go an extra mile to help achieve our organizational goals, and lastly being available at the PoS becomes most important as we are an FnB brand.”

Abhilash Panda, CEO, Dizo has a different objective to scale. They wish to become the No. 1 brand in India and beat one of the sharks. Their focus also revolves around scaling sustainably as they’ve been around only for a year. He said, “Understanding our customers to retain them, providing the best technology to consumers at competitive pricing, and improving consistently on our ‘post-sale-service' is how we look at scaling.”

At Flatheads, Utkarsh Biradar, Co-founder mentioned, “We started with one SKU and that didn’t work. We finally found the product-market fit. One of the ways to scale is to know how many more hero-SKUs you can find. It’s very simple as one has to look at reviews and ratings that keep coming on the website or Amazon.”

The jewelry industry is a different game altogether where trust plays a critical role as the average order value is very high. At Candere (by Kalyan Jewelers), Rupesh Jain, Founder, and CEO said, “One - the most important factor for us is how we can manage trust at scale. That’s the reason that we are the only online player that manages the conversion rates consistently for over a year now. 85-90 percent of our business now happens on our own website and the remaining 10 percent happens on our partner websites. Second - Managing your customer expectations at scale and offering good quality service is what we focus on. We have a huge team delegated for ‘customer delight’. Lastly, our focus is on LTV (Lifetime Value) where we’ve factored in conversion rates, lifespan of our customer, reviews, frequency of purchase, and finally our margins and unit economics which are important to focus on to survive in the long-term game. This is how we measure scale at every single point.”

Dhivakar Sathyamurthy, Head of Sales and Operations of OneGood said, “Scaling up means building a plant-based Amul. For us to match, meet and beat the dairy prices in the market would be truly scaling up. In the plant-based space, affordability and accessibility play major roles and that’s what we’ve been working on to suit the Indian markets where it all begins with the ‘pricing’ for vegan products. We’ve been able to crack it by being honest about our business decisions (transparency) when we hiked the prices of some of our products. We always talk to our customers through different channels. Since it’s a niche market, trust is an important factor for us. I truly believe that affordability, accessibility, functionality along with taste together would help us scale at one point in time”. 

Siddhartha Gondal, Co-founder on the other side elaborated on scaling XYXX Apparels. “One of the conscious calls we took was to look at where the consumer buys the inner wear from. Scaling therefore is scaling to where the consumer is shopping from - online as well as offline. Then comes figuring out the distribution as each channel would have its own distribution infrastructure to scale. From day one, we’ve been clear that our burn should be controlled. Which means finding a balance between growth and funds.”

Abhishek Negi, Co-founder of Eggoz said, “Our aim at Eggoz is to become a synonym for eggs just like how a Bisleri is a synonym for water. In consumables, especially food, that will come through scalable quality control while we are branching out in different cities. Another factor is sustainability which we are trying to crack through product-lead growth and not just rely on marketing and branding.”

Hopscotch has a different view on growth. “We don’t see growth in isolation. We see growth aligned with sustainability and customer experience. In the long-tail fashion business, we have to deal with N number of SKUs as opposed to a head-heavy category where one deals with only a handful of products. So we invest a lot in demand forecasting, making the best use of data models, and making our supply chain agile so that we can have healthy inventory turns. NPS is equally important to us when talking about growth - how we manage customer expectations. Combining these, we have grown to 5x in our top line,” said Govind Kumar, VP – Business, Hopscotch.

Tracking the Less Glamorous Metrics of the D2C Business Model 

We further got down to specifics with our panel where we deep-dived into their businesses by letting our founders spill the beans on key metrics (which aren’t that starry) that they track at regular intervals and around which they drive their turns in the business. 

At Flatheads, it’s about the percentage of paid conversions (or marketing spend on e-commerce), whether or not it’s constant or increasing, tracking organics, the search funnel traffic, reviews, and ratings as they’re non-fungible, and lastly the returns and exchanges.

It’s very important for a business in the D2C space or planning to enter a D2C model to understand the metrics that move the needle for them or that influence their goals and objectives. Founders need to keep a close eye on those very metrics from time to time to get insights and build on them. 

Conversion rates continue to top the lists for most founders as that defines the bread and butter for any online business. 

Rupesh Jain of Candere said, “Daily NPS score and reducing the timelines in manufacturing the same products as jewelry is an inventory-heavy business”. 

