The next wave of retail: interpreting the evolving landscape of digitally native brands April 202 3 Glossary Term Definition A business that began by selling its products or services online, either through its website or on online DNB (digitally native brands) marketplaces with a majority of its sales coming through online channels An online distribution channel in which there are no intermediaries involved between the manufacturer/ brand DOC (direct online channel) and the final customer or consumer i.e. the brand’s website Traditional brands A traditional business that mainly offers products and services to its customers face - to - face in offline stores, but can even offer its products through its own website/online marketplaces Marketplaces Online retailers that allow brands to sell their products through the platform (Amazon, Flipkart etc.) Total market of digitally native brands; includes channels such as DOC, traditional offline stores and online DNB market size marketplaces Total market of the direct online channel; includes sales of traditional brands and DNBs only through their DOC market size websites © 1Lattice | 2 Key takeaways Growing at a CAGR of ~40%, DNB market is a ~US$ 12.3B opportunity in FY22 and is expected to reach ~US$ 61B market by FY27 Digitally native brands (DNB) market is a US$ ~12B opportunity in FY22; e xpected to grow at a CAGR of ~40% and reach US$ 5x ~61B market in FY27 Growth Direct online channel (DOC) market for traditional and DNBs is a US$ ~4.6B market in FY22; Expected to grow at a CAGR of ~35% 4.7 x reach US$ 22B by FY27 Growth Grocery and gourmet (38%) holds the largest share in the DNBs market followed by apparel & footwear (26%); Healthcare is projected to be the highest - growing DNB category with a CAGR of 42% Apparel & footwear (~40%) holds the largest share in the DOC market followed by grocery and gourmet (25%); Apparel & footwear is projected to be the highest - growing DOC category with a CAGR of 43% DNB brands are witnessing rapid growth and scale; Several brands have crossed INR 100Cr revenue, taking on average 4 - 5 years to reach this mark Personalization & customization, natural & high - quality ingredients, subscription models, & sustainable offerings are the key trends across various DNB categories Improved logistics & online infrastructure, ease of convenience, customization & multiple advertising avenues are factors driving growth for DNBs whereas for DOC, they are low upfront costs, higher margins & leveraging purchase data for repeat orders Innovative products/services, omnichannel approach, high - tech and new trends adoption are key differentiating factors and drivers for the success of DNBs Slower rate of growth post COVID, hyper - competitive market and decline in funding are the major headwinds being faced by DNBs Source(s): Industry reports, Invest India, IBEF, Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis © 1Lattice | 3 Agenda Market size and potential of DNB brands DNB models Category themes Growth drivers & challenges DNB and DOC market size Total DNB market size across 7 major categories is US$ 12.3B in FY22; DOC market across 7 product categories for traditional and DNBs is US$ 4.6B in FY22 Retail market US$ 903B Includes offline sales (for categories covered) E - commerce market Others of DNBs = US$ 70B US$ 833B ~ US$ 1.8B Total DNB: Categories include personal care, apparel and E - commerce market of other categories E - commerce market of categories covered footwear, grocery and gourmet, jewellery, US$ 12.3B US$ 42B US$ 28B electronics, health care, home décor, household supplies and garden Digitally native brands Traditional brands selling online US$ 10.5B US$ 17.5B Marketplaces Direct online channel Direct online channel Marketplaces US$ 7.9B US$ 2B US$ 2.6B US$ 15.5B Note(s): 1. FY22 numbers have been updated to include first 6 months of FY23 as well 2. Direct Online Channel = Sales done through own websites Total DOC: US$ 4.6B Source(s): Industry reports, Invest India, IBEF, Praxis CII Shiprocket India D2C report 2022, © 1Lattice | 5 1Lattice analysis DNB and DOC market size - projections Digitally native brands market in India is expected to be a US$ 61.3B market in FY27; the DOC market for traditional and DNB brands is expected to reach US$ 22B by FY27 Fastest growth for DNB brands is being driven by brands’ own Direct online channel (DOC) market is expected to reach US$ websites 22B by FY27, growing at a CAGR of 37% CAGR Digitally native brands market size Direct online channel market size (for FY22 – 27P (US$ B) both traditional and DNBs) (US$ B) 61.3 38% Offline , 22.0 35% 8.2 Brand's own 39 % website , 13.5 8.5 CAGR 37% Marketplace , 39.6 12.3 13.5 4.6 Offline , 1.8 38% Brand's own website , 2.6 2.0 Marketplace , 7.9 2.6 FY22 FY27P FY22 FY27P Note(s): FY22 numbers have been updated to include first 6 months of FY23 as well DOC= Direct Online Channel Traditional brands DNB Direct online channel is composed of online sales done via their own website + social media