As intermittent lockdowns and movement restrictions disrupted the working of physical shops, the businesses found their own ‘eureka’ moment to quickly reach the end customer, without depending on the middlemen and suppliers.
To stay afloat in much tougher times, new-age startups from small towns and cities sought refuge in D2C ( Direct-to-consumer) business model and emerged as the strongest contender against the e-commerce behemoths Amazon and Flipkart.
As brands have evolved from offline channels to go online, shopping from the D2C brands is no longer a metro city phenomenon. Social distancing norms increased usage of data, and smartphones have nudged shoppers from small towns and cities to shop online. Today, small-town shoppers account for 40-50 percent of sales of several premium D2C brands across grooming and beauty, wellness foods, wearables, cookware, and appliances.
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According to a study by Bain & Company, three out of every five shoppers of social commerce now come from smaller towns.
D2C brands holding a soft corner among small-town shoppers
Surprisingly, job losses and pay cuts did not reflect in the purchases of D2C brands. Here are some of the reasons why it drove the demand.
Rise of social commerce: Social commerce platforms are currently becoming the launchpad of D2C brands and have empowered several small retailers and women entrepreneurs. Generally, products sold in tier-II and tier-III cities are unstructured and unbranded. Being listed on social commerce platforms helps small D2C business to sell their products to nearby towns and cities without having to bother about middlemen and pay commission. Also, listing businesses on B2C platforms is a time-consuming process. According to a study by Bain & Company, three out of every five shoppers now come from smaller towns.
Faster and timely deliveries: The shortening of delivery timelines by introducing same-day delivery or delivery within five days has instilled confidence for shopping online more as in physical shopping they get the product as soon as they purchase it.
Shopping in vernacular: Vernacular will drive shopping for the next generation of consumers. Most shoppers from small cities will prefer purchasing browsing web pages that have vernacular content. According to Bain & Company, webpage translation to vernacular languages increased to 1.5 times in 2020.
Digital Payments and BNPL (Buy Now Pay Later): Digital payments are increasingly gaining acceptance and especially with purchasing electronics online, newer payment models such as BNPL (Buy Now Pay Later) that do not require upfront full payment is quickly gaining ground in online shopping.
Another reason for D2C brands’ success can be attributed to its focus on ‘ individualisation’ especially in the personal care segment. Different hair types, skin types, body sizes, and purposes are driving the demand for the same.
What is in it for the D2C brands to foray into tier-II and tier-III cities?
According to a study by Bain & Company, India’s e-retail market is projected to grow at 25%–30% annually over the next five years to reach $120–140 billion by FY26, which is higher than Modern Trade. It is anticipated that India’s e-retail growth will be fuelled by small-town shoppers especially by women and older shoppers. Moreover, most shoppers from lower-tier cities are aspirational and thereby will choose products that will enhance their self-image and desirability. Gone are the days when brands underestimated the shoppers of low-tier cities based on their income and willingness to shop. With deeper internet penetration and increasing disposable incomes, tier-II and tier-III markets will have maximum growth potential than metro cities.
