Rise of D2C (direct-to-customer) commerce and its impact on the Indian fashion industry

The Emergence of Direct-to-Consumer Commerce (D2C) and Its Influence on India's Fashion Industry

Direct-to-consumer (DTC) commerce has experienced remarkable growth in recent years, as more businesses choose to bypass middlemen and sell directly to their customers. This shift has had a significant effect on India's fashion industry, which has traditionally depended on wholesalers and retailers for product distribution. In this article, we will discuss the emergence of D2C commerce and its impact on the Indian fashion industry.

Understanding Direct-to-Consumer Commerce

Direct-to-consumer commerce is a business model in which companies sell their products directly to consumers, eliminating the need for intermediaries like wholesalers or retailers. This approach allows companies to exercise greater control over their products, pricing, and distribution channels, often resulting in cost savings passed on to the customer.

India's Direct-to-Consumer Commerce Surge

India has witnessed a substantial increase in D2C commerce in recent years. This surge can be largely attributed to the expansion of e-commerce platforms such as Amazon, Flipkart, and Myntra, which have simplified the direct sale of products to consumers. Furthermore, the rise of social media platforms like Instagram and Facebook has made it easier for businesses to connect with their target audience and sell their products online.

Myntra: As one of India's leading online fashion marketplaces, Myntra offers an extensive selection of products from various brands. Actively advocating for direct-to-consumer (DTC) commerce, Myntra witnessed a remarkable 68% increase in revenue in FY 2020, reaching Rs. 2,069 crore.

Flipkart: E-commerce behemoth Flipkart has extended its reach into the fashion industry, utilizing its robust online platform for DTC commerce. In FY 2020, the company's fashion segment revenue experienced a growth of 62%, indicating a surging demand for DTC fashion products in India.

Amazon: With a significant presence in the Indian e-commerce sector, Amazon has ventured into the fashion industry. In FY 2020, the company's fashion category revenue increased by 63%, fueled by the growing preference for DTC commerce among customers.

Fabindia: Renowned for its handmade products, Fabindia is a popular Indian brand boasting a strong online presence for DTC commerce. The company's revenue climbed 14% to reach Rs. 1,218.72 crore in FY 2020.

Manyavar: As a prominent ethnic wear brand in India, Manyavar maintains a robust online presence for DTC commerce. The company's revenue amounted to Rs. 550 crore in FY 2020, marking a 10% increase from the previous year.

These examples showcase the influence of DTC commerce within the Indian fashion industry, as numerous companies have experienced substantial revenue growth by embracing this approach. By utilizing DTC commerce, these companies have been able to forge personalized relationships with customers, customize their products and services to suit individual preferences, and minimize inventory and supply chain expenses. As digital technologies continue to progress and consumer behavior evolves, the impact of DTC commerce on the Indian fashion industry is poised to grow even further.

In 2020, the D2C category saw one of the highest growth rates, at nearly 45 percent year-over-year. Although the pandemic initially fueled e-commerce growth, most forecasts suggest continued expansion well into the future. Estimates indicate that e-commerce will maintain growth rates of around 11 percent until 2025. The D2C market in the US is expected to grow at a CAGR of 23 percent from 2019 to 2023. Prabhkiran Singh, founder of Bewakoof.com, stated at the D2C Summit that “D2C is not just a niche creation to step away from legacy brands… It is, in its entirety, a process-creation to address issues at every product touchpoint.”

Implications for the Indian Fashion Industry

The emergence of DTC commerce has significantly affected India's fashion industry. Historically, Indian fashion companies relied on wholesalers and retailers for product distribution. However, e-commerce platforms and social media have simplified direct sales to consumers.

Direct-to-consumer commerce has revolutionized the traditional retail landscape, offering consumers a more convenient and customized shopping experience. In India's fashion industry, this approach has emerged as a catalyst for change, creating new opportunities for designers and brands to showcase their products directly to customers, bypassing conventional retail channels.

• One of the most notable effects of direct-to-consumer commerce on the Indian fashion industry is the democratization of fashion. Previously, high-end fashion was only accessible to the elite, but now, with the rise of direct-to-consumer commerce, affordable fashion has become available to a broader audience. This allows consumers to purchase products directly from designers and brands, cutting out the middlemen and resulting in lower prices. Consequently, this has expanded the customer base for fashion brands, including those in Tier 2 and Tier 3 cities.
• Direct-to-consumer commerce has also fostered stronger, more personalized relationships between brands and customers. Brands can now tailor their products and services to suit individual preferences, building brand loyalty in the process. Furthermore, data collected through direct-to-consumer channels can be analyzed to better understand customer behavior and preferences, which can then inform targeted marketing campaigns.
• Another significant impact of direct-to-consumer commerce is the reduction of inventory and supply chain costs. Traditional retail channels involved lengthy supply chains that inflated product costs. However, direct-to-consumer commerce allows brands to ship products directly to customers, eliminating the need for intermediaries. This not only results in cost savings for the brands but also enables them to offer products at more competitive prices.
• The rise of direct-to-consumer commerce has also contributed to the growth of e-commerce in India. Factors such as high-speed internet, increased smartphone usage, and the adoption of digital payments have made it more convenient for customers to shop online. This has led to the expansion of online marketplaces, which provide a diverse range of products, including fashion items. Brands can now sell their products through these online platforms, opening up new revenue streams.
• Lastly, direct-to-consumer commerce has promoted sustainability within the fashion industry. By selling products directly to customers, brands can eliminate the need for excess inventory and reduce waste. Moreover, brands can adopt sustainable materials and production processes, which are becoming increasingly important to modern consumers. This shift towards sustainable practices not only mitigates the environmental impact of the fashion industry but also helps to establish a more socially responsible brand image.

Between 2014 and April 2021, fashion D2C brands secured $756 million in funding across 123 deals, with fashion leading the funding list among D2C sectors. The message is unambiguous: this segment will continue to offer numerous opportunities as long as brands can identify their target audience, address their specific needs, and engage in intelligent problem-solving.

The rise of DTC commerce has had a profound effect on the Indian fashion industry. By eliminating intermediaries and selling directly to consumers, Indian fashion companies can now reach a larger audience, control pricing and distribution channels, and exercise greater control over their supply chain. As e-commerce and social media continue to expand, it is likely that an increasing number of Indian fashion businesses will adopt the DTC commerce model.