by both traditional and DNB brand s. © 1Lattice | 6 Numbers might not add up due to rounding off Source(s): Industry reports, IBEF, Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis Growth of DNB categories DNB brands operating in ‘personal care’ and ‘electronics’ have seen highest growth in terms of revenue since FY'19 Personal care Apparel and accessories Grocery and gourmet Home decor Sales in the ~65% category ~130% ~15 % ~65% are recovering post dip Average CAGR of Average CAGR of Average CAGR of Average CAGR of during revenue, FY19 - 22* r evenue , FY19 - 22* revenue, FY19 - 22* revenue, FY19 - 22* COVID Jewellery Electronics Healthcare ~50% ~100% ~75% Average CAGR of Average CAGR of Average CAGR of revenue, FY19 - 22* revenue, FY19 - 22* revenue, FY19 - 22* Note(s): 1. *These figures are illustrative and are calculated on the basis of information available of brands in these categ ori es 2. These categories do not include any online marketplaces © 1Lattice | 7 Source(s): Tracxn , Industry reports, Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis DNB and DOC market size – category deep dive In terms of market size, healthcare and apparel & footwear are projected to be the highest - growing DNB and DOC categories respectively Grocery and gourmet holds the largest share in the DNBs Apparel and footwear holds the largest share in the DOC market market Category - wise DNBs market size Category - wise Direct online channel market size CAGR CAGR (US$ M) (US$ M) FY22 – 27P FY22 – 27P 38% ~US$ 22B US$ 61.3B 37% 697 27% 2,785 326 28% 3,307 968 1,969 6,852 36% 42% 1,239 7,586 2,086 41% 35% 4,884 14,196 23% 40% 29 % 36% US$ 12.3B ~US$ 4.6B 34% 35% 10,569 203 25,961 100 483 210 750 354 433 1,291 1,643 587 41% 43% 3,212 1,151 4,738 1,793 FY22 FY27P FY22 FY27P Grocery and gourmet Apparel and footwear Apparel and footwear Grocery and gourmet Personal care Electronics Personal care Electronics Home décor, HH supplies and garden Healthcare Home décor, HH supplies, garden Healthcare Jewellery Jewellery Note(s): FY22 numbers have been updated to include first 6 months of FY23 as well Direct online channel is composed of online sales done via their own website + social media by both traditional and DNB brand s Numbers might not add up due to rounding off © 1Lattice | 8 DNB= Digitally Native Brands Source(s): Industry reports, IBEF, Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis DNB and DOC market split Digitally native brands (~US$ 2.5B) form ~55% of the total DOC market (~US$ 4.5B); sales through brand’s own website, marketplace & offline channels constitute ~20%, ~65% and ~15% respectively in DNB market DOC and DNB market split US$ M, FY22E 4,739 12,318 3,212 1,644 1,291 711 1,821 321 155 748 411 483 70 Digitally 72 native brands 203 1,793 3,222 428 7,933 2,174 963 822 81 354 274 4,629 587 211 433 1,076 104 100 2,065 176 1,151 52 74 30 260 345 250 250 411 411 137 137 717 717 2,564 2,564 70 70 806 806 173 173 DOC DNB DOC DNB DOC DNB DOC DNB DOC DNB DOC DNB DOC DNB DOC DNB market market market market market market market market market market market market market market market market Grocery and Apparel and Home décor, HH Personal care Electronics Health care Jewellery Total gourmet footwear supplies and garden Traditional brands (majorly having S ales through own website Note(s): Direct online channel is composed on online sales done via own website + social media by offline presence) both traditional and DNB brands. Numbers might not add up due to rounding off © 1Lattice | 9 Source(s): Industry reports, IBEF, Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis Marketplace Offline DNB Indian success stories DNB brands are witnessing rapid growth and scale in India; several brands have crossed INR 100Cr revenue (1/2) Number of years to cross INR 100 Cr revenue* Grocery & gourmet Apparel & accessories 8 8 7 7 6 5 5 5 4 4 4 4 4 4 3 3 3 Note(s): *The list of brands is illustrative and not an exhaustive list Source(s): Tracxn , Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis © 1Lattice | 10 DNB Indian success stories DNB brands are witnessing rapid growth and scale in India; several brands have crossed INR 100Cr revenue (2/2) Number of years to cross INR 100 Cr revenue* Beauty and Jewellery Electronics Home decor personal care 11 8 7 6 6 6 5 5 5 5 4 4 3 3 3 2 2 Note(s): *The list of brands is illustrative and not an exhaustive list Source(s): Tracxn , Praxis CII Shiprocket India D2C report 2022, 1Lattice analysis © Praxis Global Alliance | 11 Agenda Market size and potential of DNB brands DNB models Category themes Growth drivers & challenges DNB Models The DNB Model offers various channels which include Direct Online Channel (DOC), Marketplace and Exclusive brand outlets Key Native stores / Exclusive brand DOC Marketplace parameters outlets • Channel through which customers purchase and • Digital platforms that sell multiple brands • Offline channels include the usage of exclusive receive goods directly from the manufacturer across different