25 November 2022, Mumbai:
Before the internet existed and its democratization of the tools that traditional industry has used for decades, direct-to-consumer (DTC) selling was on the rise. DTC cut out the intermediaries, allowing brands to maximize their earnings.
D2C playbook
"Brand purpose" has become crucial for the overall positioning of brands as customers grow more aware of environmental challenges. It aids the brand in maintaining appeal among consumers who choose sustainable fashion over fast-fashion options.
The fashion industry has come to understand that adopting a direct-to-consumer (DTC) approach gives a brand more flexibility over how it presents itself to customers due to the sector's warming up to digital methods.
Retailers may develop at-home experiences, interact directly with customers, and foster brand loyalty by using subscription boxes. The advantage of a subscription service is that once customers sign up, they are less likely to go through the process of switching brands and will simply auto-renew.
Shopping needs can frequently be driven more by convenience than brand loyalty. COVID-19, A fundamental tailwind; The step is in tandem with the group’s aspiration, and vision strategy to launch and back to new-age digital ventures. Another benefit of DTC is that, in contrast to a traditional wholesale shop, brands can contact directly with consumers and better understand their specific needs.
DTC scenario
Studies indicate that the decade 2021-2030 will see D2C brands attract significant attention and investments as they keep growing. KPMG India reports that there are more than 800 D2C brands in the country today. The D2C sector is worth $44.6 billion currently, projected to touch $302 billion by FY 2030. Further to one of the Financial Express reports," The latest report reveals that D2C brands are estimated to be $60 billion industry by FY27, registering a CAGR of about 40%.".
Helps brands launch new products; Stakeholders believe the D2C brands' segment enables new retailers or brands and labels to launch their products as no big product development, lead times, and investment is required. India is witnessing a rapid rise of D2C brands in all segments, and the market is forecast to grow exponentially.
E-commerce majors take to D2C
With an expected market size of $100 million by 2026, D2C brands are expected to be the biggest drivers of the retail market. In 2021, these brands clinched around 174 deals to raise $1.81 billion in the capital. This not only resulted in the creation of thousands of new brands but also gave enablers and digital sellers new growth opportunities by launching new disruptive models such as e-commerce roll-ups, houses of brands, etc.
Aditya Birla Group
Aditya Birla Fashion and Retail Limited (ABFRL), India's leading fashion company part of Aditya Birla Group announced earlier this year the launch of its new D2C entity– TMRW to cash in on the fast-emerging business category, with the mandate to acquire as well as incubate 30 brands in the next three years. The newly incorporated entity will organically incubate and also acquire promising and scalable D2C brands.
It was on the back of "The Board of directors of the Company" in their meeting providing an omnibus approval to set up a new subsidiary towards building a portfolio of distinct, new-age, digital brands across categories in fashion, beauty, and other allied lifestyle segments. The D2C portfolio will be built through organic and inorganic means.
This venture will initially be funded through ABFRL's internal accruals. At an appropriate time, the company will look to bring in external capital to accelerate the growth journey.
The newly set up D2C entity TMRW intends to acquire as well as incubate direct-to-consumer fashion and lifestyle brands going forward. New Age consumers in focus; Many of these brands may not be able to expand their operations in the digital space yet, they can leverage ABFRL’s tradition, experience, and network by acquiring a plethora of brands like the company.
"We also plan to help ABFRL grow its brand portfolio by investing in other selective brands, as we do not want to miss out on consumers of the future. While our existing brands will grow and continue to remain relevant and (eventually) become more digitally-savvy, there is a whole bunch of new digital-first brands, which would come up and that's why we decided on this strategy.
Leveraging our core capabilities around design, product creation, sourcing, and brand building that have enabled us to create some of India's most loved fashion brands in the offline space, we now wish to craft a blockbuster portfolio in the digital space as well.
We are confident that this foray will successfully meet the aspirations of digitally native customers and also create long-term value for investors and other stakeholders.
The company will now accelerate the process of building the D2C framework and identifying key talent for this play. ABFRL will look to tap into the broader tech ecosystem and collaborate effectively with its e-commerce partners, tech service providers, and digital marketing agencies to scale this business rapidly.
The House of Brands business of Aditya Birla Fashion subsidiary will initially include 8 to 10 brands acquired through its own capital and continue to remain relevant and (eventually) become more digitally savvy. These small companies will have the required potential to become large brands over the next 5-10 years, In about three-four years, the ABFRL subsidiary will be created to invest in early-stage brands, as we are eying @10-15 percent of its revenue coming from its D2C subsidiary in the next five years, said Ashish Dikshit, Managing Director, ABFRL.
Prashanth Aluru is the Co-Founder & CEO, TMRW 'House of Brands'. To be known as the House of Brands, the initiative will help it align itself with evolving markets, says an Inc4 report.
The company has a bouquet of leading fashion brands and retail formats under its belt brands like Louis Philippe, Van Heusen, Allen Solly, and Peter England established for over 25 years, while Pantaloons is one of India’s largest fast-fashion store brands and it also has partnerships with Ralph Lauren, Hackett London, Ted Baker, Fred Perry, Forever 21, American Eagle, Reebok & there is a whole bunch of new digital-first brands.
The company has forayed into branded ethnic wear businesses including Tasva, and Jaypore, and strategic partnerships with designers including Shantanu& Nikhil, TarunTahiliani, and Sabyasachi Mukherjee.
As of December 2021, the company had a network of 3,370 stores across approximately 26,744 multi-brand outlets with over 6,751 points of sale in department stores across India.
Other than providing growth capital, ABFRL's proposition is built around its strong operational expertise where it will utilize its rich experience and capabilities to scale up this portfolio.
Latest News Headline
As per ET dated 25-11-2022 breaking news on how the D2C trade landscape is unfolding," Aditya Birla Fashion & Retail (ABFRL) is in the advanced stages of buying a majority/controlling stake in apparel and accessories brand Bewakoof.com for 100 crores or thereabouts, consolidating its position in the direct-to-consumer (DTC) segment, the report further states that both entities have signed a non-disclosure agreement having finished due diligence and this is going to have a serious impact on the trade dynamics going forward".
