THE COMING THE COMING OF AGE OF D2C OF AGE OF D2C IN INDIA IN INDIA Confidential and proprietary © 1Lattice June, 2024 Table of contents 1 Executive Summary 2 India Retail Market Overview 2.1 Retail Contribution to GDP 2.2 India Retail Market Deep-Dive 2.3 Sales Channel Comparison 3 India D2C Market Overview 3.1 India D2C Market Deep-Dive 3.2 D2C Impact on Retail & Economy 3.3 Inception of D2C as a Sales Channel 4 India D2C Investment Landscape 4.1 India D2C Market Investment Scenario 4.2 D2C Investments Comparison 4.3 D2C Growth Drivers & Challenges 5 India D2C Segment Specific Deep-Dives 5.1 Electronics 5.2 Beauty & Personal Care 5.3 Fashion 5.4 Grocery 6 Benchmarking Sub-Segments Across the D2C Landscape 7 Looking Back 7.1 Key Success Factors for D2C Brands 7.2 Key Enablers for D2C Brands 8 Looking Ahead 8.1 Predicting the Way Ahead for D2C Brands Foreword Ashish Dhir Abhishek Maiti Senior Director Director India's retail market comprises ~50% of consumer spending, highlighting the remarkable potential for further expansion, particularly through increased online penetration. With constantly evolving consumer behavior & retail expansion, D2C is developing as an ecosystem reshaping the e-commerce landscape. D2C brands are mobilizing technology along with a deep understanding of consumer needs & preferences to establish direct connections with their customer base. This report conducts an analysis of the evolutionary journey of D2C in India thus far, examining the emerging tech-based approaches, key drivers, evolving trends, and the substantial benefits to all stakeholders. Additionally, it highlights the challenges & bottlenecks in greater omnichannel integration in the coming years. Furthermore, the report underlines the role of enablers within the D2C ecosystem, emphasizing how they streamline the process of establishing and enhancing the competitiveness of D2C brands in the market. With further expansion of the online market & integration of offline aspects into the D2C ecosystem, there will be large numbers of brands entering the market in the coming years. The report shed light on dynamic forces shaping the D2C landscape offering valuable insights for businesses seeking to thrive in this new era of commerce. It also aims to provide various industry stakeholders including business leaders with an overall perspective on the market. The report reflects our perspectives as of March 2024. We, at 1Lattice, look forward to continuing the discussion with our friends across sectors and exchanging notes. Foreword Anshul Bansal Harsh Khara Mandar Dandekar Principal Vice President Partner India’s retail market is a core element of its overall GDP. As India continues to grow, so will its overall retail market. However, this growth might differ from the past with the emergence of new distribution channels and their respective ecosystems. India’s per capita income is also at an inflection point that will lead to an increase in discretionary spending going forward. Thus we believe that mid-term growth is bound to accelerate vs the past. We also foresee a shift in the overall channel mix, with marketplace + brand.com channels poised to gain at the expense of offline. Coupled with accelerating growth and channel share gains, we believe that the next 3-5 years are ripe for digital first brands to potentially breakthrough and establish themselves. We also believe that this opportunity isn’t limited to any particular category but far more homogenous. Through this report we’ve endeavoured to provide an overview of the Indian Retail and D2C markets with segment specific deep-dives. Our objective was to layout the massive opportunity for digital first brands and highlight key success stories while providing a potential framework for segments covered. We spoke to several players from the ecosystem (entrepreneurs, marketplaces, investors, employees, consumers etc) and have embedded our key learnings and takeaways. We believe that this report will serve as a great repository for anyone interested in learning more about digital consumer brands and the coming of age of D2C. If you are a current entrepreneur, budding entrepreneur or an investor focusing on D2C, we would love to chat and exchange notes. Executive summary India Retail & D2C Market Overview India D2C Investment Scenario • In FY23, Indian GDP was estimated to be ~ US$ • India’s D2C industry witnessed a total 3.4T, out of which retail contributed ~30% investment of ~US$ 4.1B from CY20-23 across ~730 transactions • Indian retail market size is expected to reach ~US$ 1.4T in FY27, growing at a CAGR of ~10% - The investments peaked in CY22, with total from FY23-27 investments around ~US$ 1.6B across ~240 transactions • Food & grocery (65%), appliances & consumer durables (9%), & apparel & - Post-COVID (CY22-23), ~US$ 2.5B has footwear (8%) are the three biggest been invested in the India D2C industry categories across the Indian retail market - Beauty & personal care, & fashion have • The overall India D2C market was estimated been the key categories attracting a lion’s to be ~US$ 16.9B in FY23, expected to grow at share of investments in the India D2C a CAGR of ~38% & reach ~US$ 61.3B by FY27 market - Grocery (39%), fashion (27%) & beauty & • Marketplace expansion, technology adoption, personal care (13%) are the three biggest & nuanced marketing strategies are the categories in the India D2C market biggest growth drivers for D2C market in India 1 - Marketplace (64%) continued to dominate • OEM dependency, cost of acquisition & brand the overall sales channel mix followed by loyalty, & talent acquisition are the three brand.com (21%) and offline (15%) biggest challenges visible • The increase in D2C brands is fostering India’s economy, retail market, entrepreneurial D2C Segment Deep-Dive ecosystem, driving technological advancements & enhancing customer • India’s D2C electronics market was estimated satisfaction to be ~US$ 1.8B in FY23 & is expected to grow - D2C shipments are expected to increase at a CAGR of ~40% from FY23-27 from ~0.6B in FY23 to ~2.3B in FY27 - Increasing demand for premium - D2C brands also seem to be ahead of the products, increase in affordability, & rising curve in AI & analytics adoption; ~65% demand across tier 2 cities are some of brands adopted AI & analytics in CY23 the key trends 1 Note(s): Orignal equipment manufacturer Source(s): 1Lattice & Sorin analysis © 1Lattice | 05 - Achieving product-market fit & - Quality & differentiation, & optimization user-driven innovation are some of the of E-Commerce platform are some of key success factors the key success factors • India’s D2C beauty & personal care market was estimated to be ~US$ 2.2B in FY23 & is D2C Market Way-Ahead expected to grow at a CAGR of ~36% from FY23-27 • The focus & key success factors in the D2C market evolve basis the scale of the brand - Leveraging digital channels & technology, personalization & - Budding brands (revenue < US$ 6M) subscription services, & expansion of should ideally focus on getting product men’s grooming are some of the key market fit & brand building trends - Growing brands (revenue US$ 6M – - Innovation & product development, & 12M) should ideally focus on customer creating customer resonance are some acquisition & growth of the key success factors - Established brands (revenue >US$ 12M) • India’s D2C fashion market was estimated should ideally focus on increasing to be ~US$ 4.6B in FY23 & is expected to overall efficiency & expanding grow at a CAGR of ~34% from FY23-27 omnichannel presence - Personalization & customization, • Different tools & enablers exist to help D2C celebrity-owned labels & growing men's brands optimize operations, enhance fashion are some of the key trends personalization capabilities & drive business growth through different parts of - Revenue optimization & demand-driven the brand’s value chain product assortment are some of the key success factors • Process automation, social commerce integration, & hyper-localization are some • India’s D2C grocery market was estimated of the levers expected to drive D2C brand to be ~US$ 6.7B in FY23 & expected to grow growth in the future at a CAGR of ~41% from FY23-27 - Unadulterated & fresh offerings, subscription & customization model, & conscious snacking options are some of the key trends Source(s): 1Lattice & Sorin analysis © 1Lattice | 06 Agenda India Retail Market Overview Retail Contribution to GDP India Retail Market Deep-Dive Sales Channel Comparison India D2C Market Overview India D2C Investment Landscape Segment Specific Deep-Dives Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 07 Significance of Retail in India’s GDP Retail