categories brand outlets for selling products directly to the customer • Sales done through company’s own websites or • Platforms like Amazon & Flipkart are some of apps are included in DOC the major marketplaces for brands in India • Offline stores are critical in spreading brand Overview awareness • Marketing of the products is done through • Customers may choose from the available mobile applications, websites and social options of different brands and product varieties media channels Brands utilizing this channel Source(s): 1Lattice analysis © 1Lattice | 13 DNB Models > DOC channel Lower upfront costs and higher margins are key drivers of DOC; key challenges include logistics delays, high competition & low brand visibility Tail winds Leveraging purchase Low upfront costs Higher margins data for repeat orders Brand • Infrastructure requirements • Re quires minimal • Helps refine customer are limited expenditure because of low experience and understand • Lo wer - risk option because overheads and no their needs & wants by analyzing their purchase of low overheads commissions to middlemen trends resulting in higher margins Brand website / App (Direct online channel) Headwinds Difficulty in fulfilling High competition due to Low brand visibility delivery expectations low entry barriers rd In - house/3 party delivery • In an era of rising delivery • Minimal entry barriers to • Difficult to reach out to the standards and reducing TAT, launching a DOC channel targeted customers due to unavailability of adequate encourages new players to limited online presence • Smaller brands are order fulfilment systems & join the market resulting in overshadowed by larger warehousing spaces are a fierce competition major roadblock brands Consumer Source(s): 1Lattice analysis © 1Lattice | 14 DNB Models > Marketplace channel Marketplaces offer DNB brands greater reach and scaling opportunities but due to the competitive environment and lower margins, profitability can reduce Tail winds Scaling Revenue Marketplace Greater reach opportunities diversification receives order • Brands can reach a broader • M inimal overheads allow • Sales generated through a Brand and wider variety of DNB brands to scale quickly variety of channels make the prepares order audiences • Marketplaces aid brands in business resilient to external shocks • V ast catalog of available reaching new customers products attracts customers helping improve revenue If self delivery is chosen by brand Order received at Headwinds marketplace dispatch center Limited control over Lower margins High competition customer experience In - house/ rd 3 party rd • Involvement of a 3 party • Brands sacrifice control of • Due to the presence of delivery Marketplace which charges some sort of customer data (which aids in multiple brands and delivery commission, final value fees refining customer smaller sellers on the same site , the market is or indirect costs, leads to experience) while selling via characterized by cut - throat split in margin a marketplace competition Consumer Note(s): DNB=Digitally Native Brands Source(s): 1Lattice analysis © 1Lattice | 15 DNB Models > Offline channel Offline stores benefit from higher trust and visibility but face challenges such as high overheads and higher inventory requirement Tail winds In - person Higher trust Higher visibility experience Brand • U seful in establishing trust • Helps in providing a live • Allows customers to carefully examine products for high - value purchases experience of their products especially in industries like to determine their suitability which improves visibility jewellery , furniture, and • Brands can strategically • The salesperson can push Delivery to self expensive electronics place SKUs to catch customers to make an owned stores customers’ attention informed decision Includes exclusive Headwinds brand outlets Supply chain Higher inventory High overheads management requirement O ffline stores • Fixed and su nk costs, rent, • R equires a carefully • Brands must always maintain a steady stock of inventory and lease payments are planned and managed to meet customer demand among some of the factors supply chain since overhead that are a major issue for costs are higher • Requirement for huge DNB brands going the offline storage space leads to route additional costs Consumer Note(s): SKU=Stock Keeping Unit, COCO=Company owned company operated Source(s): 1Lattice analysis © 1Lattice | 16 Agenda Market size and potential of DNB brands DNB models Category themes Personal care Grocery and gourmet Apparel and footwear Jewelry Electronics Healthcare Home décor, household supplies & garden Growth drivers & challenges Personal care > Key trends Clean, sustainable and premium offerings with personalization are the key emerging trends in the DNB personal care landscape 1 2 3 4 5 Premiumization & Ingredient specific Clean beauty Personalization Sustainability subscription models products • Customers demanding • Addresses individual • DNB brands offer • Stance on sustainability • DNB brands are chemical - free products need of a customer as premium products at important for attracting focusing on products per unique profile demand with specific ingredients with natural ingredients more affordable prices • Premium ayurvedic • Personalization helps than premium brands • Products marketed as for different skin needs create customer cruelty - free, vegan, • Product categories like products in high demand Example: Shampoo stickiness as customer eco - friendly packaged onion - based Natural, toxin - gets used to the product are getting popular shampoos, charcoal free skincare facewash and caffeine Safe & products by The products are some Quiz to find sustainable Moms Co. examples of this trend suitable products for Mass products DNB brands Premium Gen Z & Natural Caffeine - brands ( Mamaearth , brands for skin Millennials (Clinic Plus, Wow, etc.) ( L’Oreal Seri based ingredients , types by Dove, etc.) INR 900 – Expert, etc.) from The personal free of harsh INR 450 - Bare 1,000 INR 2,200+ Switch Fix care chemicals by 700 Sulphate Sulphate anatomy free free products WOW 100% cruelty - free & vegan from Subscription models to build brand Pilgrim aimed to MCaffeine customer loyalty become plastic positive Charcoal based Earth facewash Rhythm uses by only Products with clinically Subscription model by Nua Bombay Customized products by recycled tested ayurvedic Shaving and Vedix resulting in higher SkinKraft and Vedix material for ingredients by Soultree retention rate Company packaging Note(s): These trends are not basis the frequency of occurrence but on the prominence Gen Z= Generation Z © 1Lattice | 18 Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis DNB player case study > Beauty and personal care mCaffeine is the first homegrown DNB start - up brand to create caffeine - infused (single - ingredient) personal care products for a premium millennial audience Founded Total funding Offerings Headquarters Company stage 2015 Caffeinated personal care Goa, India ~ US$ 41M Series C products Key product categories Key highlights Marketing & brand building • Caffeine - infused, 100% vegan, cruelty - free, 429K+ 13K+ natural brand, serving the needs of an active 119K+ followers subscribers followers millennial lifestyle 2,470+ 250+ videos posts • Successfully achieved more than 100% YoY growth and plans to acquire small brands from • Associated with Alia Bhatt for their biggest the beauty industry marketing campaign, garnered 100 million+ • Focusing on launching 15 - 20 SKUs by the end of impressions across media channels 2023, expanding the reach to 12 countries • #GetNaked became one of their most popular across the globe in the next 3 years and to Body care Face care Hair care campaigns for their body care launch 100,000 stores in the next 5 years Revenue DNB channels Business Facts Channel split • Among the online portals, Gross MV (%) ~45% sales comes from (INR Cr) their own website and the Offline , rest ~55% from eCommerce 12K+ 102 540 10% platforms Network of SKUs offline stores DOC , • While online remains the core 320 40% focus of the brand, they are expanding their offline 150 ~8M Marketplace , portals 50% Customers • Operates from 12,000 stores in general and modern FY21 FY22 FY23E trade , including Wellness © 1Lattice | 19 Forever and Health & Glow Note(s): YoY=Year on Year, SKU=Stock Keeping Unit Source(s): Tracxn , Industry reports, Company websites, Secondary research, 1Lattice analysis Grocery and gourmet > Key trends Healthy product offerings and the emergence of disease - specific products are the key emerging trends in the grocery & gourmet DNB landscape 1 3 4 5 2 Emergence of disease - High - quality ingredients Subscription and Consultations / diet Healthy offering specific products & clean labelling customization models plans Subscription model repeat customers and higher purchase frequency • DNB brands like Slurrp Farm offer diabetic combos such as millet dosa mix, sprouted ragi • With every trial order, • Ketofy offers powder, etc. which are also Country Delight includes a personalized diet plans, great immunity boosters self - test kit where the users can • Presence of natural and • Minus Thirty is an ice consult with the certified cream brand that has high - quality ingredients is experts • Since COVID - 19, sugar - free and vegan assured by various brands consumer preferences • Fitmeals offers meal e.g. The Whole Truth have changed to favour options with no True Elements, Beyond plans for different goals preservatives or artificial promises 100% clean including weight loss, healthier options across Water offer customization ingredients different food categories flavors option athletic meals, etc. Note(s): These trends are not basis the frequency of occurrence but on the prominence Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis © 1Lattice | 20 Apparel and footwear > Key trends Celebrity - owned labels, customizable offerings, AI/ML based product designs, sustainable fashion and quirky designs are key