It’s now widely acknowledged that the 2020 global pandemic has transformed human lives in many ways, including how we socialize, work, and shop. Brands are now looking to connect and engage with their customers more directly than ever. This business approach is accelerating the growth of the “Direct-To-Consumer” (or D2C) model in the Indian market.
According to KPMG data, India is home to over 800 D2C brands, with the industry valued at $44.6 billion in 2021. This is expected to grow to $100 billion by 2025. Adding to that, over 200 million online shoppers will be added in the next four years. Some of the successful D2C brands operating in India include boAt, Lenskart, and Mama Earth.
What is driving the D2C boom in India? Several favorable factors include an increase in the number of smartphone users, Internet penetration, a flourishing digital payment ecosystem, and the growth of online shopping. At the same time, there is growing competition among D2C brands in India, with challenges revolving around how to know more about their customer base.
Let us look at the five significant customer-centric challenges in the D2C sector and how to overcome them with the right technology solution.
Five challenges in the D2C sector
There is a growing trend towards shifting towards new brands and products in the online world among consumers. This poses many customer-centric challenges for D2C brands, including the following:
- Customer Experience (CX)
D2C brands face stiff competition from modern-day retailers in creating a user or customer experience that can bring shoppers to make the first purchase and then continue to buy again. The digital shopper has many needs that any D2C brand should anticipate.
Harsha Razdan of KPMG India states that “customer experience is building up to be an important lever for brands and retailers, with technological dependence is also expected to be a game-changer for D2C brands.”
D2C companies need the right technology infrastructure to integrate with third-party payment services and product delivery systems seamlessly as part of their CX initiative. Other CX challenges include enabling technology-enabled “virtual product trials, as launched by the jewelry brand, CaratLane with its “virtual” 3D imaging.
2. Brand story and credibility
Over the years, major retail brands like Amazon and Walmart have built trusted customer relationships. Besides the ease of purchase, these brands know how to meet their customer’s expectations and build a loyal relationship. Even when these expectations are not met, “big” retailers know how to fix the problem.
On the other end, customers do not know what to expect from a “new” D2C brand or whether they will receive their placed orders correctly and on time every time. Brand credibility is a challenge for consumers to trust their confidential information.
Consumers are open to engaging with new brands as long as their “story” resonates with them. In many ways, the consumer is taking a risk by turning to these smaller, niche, and unknown brands instead of the online giants. A compelling story becomes a reason to “like” the brand and transact business with them in the “desire” to help the brand succeed.
The challenge for the brand lies not just in crafting this story but in ensuring the level becomes visible to the right target audience at the most appropriate moment.
3. Customer acquisition & retention
Traditionally, the retail space has been dominated by the mantra of “manufacturers creating products and retailers selling them.” With the opening of eCommerce channels in addition to physical retail stores, shoppers have a clear idea of what to buy and where to buy their desired product.
The challenge for D2C players is to implement the right strategy for acquiring and retaining customers. This requires cost-efficient and effective marketing and advertising strategy to build brand awareness and engage with their target audience.
For example, Bengaluru-based D2C brand, Wakefit overcame its customer acquisition & retention challenge to record over INR 400 crores in revenue in FY21. The company achieved this growth by focusing on extensive product research and customer personalization that drove its digital and offline marketing efforts.
4. Changing customer behavior
Modern shoppers are not restricting themselves to shop from eCommerce shops. They are increasingly embracing diverse shopping channels, including offline and pop-up stores, mobile shopping, mobile apps, and even social media platforms.
D2C brands like MyGlamm and Sugar Cosmetics are also investing in physical retail stores to improve their brand visibility and market reach to adapt to changing customer behavior. For instance, Sugar Cosmetics plans to increase physical retail stores from 10,000 to over 40,000 over the next year.
Besides embracing more online and offline channels, D2C brands need to understand their customer habits and use technology to enhance their multi-channel experience. The marketing mix also becomes more complex to cater to omnichannel customers.
5. Omnichannel shopping
Omnichannel has been a talking trend among retail companies in recent years. Harsha Razdan talks about an “omnichannel presence that can further enhance customer experience, leading to increased customer stickiness. As the omnichannel shopping experience goes more mainstream, D2C brands also need to add this to their strategy to compete with other retail brands.
One example is that of the D2C brand, Pee Safe, with over 10,000 stores in 100 cities in India, increasing its omnichannel presence. The company’s founder, Vikas Bagaria, believes an “omnichannel strategy works well for us, and we have been seeing great traction across both online as well as offline retail channels.”
How can a Customer Insights tool help D2C companies overcome these challenges and understand their target customers accurately? Let’s discuss this in the next section.
How to overcome D2C Customer challenges
Consumer insights tools like Aroscop’s Ask1 are designed to identify the right customer cohorts with a particular behavior. This solution aims to identify target customers (or cohorts) and deliver the relevant display ads to get the correct responses. The aim is not just to become visible to the right people but also to engage with the brand by responding to specific queries.
What capabilities must D2C organizations look for before investing in a consumer insight tool? Here are a few of them:
- Pre-built audience segments for a business platform
- Contextual placements of display ads that can deliver the proper response
- Target audience attribution feature that can measure the effectiveness of marketing campaigns
- Nation-wide market reach
- Redirection of online surveys and questionnaires based on individual response
- Geo-fencing and support for multiple languages to increase audience reach
- Support for look-alike and re-targetable audience
The COVID-19 pandemic has made retail brands realize the importance of engaging directly with consumers. The D2C wave in India is here to stay as consumers start looking at new ways to engage with brands and products.
We at Aroscop are excited to witness the transformational change of the D2C movement and are actively helping our business customers leverage its benefits in their business sphere. Our Ask1 consumer insights tool is designed to help D2C brands identify their target audience and build an accurate customer profile.
Contact us to learn how our consumer solutions can help grow your business.