contributes ~30% of India’s GDP; Offline retail continues to dominate with the lion’s share Retail Contribution in India’s GDP (%, FY23) ~US$ 3.39T ~US$ 2.05T ~US$ 0.95T Brand.com, 1% Government Marketplace, Others**, 15% spending, 7% 10% Communication, 2% Education, 4% Health, 5% Investments, 29% Fuels*, 12% Transport, 15% Offline, 92% Consumer spending, Retail, 61% 46% GDP Consumer Spending Retail Note(s): *Includes housing, water, electricity, gas & other fuels, **Includes spend on recreation, restaurants & hotels, & other goods & services Source(s): Ministry of Statistics and Programme Implementation (MoSPI), Industry reports, 1Lattice & Sorin analysis © 1Lattice | 08 India Retail Market Deep-Dive: Sales Channel Comparison Benchmarking offline retail & online marketplaces viz-a-viz Brand.com Offline Marketplace Brand.com Definition (Traditional brick-and-mortar (Digital platforms that connect (Digital-first brands, selling stores, consumers physically buyers & sellers, facilitating products directly to consumers, visit for purchases) transactions between them) bypassing intermediaries) • In-person shopping • Vast array of options, • Direct interaction Customer experience, with the but less direct allowing for a experience ability to touch & feel interaction with personalized & products individual brands controlled customer experience • Limited control as • Brands share space Control over • Full control over products are with competitors, branding brand image & displayed within the potentially impacting opportunity to drive store's context individual brand customer loyalty visibility Supply chain • Inventory • Dependence on the • Higher supply chain logistics management is marketplace's control, but full-scale crucial & distribution logistics, however, benefits take time is typically benefit of economies centralized of scale • Localized presence • Global reach with • Benefit of targeting Market required coupled with access to a specific reach distributor & Stockist diversified customer demographics, but relationships base with smaller reach initially Incurred • While • High overhead cost • Minimal overhead expenses no-commissions & as rent, staff, and cost, however, lesser overhead costs, physical significant significant infrastructure incur commissions paid performance significant expenses out to marketplaces marketing & branding expenses required Outlook • Offline retail expected • Marketplace • Brand.com brands to remain an penetration expected expected to emerge important touchpoint to increase due to a on the back of for brands plethora of choices & innovative marketing customers’ strategies convenience Source(s): Industry reports, 1Lattice & Sorin analysis © 1Lattice | 09 India Retail Market Deep-Dive India retail market size expected to be ~US$ 1.4T in FY27; growth expected to accelerate to ~10% from FY23 to FY27 India Retail Market (US$ B, FY23-27P) 1,396 CAGR ~10% CAGR ~7% 953 763 FY20 FY23 FY27P* Share of Brand.com expected to grow from ~1% in FY23 to ~2% in FY27 India Retail Market Sales Channel Mix (%, FY23-27P) 953 1396 1% 2% 7% 9% Brand.com Marketplace 92% 89% Offline FY23 FY27P* Retail market expected to grow due to increase in consumer spending, however, category split expected to remain same India Retail Market Basis Category (%, FY23-27P) 65% 9% 8% 7% 3% 3% 5% FY23 65% 9% 8% 7% 3% 3% 5% FY27P* Food & grocery Appliances & consumer durable Apparel & footwear Gems & jewellery Furniture & furnishing BPC Others** Notes(s): *Projected, **Pharmacy & other categories © 1Lattice | 10 Sources(s): Industry reports, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Market Deep-Dive D2C Impact on Retail & Economy Inception of D2C as a Sales Channel India D2C Investment Landscape Segment Specific Deep-Dives Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 11 India D2C Market Deep-Dive [1/2] India D2C market expected to Uniform growth expected across grow at a CAGR of ~38% & reach all three channels till FY27 ~US$ 60B in FY27 India D2C Market Size Category Mix India D2C Market Sales Channel Mix (US$ B, FY23-27P) (US$ B, FY23-27P) 61.3 61.3 5% 13% 5% 11% CAGR 22% 12% ~38% 24% 16.9 16.9 65% 4% 6% 15% 11% 13% 42% 21% 27% 64% 39% FY23 FY27P* FY23 FY27P* Grocery Fashion Marketplace Brand.com Offline Beauty & personal care Electronics Home decor, household Healthcare supplies & garden D2C brands typically index on an online first persona for building their presence, post brand resonance they shift to adopt an omni-channel strategy Note(s): *Projected Source(s): CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis © 1Lattice | 12 India D2C Market Deep-Dive [2/2] Grocery & fashion expected to add ~US$ 30B incrementally to the overall D2C market by FY27 India D2C Market Category Mix (US$ B, FY23-27P**) CAGR (FY23-27) 38% 61.3 42% 2.1 2.8 2.3 35% 3.3 5.1 6.9 40% 5.4 7.6 36% 10.3 14.9 34% 19.4 16.9 0.7 1.0 1.8 41% 26.0 2.2 4.6 6.6 FY23 Grocery Fashion BPC* Electronics Home Healthcare FY27P** Note(s): *Beauty & personal care, **Projected Source(s): CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis © 1Lattice | 13 India D2C Market Deep-Dive: Impact on Retail & Economic Growth D2C shipments projected to grow at a India retail expected to create an CAGR of ~45%; FY27 shipments incremental ~10M jobs by FY27; D2C to expected to be ~4x of FY23 help drive an incremental ~2.5M jobs D2C Shipments Employment in Retail (in B, FY23-27P*) (in M, FY23-27P*) 2.3 56.0 2.4 2.5 46.0 5.1 CAGR ~43% 0.6 FY23E** Offline FY27P* FY23 FY27P* Auxiliary Marketplace services*** / Brand.com Increase in D2C brands is fostering India’s entrepreneurial ecosystem, driving technological advancements & enhancing customer satisfaction ~25% ~20% ~65% ~20% Increase in Rise in Brands Reduction in 1 brands in CY23 direct brand adopting AI & shipping costs vs CY22 interactions in analytics in in CY22 vs CY21 CY23 vs CY22 CY23 vs CY22 1 Note(s): *Projected, **Estimated, ***Support services like repairs & maintenance, logistics, return & exchange etc. Artificial Intelligence © 1Lattice | 14 Source(s): Industry reports, 1Lattice & Sorin analysis Inception of D2C as a Sales Channel in India Since CY16, 600+ D2C brands have started operations, have received >US$ 4B investment, & 9 companies have scaled up to become unicorns #Brands entered in D2C space since CY16 Value of overall D2C Surge in #D2C brands 600+ ~US$ India market in FY23 entering the market in CY23 ~25% 17B Funding attracted D2C brands by D2C brands in ~US$ adopting AI & CY20-CY23 4B ~65% analytics in CY23 vs CY22 #Investment Reduction in transactions ~730 shipment during costs in CY22 CY22-23 ~20% compared to CY21 Average investment ~US$ amount / D2C brands 7M 1 transaction integrating in CY23 supply chain ~75% 3 tech like RFID & #D2C focused 4 IoT for better 9 startups entering the control in CY23 unicorn club during CY16-23 ~60% D2C brands using ~3 ~70% years Time taken by leading third-party D2C brands to reach US$ logistics in CY23 2 12M (INR 100Cr) in revenue D2C brands using social media for distribution in CY22 2 Note(s): is calculated by dividing the total investments in a specific year / total # transactions in a specific year, US$ 1 = INR 82.25, 3 4 Radio-frequency identification, Internet of Things © 1Lattice | 15 Source(s): Industry reports, expert interviews, Press releases, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape India D2C Market Investment Scenario D2C Investments Comparison D2C Growth Drivers & Challenges Segment Specific Deep-Dives Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 16 India D2C Market Investment Scenario D2C companies have seen a cumulative D2C companies have seen a total of investment of US$ 4B from CY20-23 ~730 transactions from CY20-23 India D2C Industry Investment Landscape India D2C Industry Investment Landscape (US$ B, CY20-23) (#transactions, CY20-23) The average investment amount per transaction is constantly increasing. In CY23, it reached ~US$ 7M per transaction from ~US$ 3M in CY20 732 4.1 127 605 0.9 3.2 240 365 605 1.6 212 365 153 1.6 153 153 3.2 CY20 CY21 CY22 CY23 1.2 1.6 0.4 #Transactions in specific years Total #transactions since CY20 0.4 0.4 CY20 CY21 CY22 CY23 In ~US$ M CY20 CY21 CY22 CY23 Investments in specific year Total investments since CY20 Average Invest- 2.8 5.5 6.7 7.1 ment Amount / Transaction* Note(s): * is calculated by dividing the total investments in a specific year / total # transactions in a specific year © 1Lattice | 17 Source(s): Tracxn, 1Lattice & Sorin analysis D2C Investments: Pre-COVID, During COVID, & Post COVID Pre-COVID During COVID Post-COVID (CY18-19) (CY20-21) (CY22-23) Total Investment ~US$ 0.8B ~US$ 1.6B ~US$ 2.5B Number