emerging trends in the industry 1 2 3 4 5 Celebrity & influencer Artificial intelligence & Customizable offerings Sustainable fashion Funky & quirky designs owned labels machine learning Brands such as No Nasties & 11.11 provide sustainable Brands are leveraging AI - clothing items along with a powered recommendation zero - exploitation policy, & product development Celebrities are either aiming towards the engines to create new launching their own labels Bombay Shirt Company & betterment of the lives of designs that best meet the Dapper Shoes Co. are some or investing in brands as the farmers customer’s needs. opposed to merely endorsing of the brands offering customization option a brand Note(s): These trends are not basis the frequency of occurrence but on the prominence AI=Artificial Intelligence, ML=Machine Learning Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis © 1Lattice | 21 Jewellery > Key trends Jewellery DNBs are moving towards an omnichannel strategy; key trends emerging in the space are fast fashion, AR tech, and personalization 2 3 4 5 1 Celebrities endorsing Fast fashion Augmented reality Personalization Omnichannel jewellery “Companies should now strive to create an omni channel strategy to leverage the strengths from both channels to provide the The concept of fast fashion i.e., best shopping experience . Soon companies can strive trendy & lightweight products Influencers and celebrities to adopt AI technologies to are endorsing various at affordable prices is fast personalize customer gaining traction in the Indian ‘Try and buy’ is deeply DNBs are focusing on jewellery brands like experience on digital DNB jewellery landscape due to Melorra and Caratlane , rooted in Indian psyche customization because it platforms..” changing customer hence brands are helps to address unique discussing the confidence - Co - founder, DNB behaviour , especially among that needs to be felt by the integrating it into their user customer demands & focused jewellery brand women millennials & Gen Z experience preferences Note(s): These trends are not basis the frequency of occurrence but on the prominence AR tech=Augmented Reality technology © 1Lattice | 22 Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis Electronics > Key trends Fast - moving affordable products and a shift towards branded & Indian products are the key trends in the electronics DNB space 2 1 3 4 5 Shift towards local / Fast moving affordable Increased health Shift to branded Switch to wireless India n manufacturers products awareness products • Indian brands have • Electronics brands are • Increased demand for • India’s hearables’ market • Wireless technology captured significant launching good quality smartwatches with was earlier dominated has been gaining market share as products at an health / fitness tracking by unbranded prominence in the consumers are preferring affordable price in a features such as HR, products . In the past few market across devices, to buy Indian brands over segment that was SpO , steps especially years, there has been a especially hearables 2 foreign ones dominated by mid and after the pandemic shift towards branded • Comfort and simplicity • Further schemes like PLI high - end products hearables , due to are the key factors and Make in India will • Moreover, they are growing brand affinity creating demand for reduce cost and democratizing tech especially for internet wireless products increase penetration resulting in higher first brands • Improving wireless tech repurchases as users • Brand reputation has has made the adoption wish to upgrade to the become one of the top Marketing by boAt , with of several devices such latest tech KPCs for user buying emphasis on ‘Made in India’ as wearables, smart hearables & wearables assistants & computer Earwear market by Avg accessories possible Selling Price (ASP) Unbranded Branded 2021 >5K , 1% >5K , 9% <5K , 99% <5K , 91% TWS Earwear (excluding TWS) Note(s): These trends are not basis the frequency of occurrence but on the prominence TWS=True Wireless Stereo, PLI= Production Linked Incentive, HR= Heart Rate Monitoring © 1Lattice | 23 SpO2 = Blood oxygen monitoring, KPC= Key Purchasing Criteria Source(s): BOAT DRHP, Industry reports, Secondary research, 1Lattice analysis Health care > Key trends Increased demand for ayurvedic remedies and health supplements are key trends driving the DNB healthcare market 1 2 3 4 5 Increased usage of Shift towards digital Demand for natural & Increased awareness for Varied mode of health supplements healthcare ayurvedic remedies mental health consumption • Customers are • Supplements are not • The main goals include • Focus on increasing • CHC firms have weight management, online accessibility of increasingly looking for supported mental restricted to traditional balanced nutrition and alternatives to tablets or powders high - quality and low - health services and are muscle development cost healthcare services chemical options helping normalize • They are increasingly • Due