Online spending, which has got a boost during the pandemic, is expected to grow at an annual rate of over 35 percent to US$ 200 billion in the next five years, and a lot of this growth will come from direct-to-consumer brands, according to a report.
The domestic direct-to-consumer (D2C) market is estimated to be US$ 100 billon by 2025, or 11 percent of the total retail market that is slated to touch US$ 1.7 trillion by then, investment bank Avendus Capital said in the report.
Overall retail market stood at US$ 977 billion in 2019, it said.
The domestic retail market, which is the fifth largest globally, is projected to surpass US$ 1.7 trillion by 2025, driven by e-tailing. Of the total retail market, only 17 percent was in the modern trade in 2019, which is slated to touch 31 percent by 2025. The rise in online shopping is fuelled by the 639 million strong internet population, which is growing at 24 percent.
The country has added 80 million shoppers in the past three years to reach 130 million now, according to the report. The domestic e-tail market, which stood at a low US$ 39 billion in 2019 or four per cent of the total market, is slated to be a US$ 200 billion opportunity, enjoying a share of 11 percent of the total market, it said.
The report also said the online ecosystem and evolving consumer needs have made new business models viable and have led to the emergence of D2C distribution channels. Leading domestic D2C brands include Lenskart, Licious, Zivame, Boat, Wow Skin Science, Healthkart, Mamaearth, MyGlamm, Sugar, Incnut, Country Delight, Atomberg, and Lifelong, among others.
“We expect high levels of funding activity in this space, as more successful D2C outcomes will validate the hypothesis for newer capital deployment,” said the report, adding that the addressable market for this segment is US$ 100 billion by 2025.
It added that robust consolidation is anticipated in the next three-four years, either as roll-ups or incumbents buying new-age D2C companies. Globally, D2C brands have shown mixed results, and the leading names in this category are companies like Warby Parker, Allbirds, Away, Fenty Beauty and Perfect Diary.
The key drivers for D2C brands in the country are beauty and personal care, food and beverages, and fashion. D2C brands refer to businesses that have majority of their revenue or customer acquisition from D2C online channels or started with an online-first distribution before going omnichannel.