of Transactions 269 365 367 Average Investment Amount / Transaction* ~US$ 2.8M ~US$ 4.4M ~US$ 6.8M Key Investment Category BPC, Fashion, Fashion, BPC, & Home décor Fashion, & Electronics & Household Supplies Grocer, & BPC** Illustrative Investment During the Period Notes: *is calculated by dividing the total investments in a specific year / total # transactions in a specific year, **Beauty & Personal Care © 1Lattice | 18 Source(s): Tracxn, 1Lattice & Sorin analysis D2C: Growth Drivers & Challenges Growth drivers Challenges Growth drivers Description Challenges Description 3 3 Marketplace • Leverage universe of OEM • Dependance on OEM (s) expansion E-Commerce platforms to dependency poses a risk as drive incremental revenue manufacturers might opportunities for best-selling independently produce SKUs* generic products - Engage with category • Require high investments managers + adapt tools for R&D to create unique / enablers to drive offerings & self owned category growth manufacturing facilities Technology • Incorporate data analytics, 1 2 Cost of • Rising customer adoption AI & ML for acquisition & acquisition costs & shifting - Data driven brand loyalty brand loyalty decision-making • Requires diversification - Product optimization / beyond digital platforms SKU mapping due to evolving privacy - Customer experience policies enhancement - Marketing optimization Talent • As the industry is in the - Supply chain efficiencies acquisition nascent stage, D2C companies encounter Nuance • Focus on developing a difficulties securing skilled marketing brand identity talent strategies • Incorporate different • Require high fund & time content mediums for an investment for internal skill efficient marketing strategy development & fostering a • Strategic partnerships with culture of learning companies / influencers • Use real-time feedback to Market • Continuous marketing adapt swiftly to market saturation & expenditure needed to trends rising drive customer acquisition Customization • Leverage customer competition / engage customers for & personalization feedback for consistent brand loyalty product innovation • Challenges in adopting • Innovate / iterate product sustainable growth offerings basis differing strategies like community customer personas building, superior product offerings, & expense • Develop brand loyalty management (repeats) via personalized loyalty programs Customer • Develop a multi-channel Financial • Funding slowdown / reset experience approach for sustainability in valuations have communicating with impacted growth outlook customers (specifically for of several D2C brands after sales support) • Lack of financial • Provide a seamless prudence has dented discovery / search potential runway of experience across all brand several D2C brands properties 1 2 3 Note(s): *Stock Keeping Units, Artificial Intelligence, Machine Learning, Original Equipment Manufacturer © 1Lattice | 19 Source(s): Press releases, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape Segment Specific Deep-Dives Electronics Beauty & Personal Care Fashion Grocery Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 20 D2C Segment Deep-Dive: Electronics India D2C electronics market Marketplace market share expected expected grow at ~40% CAGR from to increase from ~75% in FY23 to ~80% FY23-27 in FY27 India D2C Electronics Market Size India D2C Electronics Market Sales Channel Mix (US$ B, FY23-27P*) (US$ B, FY23-27P*) 6.9 6.9 12% 8% CAGR ~40% 81% 1.8 1.8 12% 12% 76% FY23 FY27P* FY23 FY27P* Marketplace Brand.com Offline Note(s): *Projected © 1Lattice | 21 Source(s CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis D2C Electronics Segment: Key Trends Increasing demand for premium products • Increasing demand for premium products in metro & Tier 1 cities - For e.g., air fryer , which was considered a premium product, has now become a mass-used product due to high demand / product innovation Varied use cases / tech enablement • Emergence of smart-tech devices • Rising popularity of wearable fitness & audio devices • Higher repurchase frequency due to addition of new features Increase in affordability • Electronic devices have become more affordable • Increasing demand & value engineering have helped sellers achieve economies of scale Shift towards local / Indian manufacturers • Evolving consumer preference for Indian brands over foreign brands • Schemes like ‘Make in India’ driving a nationalistic narrative aiding domestic brands ET Retail article Rising demand in Tier 2+ markets • Rising urbanization & awareness amongst Tier 2+ customers • Increase in access to internet & E-Commerce platforms Increased health awareness • Increase in demand for smartwatches with health / fitness tracking features • Customers are willing to pay premium for health-related products Source(s): Industry reports, Press releases, 1Lattice & Sorin analysis © 1Lattice | 22 D2C Electronics Segment: Market Landscape Only Accessories Only Wearables Audio + Accessories Audio + Wearables Audio + Accessories + Wearables Others* Note(s): *Includes electric home appliances; This is not an exhaustive list of brands Source(s): Company websites, 1Lattice & Sorin analysis © 1Lattice | 23 D2C Electronics Segment: Key Success Factors Parameters Description Example Lifelong uses channel & customer Achieving • Strategic product offering: Analyze insights for product development product-market fit customer needs, differentiate product, & enhance continuously • Innovative product design: Develop portable, adaptable, & technology-driven solutions to address consumer demands • Feedback integration: Implementing boAt launched ‘Smart Ring’ to tap User-driven the need of smart wearables real-time feedback mechanisms for innovation iterative product improvements • Personalized customization: Tailoring electronic devices to deliver unique user experiences • Dynamic pricing strategies: Adapting Noise focused on pricing in the Strategic pricing competitive audio market pricing in response to market shifts optimization through data-driven insights • Efficient supply chain management: Optimize costs & reduce operation expense by direct supply chain control Amplifying brand • Lifestyle messaging: Communicating boAt markets itself as a lifestyle brand, enhancing life quality narrative how electronic products enhance daily life & connectivity • Compelling visual branding: Crafting visually engaging narratives to establish a consistent brand identity Agile tech • Swift feature integration: Incorporating Brands offering wearables with 2 features like SpO2 & pulse rate integration cutting-edge technology efficiently through agile processes 1 • AI -driven experiences: Seamlessly integrating AI for tailored & adaptive user interactions Popular D2C brands have active • Responsive customer support: Offering Engagement led social media handles engaging immediate assistance for timely query communication users resolution • Community engagement focus: Building digital communities for user interaction and knowledge sharing • Strategic influencer collaborations: Expanding brand reach through partnerships with influencers to attract customers 1 2 Note(s): Artificial intelligence, Blood oxygen level © 1Lattice | 24 Source(s): Company websites, Press releases, Industry reports, 1Lattice & Sorin analysis D2C Electronics Segment Case Study: Boat Founders Launch year Years to INR 100Cr Revenue Aman Gupta, 2016 ~2 years ~INR 3,403 Cr (FY23) Sameer Mehta Value proposition • A youth centric lifestyle brand, selling affordable audio devices, wearables & accessories • Targets mass market, while maintaining focus on style & innovation Current offerings Audio devices Smart Accessories Grooming • Earwears wearables • Power banks devices • Headphones • Watches • Cables • Trimmers • Speakers • Rings • Car accessories Success enablers for boAt • Market entry: Launched with indestructible iPhone cables, became a major hit due to low durability of iPhone cables previously • Market need & whitespace identification: Identified need for affordable high bass audio accessories - Offering: Launched bass enriched, high quality audio products at an affordable price point • Expanding distribution network: Started offline retail by partnering with large retail chains like Reliance Digital, Croma, & retail stores - As of CY22, has a pan-India network of 13K+ stores, 40+ modern retail chains & 40 distributors • Endorsement & collaborations: To attract youth, signed celebrities like Hardik Pandya, Kiara Advani, Diljit Dosanjh - Collaborated with brands, events, movies, & influencers, re-stating its youth centric & lifestyle brand image, e.g. Marvel, Bira91, Masaba, Lakme Fashion