to the growing • The pandemic has led to being chosen by to patients mental health a significant shift in consumers as shots, health consciousness • Ensures comfort & interactions on social among consumers reduces the need of consumer behavior media platforms gummies, blended post - COVID, the industry towards herbal and the teas , etc. going to a hospital • New technology and is expanding • Post - COVID, people are natural health markets digital behavioral health giving priority to their applications also health and getting contribute to improving regular checkups done mental health Amrutam , Oziva offer herbal Brands such as MuscleBlaze , Apps like MediBuddy , Visit Nature’s Bounty has Supplements are available / ayurvedic medicines and a introduced ‘Anxiety and from Akiva and Power Kapiva and NutraBay offer and Navia Life Care are variety of plant - based nutrition supplements providing digital healthcare Stress Relief’, to protect the Gummies in the shot and products for daily fitness brain’s mood center gummy forms Note(s): These trends are not basis the frequency of occurrence but on the prominence CHC= Community and home health care © 1Lattice | 24 Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis DNB player case study > Nutraceutical Power Gummies is a nutraceutical DNB selling crafted vitamin gummies with an aim to make health regime simple and fun Offerings Founded Total funding Headquarters Company stage Nutraceuticals in a tasty & 2018 ~ US$ 7M Delhi NCR, India Series A chewable format (Gummies) Key product categories Key highlights Marketing & brand building • Successfully launched 6 SKUs and have future 314K+ 376K+ 24K+ plans to launch 40+ SKUs with new additions to followers subscribers followers their portfolio every few months (recently 541+ posts 80+ videos launched hair & beard gummies aimed at men) • Increasing reliance on short form content like INR 800/ month INR 999/ month INR 1200/ month • Increased focus on offline stores specially in Insta R eels and Snapchat high ticket value areas like airports, highstreets and malls to increase brand presence • Higher engagement with smaller influencers to target niche audiences • Focus area remains metro and T1 cities but plans to enter T2+ markets with generalised • Low focus on offline marketing due to their INR 1200/ month INR 999/ month INR 1300/ month SKUs (multivitamins etc.) soon low ROI Revenue DNB channels Business Facts Channel split Forecasted net 38 (%) • Offline channels are revenue by end of 50% creating high brand March 23 ~4.3cr presence revenue generated Monthly from Gorgeous • Share of marketplace 65% turnover as 17 Hair & Nail 95% channel reducing due to of Oct 22 Gummies higher CAC 6 35% SKUs (Stock 5% 3.8 • DOC channel generating Keeping 32% revenue, driven by the 2019 2022 Units) brand’s digital presence and Offline Online unique site - only offers FY21 FY22 FY23 © 1Lattice | 25 Note(s): CAC=Customer Acquisition Cost Source(s): Tracxn , Industry reports, Company websites, Secondary research, 1Lattice analysis Home décor, household supplies & garden > Key trends Trends like furniture rentals, sustainability and Indian handicrafts are prevalent in the DNB home décor industry 1 2 3 4 5 Augmented reality Furniture rentals Sustainability Indian handicrafts Buy & try assisted experience • Indian handicrafts & • In case of products like designs have witnessed a • Many brands in the home furniture and home decor décor & furniture space resurgence as people • Consciousness for placement & aesthetics move towards “Make in are offering customers sustainability is rising matter a lot hence brands India” extended trial periods • Rental services offer a are focusing on giving • This helps customers to cost - effective among consumers as they want to opt for products users live experience of • DNB brands are playing a get a proper experience alternative for users which do not have toxic their products through before making a long - • The concept is especially vital role in promoting popular among Gen Z materials or are unhealthy experience centers or export of Indian term commitment to their for people and the planet augmented reality handicraft purchase and Millennials © 1Lattice | 26 Source(s): Company websites, Industry reports, Secondary research, 1Lattice analysis Agenda Market size and potential of DNB brands DNB models Category themes Growth drivers & challenges Growth drivers Improved logistics and online infrastructure, untapped markets and increasing technological penetration are driving growth for major DNB brands Growth drivers for DNB brands in India • Innovative DNB brands are identifying market prospects in India's tier II & III regions to target untapped audiences & scale up their business Untapped markets • With ~ 825 million internet subscribers in • The online advertisement market focuses on 2021, India is becoming one of the largest and increasing the sales of brands by advertising fast - growing markets for digital consumers Multiple avenues Increased them