Dizo on other hand tracks new consumer use cases to solve for as they operate in a cluttered market making it difficult to offer something new each time. 

Building Custom Data Sets to Gain Consumer and Market Insights  

Omnichannel brands that are retail-heavy are constantly churning different types of data sets and metrics from their own websites, marketplaces, and other channels. Forming the right and relevant perspectives through these data points can make all the difference. It helps founders make better decisions. Our panel elaborated on their respective ways of decoding the data to interpret and make better decisions. 

Ajai (Sleepy Owl Coffee) said, “It’s all about cohort analysis, be it any channel that we track. That’s basically how long one acquired customer continues to give revenue or how fast is the product moving on a particular channel. This helps them understand the product-market fit, retention, upselling, and offering a differentiated product to that customer. It’s helpful in D2C where they also compare one cohort to another. In retail, the billings happen at the distributor’s end. Store level metrics by using platforms like field assist and Bizom and then adding a player of cohort analysis on store font data can offer that granular clarity. While going online to offline a key answer that a D2C brand online can offer is to tell where is the demand likely to increase or where is it the most. Accordingly, a brand can open an offline store in that geography to have certain assured transaction numbers at the start.”

At Eggoz, Abhishek said, “Our main purpose is to lever freshness of eggs. To track that we use lead indicators and lag indicators. How many retailers are we touching on a daily basis, is our product available, and are our POs getting delivered or not are a few metrics that would tell about the share in that retail segment? For us Kiranas, offline and online together with makeup for our sales. We focus on how many repeat customers we are getting through marketplaces like Blinkit or Zepto. Offline has mostly shared basis”. 

Siddhartha shared a very crucial point for omnichannel brands - that is to have synergies across channels for ‘new product development’. 

“Inventory management and omnichannel are extremely complicated. Whether it’s selling across channels or one channel. It’s very important to have clarity about how much inventory should you deploy at an Amazon warehouse, a Flipkart warehouse, or at a distributor level. It’s important to track these very data points and insights at a daily, weekly, or monthly level, to fulfill the delivery promise to a consumer as out-of-stock = out-of-mind. Secondly, for omnichannel brands it's important to get new product insights via tools like Field Assist,” he said. 

Apart from the above, the data sets can be extensively used by brands to bring back the market insights into the brand to create something more useful and introduce it to the market or they can be used to initiate product improvements from time to time. Data can be extremely powerful and even enable brands to change or introduce a catalog with an entirely new product line - a very peculiar movement in the fashion category. 

In a plant-based category, in order to build a D2C model that also is a retail fit can be considerably challenging as the prices of raw materials have increased recently. Diwakar said, while they’ve been able to retain 70 percent of their customers, new customer acquisition or conversions continue to remain a challenge. Offline for OneGood has been working really well, he says, as it offers the customers to directly engage and experience the offering. 

Balancing Customer Acquisition Costs

Solving for Customer Acquisition Costs is another metric that tops the minds of everyone on the panel. For Hopscotch, the focus is always on retention. LTV is the most important. Repeat sales are another focus area along with NPS. They focus on how they can increase product lines to have the consumer coming back. Age groups are equally important for Hopscotch, on which they capitalize to prolong the LTV of the customer. 

Candere also confessed that the CAC has gone up for them in the last two years but with a repeat ratio of 40-50 percent, where the business makes money. However, it doesn’t bother them as their Average Order Value has also seen a jump of about 6-7 percent. With their first store on the anvil by September this year, they plan to use marketing to spin the wave of footfalls. 

At Flatheads too, because of the iOS updates in Jan-Mar, the CAC has gone up significantly higher. Utkarsh further advised two things. “For the brands who want to stay online, we’ve tweaked how we market ourselves on marketplaces and also equally focusing on building heaving on the organics by educating the customers. People ignore the fact that CAC is a function of trust that the customer has for the brand. It needs to be built through content and focusing on who is endorsing the brand.”

Founders have a tough call to take and that is to decide how much or whether or not they should deploy funds for a particular channel. From a marketplace perspective, Siddhartha said, “It’s important to know which channel the consumer is frequent at. It could be one or two or many but it’s important to identify that and then double down on that.” 

D2C scaling requires a nuanced and integrated understanding of consumer channels and deep-diving over a period of time into the metrics to fuel growth and expansion.