Week, etc • Category expansion: Started as an accessories brand, expanded to audio & wearables, now expanding in personal grooming market, under the brand ‘MISFIT’ Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 25 D2C Electronics Segment Case Study: Lifelong Founders Launch year Years to INR 100Cr Revenue Atul Raheja, Bharat Kalia, 2015 ~3 years ~INR 341Cr (FY23) & Varun Grover Value proposition • Consumer-durable brand selling a wide range of products • Data-driven product development, targeting mass market with strong customer association Current offerings Kitchen (Oven, Home Fitness Grooming kettle, gas appliances (Cycle, (Hair curler, stove, mixers, (Fan, heater, treadmills, face spatula, etc) stabilizers etc) yoga mats, trimmers, etc) etc) Accessories (Power Lifestyle (Massagers, Smart home (Sensors, banks, wrist humidifier, steamer, bulbs, plug, doorbell, watches, etc) etc) etc) Success enablers for Lifelong • Market entry: Launched with compact mixer grinders; expanded to kitchen, home, grooming & lifestyle eventually • Market need & whitespace identification: Identified need for compact & innovative consumer durables at affordable price-points - Customer centric products: 60-90 days product development cycle, revolves around identifying customer needs via channel & product insights targeting tier 1, 2, & 3 cities • Asset free manufacturing & lean supply chain: Lease factories to manufacture exclusive Lifelong products. Eliminated middlemen by focusing on D2C to offer competitive prices • Endorsement & collaborations: Collaborated with Milind Soman launching range of fitness products. Signed celebrities like Vinay Pathak & Pooja Gor as brand ambassadors • Digital first approach: Digital content focusing on product installation, self service of appliances has helped Lifelong to limit overheads & increase product reach Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 26 Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape Segment Specific Deep-Dives Electronics Beauty & Personal Care Fashion Grocery Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 27 1 D2C Segment Deep-Dive: BPC India D2C BPC market expected to Marketplace market share expected grow at a CAGR of ~40% from FY23-27 to increase by ~3% from FY23-27 India D2C BPC Market Size India D2C BPC Market Sales Channel Mix (US$ B, FY23-27P*) (US$ B, FY23-27P*) 7.6 7.6 24% CAGR ~36% 22% 2.2 2.2 54% 25% 24% 51% FY23 FY27P* FY23 FY27P* Marketplace Brand.com Offline 1 Note(s): Beauty & Personal Care, *Projected © 1Lattice | 28 Source(s): CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis 1 D2C BPC Segment: Key Trends Leveraging digital channels & technology • Social media & influencer marketing helping drive a connect with target audience, especially in tier 2+ cities • Strategic partnerships with E-Commerce platforms to expand their reach & improve distribution Offering personalization & subscription-based solutions • Focus on offering personalized & customizable products to cater to diverse preferences • Brands are analyzing consumer data to create targeted products & recommendations Increasing demand for sustainable products • Growing awareness & demand for clean & sustainable beauty products. Focus is on natural ingredients - Eg: Ayurvedic & natural products are often positioned as premium, catering to growing concerns about ingredients Increased R&D in product awareness • Conducting market research, focus groups, & surveys to understand how consumers’ perceptions about products & brand image - Eg: Recognizing the diversity of Indian skin tones, Plum invests in R&D to formulate products suitable for various skin types Expansion of men’s grooming • Brands are targeting male consumers with specialized products catering to their needs, including skincare & haircare - Eg: Brands like Beardo, Ustraa, Man Matters have positioned their offerings targeting men 1 Note(s): Beauty & Personal Care Source(s): Industry reports, Press releases, 1Lattice & Sorin analysis © 1Lattice | 29 1 D2C BPC Segment: Market Landscape Men’s Grooming Men’s Wellness Women’s Grooming (Cosmetics) Private Label Personal Care Subscription model Personalised model 1 Note(s): Beauty & Personal Care, This is not an exhaustive list of brands Source(s): Company websites, 1Lattice & Sorin analysis © 1Lattice | 30 1 D2C BPC Segment: Key Success Factors Parameters Description Example Leverages virtual try-on Innovation & product • Persistent innovation: Continuously technology through its “Try It On” development evolving products, packaging, & feature on website/app marketing strategies to address dynamic demands of consumers • Extensive product range: Offering a wide array of options tailored to various skin tones, hair types, & individual preferences Nykaa Private Label caters to Localization & • Cultural sensitivity: Recognizing & different regional preferences with cultural sensitivity catering to diverse cultural preferences localized content prevalent across different regions of India • Tailored localization: Adapting marketing messages & product offerings to suit the unique tastes & preferences of local Private Label markets Creating customer Man-matters offers toxin free • Customer alignment: Focusing on products, personalized basis resonance products that resonate with the values & requirements identities of the target audience • Niche targeting & unmet needs: Crafting product lines tailored to specific communities rather than the general market, such as ‘men’s wellness products’, & providing personalized subscription services Beardo has built a community of • Online channel utilization: Establishing a Customer male grooming enthusiasts on strong online presence through social engagement social media media platforms, E-Commerce outlets, & leveraging influencer partnerships for enhanced visibility • Compelling content: Engaging consumers through interactive content & customized experiences, emphasizing community-building initiatives mCaffeine offers natural & vegan • Embracing natural ingredients: Meeting Sustainability beauty products increasing demand for toxin-free, vegan, & organic products by incorporating natural ingredients • Social responsibility: Commitment to sustainable practices to align with the growing preference for eco-friendly & socially responsible brands 1 Note(s): Beauty & Personal Care © 1Lattice | 31 Source(s): Company websites, Press releases, Industry reports, 1Lattice & Sorin analysis 1 D2C BPC Segment Case Study: Mamaearth Founders Launch year Years to INR 100Cr Revenue* Ghazal Alagh, 2016 ~3 years ~INR 1,515Cr (FY23) Varun Alagh Value proposition • A natural ingredients & toxin-free personal care brand • Started as a baby care brand, later branched out into skin care, hair care, body care, fragrances & color cosmetic Current offerings Babycare (Shampoo, Skincare (Facewash, Haircare (Shampoo, oralcare, oil, lotion, serum, lotion, soap, conditioner, oil, serum, etc.) etc.) etc .) Color cosmetics Fragrances (Lipstick, foundation, concealer, etc.) (Perfume & deodorants) Success enablers for Mamaearth • Market entry: Entered the market by offering plant-based & chemical free baby care products catering to millennial parents - Initial products were inspired from traditional DIY beauty recipes • Market need & whitespace identification: Recognized the demand for personal care items that are clean, non-toxic & organic , targeting specific needs & demands - Offering: Offered baby care products & further diversified into skin care, hair care, body care, fragrances, & color cosmetics • Endorsement & collaborations: To stay relevant among millennial parents, Mamaearth signed actress Shilpa Shetty to communicate with their consumers directly from a mother’s point of view • Expanding distribution network: Expanded to offline retail & partnered with large retail chains like Shoppers Stop, Apollo Pharmacy, & other small retailers - As of CY22, has pan-India network of 120K+ stores • Business expansion: After reaching ~INR 100Cr revenue mark, expanded to different brands & product offerings targeting specific customer requirements - In CY20, launched The Derma Co, in CY21 launched Aqualogica & Ayuga - In CY23, released IPO, proceedings from which was used for advertising setting up new exclusive brand outlets & investment in subsidiaries 1 Note(s): Beauty & Personal Care, *Revenue is for parent company Honasa Consumer Limited Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 32 1 D2C BPC Segment Case Study: Minimalist Founders Launch year Years to INR 100Cr Revenue Mohit Yadav, 2020 ~2 years ~INR 188Cr (FY23) Rahul Yadav Value proposition • Minimalist positions itself as a “transparent beauty” brand • Recentering skincare conversations on science to dispel misconceptions with transparent & data-driven approaches Current offerings Skincare (Sunscreen, Haircare (Serum, Bath & Body (Lotion, serum, cleanser, Shampoo, hair deodorant, body moisturizer, lip balm, eye mask, etc.) wash, exfoliator, etc.) cream, etc.) Success enablers for Minimalist • Market entry: Entered the market with a range of serums targeting particular skin concerns - All products featured ingredient lists with percentages & benefits backed by scientific data & test reports • Market need & whitespace identification: Recognizing the necessity for scientifically backed skincare - Offering: Initially offered skincare further expanded into a diverse product portfolio (~42 products) including hair & body care • Marketing strategies: Established robust social media presence with an active community over various platforms such as Instagram, Facebook, etc. - Centering conversations on product science and emphasizing safety & effectiveness on platforms like YouTube • Expanding distribution network: Expanded to multiple marketplaces such as Amazon, Nykaa Private Label & Flipkart, which has led to increased demand from the brand is all parts of the country - Expected to expand into offline retail with plans to unveil its first outlet in March 2024 • Business expansion: Secured funding from different investors to increase manufacturing capabilities & launch new offerings - Set to increase manufacturing capacity to support the ~10K orders per day mark - As part of Minimalist 2.0, launching new products & reformulating bestselling serums 1 Note(s): Beauty & Personal Care Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 33 Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape Segment Specific Deep-Dives Electronics Beauty & Personal Care Fashion Grocery Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 34 D2C Segment Deep-Dive: Fashion India D2C fashion market expected to Brand.com’s market share expected grow at a CAGR of ~35% from FY23-27 to increase by ~10% from FY23-27 India D2C Fashion Market Size India D2C Fashion Market Sales Channel Mix (US$ B, FY23-27P*) (US$ B, FY23-27P*) 14.9 14.9 9% CAGR ~34% 35% 4.6 4.6 11% 56% 25% 64% FY23 FY27P* FY23 FY27P* Marketplace Brand.com Offline Note(s): *Projected © 1Lattice | 35 Source(s): CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis D2C Fashion Segment: Key Trends Integrating technology for better experience 1 • Brands are increasingly leveraging AI , big data analytics & other tech to get better customer insights & introduce new offerings • Creation of new designs that best meet customer’s needs Shift towards sustainable fashion • Emergence of cause-based brands to provide sustainable clothing items with a zero-exploitation policy • Focused on reducing environmental impact & improve stakeholder support - No Nasties, 11.11, Doodlage are some brands offering sustainable clothing Personalization & customization of offerings • Brands are offering unique tailor-made solutions to address unique customer preferences & demands - Bombay Shirt Company, The Pant Project & TIPSYFLY are some brands offering customizable options Celebrity & influencer owned labels • Celebrities are launching their own labels or investing in brands opposed to merely endorsing one • Social media impacts customer buying preference Affordability • Trendy & affordable products are gaining traction due to changing customer behaviour, especially amongst the Gen Z • Influence of frequent & hyped launches by fashion brands 1 Note(s): Artificial Intelligence Source(s): Industry reports, Press releases, 1Lattice & Sorin analysis © 1Lattice | 36 D2C Fashion Segment: Market Landscape Apparel Accessories Footwear Jewelry Women’s wear Men’s wear Ethnic wear Intimate clothing Baby/kid’s wear Athleisure Note(s): This is not an exhaustive list of brands Source(s): Company websites, 1Lattice & Sorin analysis © 1Lattice | 37 D2C Fashion Segment: Key Success Factors Parameters Description Example Margins typically are:- 50- Revenue • Capitalizing on lucrative margins: Fashion sector 60% (Apparel & footwear), optimization inherently yields high AOVs & substantial profit 25-30% (jewelry) margins • Agile pricing strategies: Employ dynamic pricing methods that adjust prices & discounts based on real-time customer demand, preferences, & market dynamics Suta leverages data • Continuous design innovation: Sustain consumer Demand-driven analytics to gauge product’s product engagement & drive repeat purchases through order metrics assortment constant stream of fresh design iterations • Data-driven decision-making: Harness comprehensive data analytics to derive actionable insights into consumer preferences, guiding informed product development strategies Using advanced yarns & Product innovation • Pioneering product offerings: Foster innovation by textile tech (wrinkle-free, flex introducing novel styles, materials, & design tech waist, thermo- concepts regulating, breathable material) for stretchy, comfy • Revitalizing underexplored segments: Revitalize pants dormant market segments such as men's jewelry & accessories to unlock untapped potential Bummer focused on building Enhanced • Enhanced customer experience: Elevate customer quirky innerwear to attract customer satisfaction levels through improved sizing youth experience guidance, personalized tailoring options, & hassle-free return / exchange policies • Discreet product exploration: Facilitate discreet shopping experiences, fostering customer comfort in exploring diverse offerings especially in hush categories like innerwear Lenskart offers virtual try-on Personalization & • Personalized offerings: Implement customization feature, allowing customers technological models, to cater evolving consumer preferences to try various frames integration digitally • Interactive catalog experience: Integrate virtual try-on functionalities to enrich product cataloging, empowering customers Caratlane offers Trust- building • Establishing trust: Provide authentication authenticity certificates with measures certificates for jewelry items, instilling confidence each article of jewelry sold & trust in consumers • Synergistic omni-channel presence: Strive for a strategic blend of online & offline touchpoints to augment brand accessibility & consumer engagement across diverse channels © 1Lattice | 38 Source(s): Company websites, Press releases, 1Lattice & Sorin analysis D2C Fashion Segment Case Study: GIVA Founders Launch year Years to INR 100Cr Revenue Ishendra Agarwal, 2019 ~3 years ~INR 167Cr (FY23) Nikita Prasad, Sachin Shetty Value proposition • Positions offering of hallmarked jewelry as accessible elegance • Offers customer-centric innovation through personalized communication, easy returns & warranties Current offerings Rings Earrings Necklaces & Bracelets Others (Anklets, charms, pendants mangalsutras, etc.) Success enablers for GIVA • Market entry: Started with affordable silver jewelry, was inspired from the average spend on fine jewelry being three times more in India than compared to the west 1 • Customer awareness: Dispelled misconceptions about silver jewelry amongst Indian consumers through partnerships with influencers & celebrities like Anushka Sharma • Customer feedback & engagement: GIVA recognised trust-centric nature of jewelry business & initially engaged with customers individually - To address issues of scale, GIVA hired marketing automation services, which increased repeat customer rate from once / year to at least twice / year • Product innovation: GIVA focused on creating customer centric offerings - Provided lifetime plating services & 6-month warranty on articles sold - Built an in-house design team , launching 50+ articles each week • Omni-channel approach: Shifted focus to an omni-channel approach, GIVA expanded beyond exclusive online presence - As of CY23, it boasted 80+ operational offline stores in major India cities • Category expansion: GIVA after success in silver jewelry space, launched it’s 14K & 18K gold jewelry, featuring responsible diamonds 1 Note(s): Tarnishability, durability, etc. Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 39 D2C Fashion Segment Case Study: HRX Founders Launch year Years to INR 100Cr Revenue Afsar Zaidi, Hrithik Roshan, 2013 ~5 years ~INR 3,610Cr* (FY23) Kamal Punwani & Sid Shah Value proposition • Homegrown activewear brands owned by Hrithik Roshan • Offers products including footwear, men & women activewear, backpacks, accessories, equipment, etc. Current offerings Footwear Clothing (T-shirts, joggers, innerwear, jackets, etc.) Accessories (Eyewear, smartwatch, Equipment (Yoga mat, bicycle, audio, bags, mask, etc.) dumbbells, shaker etc.) Success enablers for HRX • Market entry: Launched by offering affordable activewear - Positioned as a collection inspired from Hrithik Roshan’s style & his lifelong dedication in achieving fitness • Brand awareness: Strategic partnerships with Myntra & Cultfit helped in achieving rapid user acquisition & build brand awareness - Created engaging content, including workout videos, fitness tips, & motivational messages to builds brand loyalty & keeps customers engaged • Collaboration: Became official fan merchandise partner for four teams in the Indian Premier League (IPL) in CY23 • Product expansion: Evolved from fitness brand to a lifestyle brand, providing value-for-money, high quality alternatives to international brands - Created affordable fitness accessories in collaboration with Xiaomi - Launched HRX Active Fragrances line in collaboration with Baccarose • Business expansion: Launched offline stores in CY19, expanded presence in cross-category product lines - Ventured into healthy food habits, by launching HRX by EatFit in CY22 - Launched HRX Cafe in Bangalore, partnered with Curefoods to bring in fusion of fitness, wellness & culinary excellence in CY22 Note(s): Revenue of Myntra which acquired HRX in 2016 Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 40 Agenda Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape Segment Specific Deep-Dives Electronics Beauty & Personal Care Fashion Grocery Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 41 D2C Segment Deep-Dive: Grocery India D2C grocery market expected to Channel-wise market share expected to grow at a CAGR of ~40% from FY23-27 remain constant from FY23-27 India D2C Grocery Market Size India D2C Grocery Market Sales Channel Mix (US$ B, FY23-27P*) (US$ B, FY23-27P*) 26.0 26.0 14% 15% CAGR ~41% 71% 6.7 6.7 15% 16% 69% FY23 FY27P* FY23 FY27P* Marketplace Brand.com Offline Note(s): *Projected © 1Lattice | 42 Source(s): CII India D2C report, IAMAI DNB report, 1Lattice & Sorin analysis D2C Grocery Segment: Key Trends Unadulterated & fresh offerings • Brand focus on natural & fresh products • Farm to home & unprocessed integrated supply chain models are becoming popular Subscription & customization model • Subscription models emerging to drive repeat customers & higher purchase frequency Transparency in product offering • Honest advertising in terms of f ood ingredients & communication, focus on natural ingredients • Brands like Country Delight offer self-test kits to build trust Conscious snacking options • Products made from millet, ragi, etc. are preferred based on their health benefits • Vegan & cruelty-free products are gaining traction Consultation or diet plans • Platforms like Ketofy offer personalized diet plans enabling users to consult with certified experts Source(s): ): Industry reports, Press releases, 1Lattice & Sorin analysis © 1Lattice | 43 D2C Grocery Segment: Market Landscape Meat / Meat Alternatives Dairy / Dairy Alternatives Beverages Packaged Foods Subscription model Personalised model Note(s): This is not an exhaustive list of brands Source(s): Company websites, 1Lattice & Sorin analysis © 1Lattice | 44 D2C Grocery Segment: Key Success Factors Parameters Description Example The whole truth offers Quality & • Unique value proposition: Develop differentiated chemical-free healthy snacks differentiation offering centered around natural ingredients, with clean* packaging aimed at attracting & retaining loyal customer base • Rigorous quality assurance: Employ cutting-edge technologies for regular product testing, ensuring consistently high-quality products Licious has an easy-to-use • Enhanced platform performance: Optimize Optimizing website & a user-friendly E-Commerce product listings, images, & descriptions to bolster app platform visibility, enhancing conversion rates • Intuitive user experience: Implement secure & user-friendly online shopping interfaces to facilitate seamless transactions • Technological integration: Integrate advanced Dairy & meat D2C brands Supply chain have tech integrated supply technologies within the supply chain to bolster management chain efficiency & uphold product quality standards • Strategic supplier relations: Foster robust relationships with suppliers to secure a diverse & reliable range of products • Dynamic online presence: Cultivate a strong Sleepy Owl Coffee has an Customer active social media page, social media presence to engage & educate relationship boosting engagement consumers effectively management • Interactive customer engagement: Drive engagement through targeted promotions, loyalty programs, & personalized recommendations Rage Coffee offers a large • Continuous product innovation: Stay aware of Innovation & selection of flavors in instant product market trends & consumer preferences, coffee expansion innovating product offerings accordingly • Strategic product line expansion: Expands product portfolio to offer a comprehensive array of flavors & tastes Country Delight utilizes Customer reviews • Proactive improvement initiatives: Solicit & act customer reviews for & feedback upon customer feedback to continually enhance promotional material products & services • Harnessing positive feedback: Encourage & leverage positive customer reviews to bolster brand trust & credibility Note(s): *No hidden ingredients © 1Lattice | 45 Source(s): Company websites, Press releases, 1Lattice & Sorin analysis D2C Grocery Segment Case Study: Country Delight Founders Launch year Years to INR 100Cr Revenue Chakradhar Gade, 2015 ~4 years ~INR 547Cr (FY23) Nitin Kaushal Value proposition • Provides natural, fresh, & unadulterated milk directly to the doorstep of consumer • Offers bread, ghee (clarified butter), paneer (cottage cheese), yogurts, & healthy smoothies Current offerings Milk & Milk product Ghee & Fruits & coconut (Yogurt, oils vegetable water paneer, etc) Bread & Other (Pulse, cereal, seeds, eggs pre-mix, spices, snacks, etc) Key levers for Country Delight • Market entry: Started by providing milk sourced directly from farmers, guaranteeing freshness & freedom from harmful chemicals or additives - Diligent quality assurance process with 107+ tests everyday • White space identification: Identified loopholes in traditional milk supply chain, eliminated middlemen, ensured customers receive high-quality products directly from the source • Subscription model: Customizable subscription plan allowing customers to receive fresh milk every day & view their monthly grocery spending - ~6K delivery workers fulfilled ~5M orders monthly, serving more than 30K households in CY22 • Product expansion: Started supplying fresh produce to the Delhi-NCR market - Launched dry fruits in the month of October of CY22 to coincide with Diwali - Plans to broad its offerings like jams & pickles, among other products • Market reach: Network of 10K+ farmers , presence in ~11 states, delivers in ~25 cities, major presence in northern parts of India - ~10% month-on-month revenue growth across geographies in CY23 Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 46 D2C Grocery Segment Case Study: Akshayakalpa Founders Launch year Years to INR 100Cr Revenue Dr. G.N.S. Reddy, 2010 ~11 years ~INR 194 Cr (FY23) Shashi Kumar Value proposition • Provides products free from antibiotics, synthetic additives, hormones & chemical pesticide residue • Offers milk, bread, ghee (clarified butter), paneer (cottage cheese), yogurts, honey, vegetables, etc. Current offerings Milk product (Greek yogurt, Milk & Ghee & paneer, buttermilk, cheese, coconut oils curd, etc) Bread & Other (Dosa batter, Vegetable eggs honey, mango drink, etc.) Key levers for Akshayakalpa • Market entry: Entered the market offering organic, antibiotics, & hormone-free dairy products - Incubated rural entrepreneurship by radically redefining dairy processes • Value chain enhancement: Supported farmers in establishing their farms to generate viable income, currently working with ~750 farmers - Arranged microfinance for farmers through campaigns on P2P* lending platforms • Organic marketing: For the first ten years, focused only on Bangalore market & zero marketing spends, relied on word-of-mouth & personal networks - Took consumers to their farm to demonstrate processes & practices - Have started producing explanatory videos & campaigns on social media platforms • Market expansion: Serves ~60K customers daily through app, ~2K retail outlets & E-Commerce platforms like Bigbasket, Swiggy Instamart, others - Currently available in 40+ cities & plans to extend in more tier-2 cities • Sustainability: Recycle used milk pouches, gable top packaging that