according to their target audience This digital revolution is acting as a catalyst for for advertising & technological • Brands also focus on advertising their brands growth for DNB brands as a majority of their promotion penetration through influencers on social media sales are online • Presence of multiple avenues for promotion has • Various government schemes to help promote massively boosted the reach of brands tech usage • The demands of the customers are evolving • An evolving online infrastructure is driving the as they are preferring customized growth of DNB firms Improved products over ‘one for all’ products • Availability of various logistics & distribution Customization & • DNB brands are utilizing this opportunity by logistics & online partners , technological advancements and personalization analysing customer’s data and their infrastructure easy payment services , is helping in the preferences to customize products smooth functioning of DNB firms Ease of convenience • Consumers find online shopping more convenient than visiting physical retail outlets due to the availability of multiple products, discounts, etc. • Marketplaces allow users to view multiple brands at once Source(s): Secondary research, 1Lattice analysis © 1Lattice | 28 Success factors Creating a unique product / service, focusing on a multi - channel approach and online brand presence are a few major success factors for DNB brands 1 4 Innovation – bridging gaps across consumer needs High - tech adoption • Focus on innovation & creating a unique • Data - led targeting of existing and potential customers product/service to make the brand stand out • AI adoption to enhance: • Identifying the gaps in different product categories and – Customer relationship management bridging them – Personalized shopper journey • Quick to integrate customer feedback in products/services 2 5 Omnichannel approach Adapting to new trends • Focus on a multi - channel approach to provide multiple • Keeping up with up - and - coming trends and customer touch points: spending habits – Own platform to get access to customer data and • Personalization, health - conscious products, and insights sustainable packaging are some trends DNB brands are – Marketplace to increase brand recognition and reduce focusing on customer acquisition cost – Physical stores for the touch and feel of products B rand awareness 6 3 • Creating brand presence & visibility online through UI / UX and content appealing marketing, customer interaction & social media • Appealing website UI / UX to attract more prospects engagement • Compelling taglines and description • High focus on quality content - oriented marketing, SEO • Usage of tech tools (website building, etc.) services and digital advertisements • Promo codes with brand name/campaign to drive recall • Influencers helping to humanize the new DNB brands on social media © 1Lattice | 29 Note(s): SEO= Search Engine Optimization, UI= User Interface, UX= User Experience Source(s): Industry reports, Secondary research, 1Lattice analysis Challenges Stagnating growth, hyper competitive market and sharp decline in funding are the key challenges being faced by DNB brands Factor Importance Description • Post - covid, with customers spending lesser on impulse purchases, the growth rates Slower pace of growth have stagnated for various DNB brands owing to the current market correction post - covid • Consumers increasingly venturing out after Covid, looking for offline options, and spending lesser screen time are other reasons that have led to flat growth for DNB brands • Limited entry barriers in the DNB market leading to the rapid formation of new brands and higher competition for brand visibility and product differentiation Hyper competitive and • Difficulty in mass - scale adoption of products in the consumer market owing to the diverse market diverse demographics of the country • Dull investor sentiment owing to factors such as US Fed increasing interest rates, public market uncertainties and fear of recession has led to limited strategic investments, lower valuations and an overall dry spell for the start - up environment Decline in funding • Sharp decline in funding and increasing volatility in the DNB market has forced companies to focus on profitability instead of raising funds and utilizing cash to fuel growth Very low Very high © 1Lattice | 30 Source(s): Primary research, 1Lattice analysis ◔ ◔ ◑ ◑ ◕ ◕ ● ● Challenges Increasing CAC, lack of a sustainable marketing strategy & difficulty in logistic & supply chain management are a few other challenges being faced by DNB brands Factor Importance Description • Emerging customer acquisition challenges due to increasing marketing and advertising Increasing customer costs ; Platforms such as Google and Facebook have increased their fees acquisition and • Post Covid, increasing need and pressure to opt for an omnichannel market presence marketing cost instead of restricting themselves to online channels have led to a significant increase in costs • With growth being driven not only by metro and tier 1 cities, but DNB brands are also looking for marketing strategies to specifically target the T2+ market • Increasing need for DNB brands to go beyond social media and focus on offline marketing Need for a sustainable and brand presence; Influencers advertising multiple brands have decreased customer trust marketing strategy • Low brand stickiness and loyalty of Gen Z and millennials leading to DNB brands competing for limited attention spans • To maintain a competitive edge, giving customers a unique experience and creating a brand story that personally connects with the audience need to be prioritized • Difficulty in dealing with multiple partners & creating an optimized flow of logistics • Conscious effort put towards masking consumer data from logistic partners Logistic & supply • High RTO (return to origin ) rates due to COD (Cash on delivery) orders chain management • Increasing customer expectations w.r.t. lower TAT leading to increased logistics costs for DNB brands Very low Very high © 1Lattice | 31 Source(s): Primary research, 1Lattice analysis ◔ ◔ ◑ ◑ ◕ ◕ ● ● Challenges With a major chunk of DNB growth being driven by Tier 2 and rural markets, DNB brands are revamping their marketing strategies “The real growth which the DNB brands “ The real growth which the brands are “ Retention & repeat customers should are seeing is from the smaller towns and seeing is from the smaller towns and be baked into the customer model. cities. It is getting increasingly important cities. The brand needs to look upon the Brands need to figure out how to create for brands to revamp their marketing 4 Cs - Content, Collaboration, brand stickiness which would be crucial.” strategies in today's age. ” Community, and Capital. ” - Founder, Tech brand - Founder, Tech brand - Founder, Tech Brand “The infrastructure is allowing small “ There is less capital in the market, but I “The challenges faced are brand loyalty brands to compete with bigger brands. feel it was long due . There are always and price sensitivity . A DNB brand needs COD has always been an issue, but this is highs and lows in every sector, I consider to acquire the customer and then their being resolved by digital payments such this as a small correction. I am personally loyalty needs to be in check. The biggest as UPI . But since most of the sales come very bullish on the market this might be a challenge is how to make the customer from rural areas so cash payments can rough patch, but I believe we will get past loyal to the brand” never be ignored” this phase soon. ” - Founder, Tech Brand - Founder, DNB Brand - Founder, Retail Brand “Logistics is very mature in India. The “I think GST simplification was the major “Nowadays, venture capital firms are very challenge will be in unit economics and step taken by the government. The selective. I also believe that the best the privacy of customers , especially in present policies and regulations can be startups are being built in these times as tier - 1 & tier - 2 cities.” simplified more as it slows down the it is a test of resilience, character, and overall process.” how further can you go.” - Founder, Skincare Brand - Founder, DNB Brand - Founder, DNB Brand Sources: Primary research, 1Lattice analysis © 1Lattice | 32 About us: 1Lattice & IAMAI 1 Lattice (erstwhile PGA Labs) is a technology - enabled business research & intelligence services firm that specializes in driving decisions from on - ground insights . Our teams are multifaceted with a unique mixture of qualitative, quantitative, and digital research experts . With a holistic approach focusing on the “What and Why” , we are able to extract relevant insights from data by employing advanced technology tools and innovative data - gathering approaches . Our Mission : To disrupt the market research by incorporating various AI tools to get quality data & produce meaningful insights which can be trusted by decision - makers 1Lattice (erstwhile PGA Labs) Our Vision : To help our clients take faster & smarter decisions Established in 2004 , the Internet & Mobile Association of India (IAMAI) is a not - for - profit industry body and the country’s only organisation representing the digital services industry with over 450 Indian and multinational corporations as its members, which include established companies in diverse sectors of the digital ecosystem as well as start - ups . Its mandate is to expand and enhance the online and mobile value - added services sectors . It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers, and other stakeholders . IAMAI represents varied sectors, such as digital advertising, digital entertainment, traveltech , online gaming, digital Internet and Mobile payments, fintech, digital commerce, edtech, healthtech , agritech , big data, ML, AI & IoT, AR/ Association of India VR, and logisticstech to name a few . © 1Lattice | 33 The team at appreciates your time and support THANK YOU Enabling better decisions. # LetsTalkSolutions