is 100% recyclable & 92% biodegradable - Encourage localization of all resources & technological advancement to cultivate chemical-free produce Note(s): *Peer-to-peer Source(s): Company websites, Press releases, 1Lattice & Sorin analysis © 1Lattice | 47 Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape D2C Segment Deep-Dive Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 48 Benchmarking Consumer Segments across the D2C Landscape Consumer Segment Benchmarking across the D2C Landscape Parameters BPC Fashion Electronics Grocery D2C Market ~US$ 8B ~US$ 15B ~US$ 7B ~US$ 26B Size, FY27 Expected CAGR 36% 34% 40% 41% (FY23-FY27) Average INR 300 – 2,000 INR 400 – 2,500 INR 500 – 5,000* INR 200 – 1,000 Order Value Purchase Monthly Quarterly Yearly Weekly Frequency High repeat Product Product High chances across offering comparison comparison of repeat Repeat Purchase before before purchase due purchase purchase to taste specifications Category Gross 65-75% 50-60% 40-50% 35-45% Margin High brand Seasonal Moderate to Brand loyalty due to brand loyalty, low brand loyalty due Brand Affinity customer’s frequent style loyalty to repetition trust in changes offerings Medium shelf Long shelf life, Long shelf life, Perishable Inventory life & fast seasonal slow turnover products, fast Management turnover turnover turnover High in- High High Medium category & in-category & in-category & category Product cross-category medium limited expansion Expansion expansion cross-category cross-category scope scope expansion expansion scope scope Time to INR 100Cr ~2-3 years ~4-5 years ~3-4 years ~4-5 years Revenue Category Very High Very High Moderate Moderate Attractiveness Very high High Moderate Low Note(s): *White products sell for higher prices, D2C electronics AOV is estimated in the INR 500 - 5,000 range © 1Lattice | 49 Source(s): Industry reports, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape D2C Segment Deep-Dive Benchmarking Sub-Segments Across the D2C Landscape Looking Back D2C Key Success Factors D2C Enablers Support Looking Ahead © 1Lattice | 50 D2C Key Success Factors D2C brands should focus on creating unique offerings & organic brand building practices for sustainable growth in the long run Budding brands Growing brands Established brands (Yearly revenue < US$ 6.0M) (Yearly revenue US$ 6.0M –12.0M) (Yearly revenue > US$ 12.0M) Focus on product market fit Customer acquisition & Increase efficiency & & brand building growth omni-channel presence • Website traction & • Paid advertisements & • Personalized marketing Marketing content marketing partnerships & loyalty programs Initiatives - Develop customers - Focus on increasing the - Create brand loyalists organically & cost- customer outreach for & drive repeat effective manner more brand trial purchase • Process & inventory • Process & warehousing • Logistics optimization & Operating optimization streamline presence expansion Activities - Focus on core - Use inventory - Optimize logistics & offerings & effectively management tools & create omni-channel manage inventory software for better presence, geographical control & planning expansion • Website optimization & • Automation & data • Integration & Forecasting Technology tracking analytics Usage - Integrate all business 1 - Utilize DIY platforms - Automate platforms to functions, optimize like Shopify & Wix, gather data on different resource allocation, track website traffic metrics, analyze to deploy demand & conversion create personalized forecast models offerings • Founders & • Department structure & • Cross functional team & Team core team specialized roles leadership development Building - Small, lean team - Create separate - Create collaborative focusing on essential departments with roles with focus on roles, developing defined roles & knowledge sharing, interchangeable responsibilities investment in training & skills development • Business incubators, • Angel investments, • Private equity Funding microloans, accrued venture capital, accrued investment, debt raising, Medium cashflow cashflow sustainable growth - Focus on raising - Capital expansion for - Large capital source, funds effectively business growth focus on growing without diluting the sustainably maximizing equity profits 1 Note(s): Do it yourself, US$ 1 = INR 82.25 © 1Lattice | 51 Source(s): Press releases, Expert interviews, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape D2C Segment Deep-Dive Benchmarking Sub-Segments Across the D2C Landscape Looking Back D2C Key Success Factors D2C Enablers Support Looking Ahead © 1Lattice | 52 D2C Enablers: Solving D2C Pain Points & Supporting Scalability D2C enablers help brands optimize operations, enhance personalization capabilities, & drive business growth Product Development • Gather insights into target audience behaviors • Identify & address usability issues, optimizing user flows • Conduct tests & track changes to improve product • Leverage segmentation & personalization capabilities Website/App Building • Built-in interface & templates accelerating website launch • Easy to use CMS allowing to update product information • Built-in product management tools • Marketing tools & analytics to track website performance Marketing • Simplify content scheduling & audience analytics • Insights into website traffic, user behavior & conversion funnels • Segmentation based on demographics, interest & purchase • Help allocating marketing budgets strategically Sales (Payments) • Caters to diverse customer preferences & reduces cart abandonment • Streamlining order fulfilment & financial management • Automate inventory updates based on sales • Integrating data allowing personalized offers & promotions Logistics • Track inventory, optimize storage, & picking • Transparent & up-to-date tracking information on orders • Utilize data & analytics assisting in logistics strategies & investments • Maintain control over supply chain Customer Support • Offer seamless support across multiple channels • Delegate repetitive tasks to chatbots & automated workflows • Gather customer feedback through surveys & reviews • Foster closer connections with customers Omni-channel Expansion • Help digital native brands expanding offline • Offers services like retail space leasing, retail strategy, store designing, & launch • Helps in-store operations, day-to-day management, staff training, & infrastructure management Note(s): This is not an exhaustive list of enablers © 1Lattice | 53 Source(s): Industry report, 1Lattice & Sorin analysis Agenda India Retail Market Overview India D2C Market Overview India D2C Investment Landscape D2C Segment Deep-Dive Benchmarking Sub-Segments Across the D2C Landscape Looking Back Looking Ahead © 1Lattice | 54 Predicting the Way Ahead for D2C Brands [1 / 2] Parameters Description Example Ultrahuman collaborated with Process • Automating key decision support systems Tradexa (automation platform) automation that enable the brand to make right decision to expand reach in E-Commerce basis different parameters domain • Prioritizing channel & marketing campaigns basis product performance Noise IntelliBuds provides Rampant • Generative AI enables brands to create customized EQ, voice control, & adoption of AI* compelling & personalized content utilizing smart gesture control vast datasets catering to specific audience preferences • Predictive AI helps decoding consumer behavior by analyzing historical data & patterns to anticipate consumer needs, & forecast trends Vedix uses only plant-based Sustainability & • Growing demand for eco-friendly products ingredients in their products ethical sourcing & ethical manufacturing practices • Brands are focused on promoting domestic craftsmanship , recyclable materials, & ensuring fair wages for workers Sugar Cosmetics hosts live Social commerce • Seamless integration of social media commerce events on social integration platforms with E-Commerce for product media allowing direct purchase discovery & purchase • Brands effectively leveraging social commerce expected to gain vast potential of online shoppers Lenskart now operates >1K offline Omni-channel • Increased adoption of omni-channel stores which has helped in driving approach approach , integrating physical stores & retail revenue growth spaces • Facilitates access to a wider demographic , especially in areas with limited online engagement Note(s): *Artificial Intelligence © 1Lattice | 55 Source(s): Industry reports, Media publications, 1lattice analysis Predicting the Way Ahead for D2C Brands [2 / 2] Parameters Description Example Mamaearth offers vernacular Hyper- • Hyper-localization strategies to cater to the language support to reach wider localization diverse preferences & increase reach to Tier 2 audience in Tier 2-3 cities & 3 cities • Localized marketing campaigns,region- specific product variations, & partnerships with local suppliers Zippee provide D2C brands Emergence • Localizing presence in high-demand regions network of dark stores & last-mile of dark stores to help brands facilitate quick fulfilment of delivery online orders • Assist brand in having greater control over inventory quality, cutting down on operational costs Acquired D2C health food brand D2C brands • Legacy heritage brands are acquiring D2C True Elements & Just Herbs in acquisition brands to undergo crucial digital CY22 transformation • Serve as a strategy initiative for heritage brands to stay relevant & connect with consumers HUL has launched it own D2C Established • Established brands are also introducing their brands such as Dove baby, players launching own D2C brands to align with evolving Simple & Dermalogica D2C brands consumer tastes • By forging direct links with consumers, these brands acquire valuable insights, customize offerings, & swiftly adapt to changing trends Note(s): *Artificial Intelligence © 1Lattice | 56 Source(s): Industry reports, Media publications, 1lattice analysis What we heard from the D2C Ecosystem “A critical winning factor right now is finding a “In modern marketing, influencers wield strong brand market fit; this can happen by considerable influence over consumers' identifying an under-served customer niche purchasing choices. Initially recognized for and understanding a product problem that product promotion, influencers have evolved you can fix.” to deeply engage with their followers, - Founder, Electronic brand leading to the rise of influencer marketing as a credible advertising avenue.” -CEO, Online marketplace “Brands should cultivate a digital-first mindset from the outset, this entails a grasp of fast supply chain dynamics, "Learn from the mistakes of others and proficiency in marketing, and brand avoid repeating them. Instead of making the positioning in the digital space. Effective same errors, leverage those lessons to storytelling is key to establishing a brand's enhance your business. If you're going to presence in the digital world.” make mistakes, let them be new ones, - CEO, Online marketplace rather than repeating past ones.“ - Founder, Innerwear brand “Omni-channel has gained significant “Brands explore offline avenues as not all traction. Seamless integration between purchasing habits have migrated online. online & offline channels is essential for Maintaining an offline presence is vital for success. Without this cohesion, it merely expanding market share. Until the entire resembles a multichannel approach rather market adopts online practices, consumers than authentic omni-channel retailing.” will continue to utilize omni-channel - CMO, Apparel Brand approaches.” -Founder, Wellness brand “D2C is a journey of brand wherein your target audience trusts you, this requires “The product captures customers' consistent communication with your attention, the story convinces them to buy, customers, a good social media presence and data ensures their loyalty. At every & efficient after-sales support.” stage of expansion, leveraging insights - Director, Footwear brand from data analysis is crucial for improving customer satisfaction and maintaining brand integrity.” “Product innovation serves as the main -Founder, Jewelry Brand catalyst for launching a business, with product differentiation and targeting specific consumer segments being crucial factors. Sustaining a brand relies on customer satisfaction and their perception of the product's quality and taste.” - Founder, Dairy brand Sources: Expert interviews, 1Lattice & Sorin analysis © 1Lattice | 57 About the Authors Mandar Dandekar Anshul Bansal Harsh Khara Partner Principal Vice President Ashish Dhir Abhishek Maiti Fanindra Tibrewal Senior Director Director Project Manager Consumer & Retail Technology & Internet Technology & Internet Meghna Arya Vansh Rastogi Business Analyst Analyst Technology & Internet Technology & Internet What is Toplyne? Topyne is used by D2C brands to drive more purchases from their high-value customers and to find more like them through Google & Meta ads. Toplyne learns from website data to predict the lifetime value (LTV) of each visitor and gets ads in front of the right buyers at the perfect time How does Toplyne work? Toplyne is used by brands to generate retargeting and prospecting audiences for Meta and Google campaigns. This happens in three quick steps: Capturing website behavior - The Toplyne Pixel, installed either through GTM or custom code on websites, tracks 1 user behavior across sessions. Model training - During a learning period, Toplyne’s AI understands user behavior, propensity to purchase, and 2 starts to predict LTV and AOV of each website behavior. Syncing audiences - A one-click integration to Meta & Google ads enables brands to tag these first-party AI 3 audiences to their ad campaigns, leading to 35%-70% higher Return on Ad Spend (ROAS) within 30 days. Toplyne provides a 30-day free trial, enabling brands to A/B test their campaigns with first-party AI audiences and measure changes in their ROAS. 200+ 30% annual engagements faster to outcomes 8 600+ practices years domain expertise 130+ 98%+ team members accuracy 100+ 2.5M towns & cities panel members 15+ 40:60 languages covered she/he ratio What We Do Making organizations effective through data-driven insights, Vision innovative tech solutions and proven expertise to enable better decisions To provide technology led solutions that unlock that power of Mission trustable data , actionable research , and deep network of experts Technology Data + People/ Accumulated Professionals/ knowledge Service providers Research © 1Lattice | 59 At 1Lattice, we address the problem statement and serve as the one-stop platform for all your knowledge and decision support requirements Customer Channel partner Market Brand 02 03 03 01 research Research (B2B Intelligence Health Track (B2C research) Research) • Market Potential • Customer behavior • Channel/ Business • Sources of Assessment (TAM, (Needs, preferences, partner feedback Awareness SAM, Attractiveness) Willingness to pay) (recurring sales track) • Market/ Sector scans • Customer journey • Channel/ Business • Usage & attitude (360 Market overview) mapping (purchase- partner Audit to-pay journeys) • Competitor structure • Price sensitivity • Mystery Shopping • Competitor and benchmarking analysis benchmarking (Price, product, services) • Target Segment • Net Promoter Score • Channel NPS and • Marketing campaign identification (NPS) and customer satisfaction evaluation (Purchase (Personal and satisfaction shift pre & post potential mapping) campaign) • Forward Trends • Charmer vs Churner • Channel marketing • Brand Reputation Analysis (Market and study (Switching and and KPI tracking (Net Sentiment) customer trend retention) forecasting) IPO program Advisory Expert network 05 06 07 management • Concept Validation • 30K+ diversified network • Authentic and detailed members industry reports • Concept / Product Testing • Depth across industries & • Flexibility of customization seniority • Go-to-Market (product • Variety of use cases: • Storyboarding and strawman launch, customer consultations to long projects with stakeholders segmentation, pricing strategy) • Impact assessment • Transparent pricing from • Financial and operational (campaigns, products, experts benchmarking against services) industry peers © 1Lattice | 60 We are here for you Let us know how we can meet your business requirement? Ashish Dhir Senior Director, Consumer & Retail E: ashish.dhir@1lattice.com Abhishek Maiti Director, Technology & Internet E: abhishek.maiti@1lattice.com For media queries, Vaishnav Kumar Rai Manager – Corporate Communications please contact E: communications@1lattice.com M: +91 782 794 4925 www.1lattice.com Disclaimer: This material has been prepared by 1Lattice, which is the trade name of Lattice Technologies Private Limited (“1Lattice”, “we” or “our”) with the intent to showcase our capability and disseminate learnings to potential partners/clients. This material can be referred to by the readers on the internet but should be referenced to 1Lattice, if reused or adapted in any form, or medium and on any forum. The frameworks, approaches, tools, analysis and opinions are solely 1Lattice’s intellectual property and are a combination of the collection of the best data we could find publicly, and the 1Lattice team’s own experiences and observations. 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