Lessons from building a Direct to Consumer brand in India
The best advice that I can give anyone thinking of starting a D2C brand in India is that you shouldn't start one. This is assuming that you have a big ambition of growing and gaining a sizeable market share. If you're happy being a small player serving a niche then it is probably a good idea.
But in any case, if you're planning to start a D2C brand, you should think hard about what competitive advantage you have and why will the TG care about it. If you don't have a solid hypothesis and some proof of concept + data to back it, refrain from getting into it because it is a very hard job.
I joined Koparo Clean a year ago as a part of the founding team and have been building it from the ground up for the past year. Here is what I have learnt.
- I would reiterate the need for having thought of what you're going to do differently and why should people care about it. This is as important as defining the TG for your product.
- Once you define a TG, pick a very small subset out of it and try winning them over. Doing this will ensure that you don't need to worry about universal brand positioning and multiple marketing campaigns for different sub-sections. Your goal should be to find the product-market fit within the subset first before targeting anyone else. This will give you a fair idea of what is working and what is not. You'll be able to make the necessary adjustments before rolling it out for more people.
- D2C companies are capital intensive businesses so make sure you have enough capital at hand before you start your own brand. Don't expect VCs to fund you for your CapEx. You'll have to bootstrap and show some traction (at least 1000 orders but preferably 10000 orders) before VCs start showing interest in you.
- If you are considering VC investments at any stage, make sure that the TAM (total addressable market) that you're serving is large. For them, taking a bet on you is a risky proposition and they are unsure of how much market share you can acquire. If the TAM is large, even a smaller percentage of the pie will mean more in an absolute sense so that is a better option to go with.
- The first step of starting a successful D2C brand is building a community. If you do this right, things will be mighty easy for you. You need to have an audience that you cater to through content, that trusts you and finds your insights useful. This doesn't take money to build. It takes a lot of effort and persistence—sometimes years. A great example of this is The Better India. They have been covering positive news stories from across the country for more than 10 years now. When they launched their home-cleaning brand The Better Home, they didn't have to go in search of customers—they had a cohort waiting. It helped them reach ₹1 Cr in monthly revenue with a 90% retention rate within months of launch.
- Go in with the understanding that social media marketing is a black box. Companies like Google and Facebook have made them into money-minting machines and they have some of the smartest engineers in the world working for them. You can't game the system. Neither can anyone else who claims to. I am not saying that they shouldn't be used. My view is that you should work on understanding the system and running controlled experiments so that you get a hang of it. At low budgets, conversions are very difficult to come by so you need to ensure that your entire marketing strategy is not dependent on paid ads. Once you have raised a round and can pump money into it, then it makes sense to hire someone or outsource it to some agency.
- I have a similar viewpoint on influencer marketing. Having talked to folks at other D2C brands as well, it seems like most of them are doing it out of FOMO. Influencer marketing works for certain categories so here as well experiment and find out if it does for yours or not. I think people should be mathematical about it in the sense that you should actually have a funnel in place and see what kind of engagement the influencer is bringing and follow it down to conversions. This is important at the early stages when you don't have a lot of cash to burn. A good way to do it is to design your program such that the influencer has some skin in the game. There should be variable payoff so that they come up with interesting and creative ways of selling your proposition to their followers.
- Solve for distribution early. Sell on multiple channels but do a cost-benefit analysis after a few months to evaluate what is working for you. Focus your energy accordingly. While D2C brands are digitally native and primarily sell through online channels, with a limited marketing budget you can't solely rely on online discovery. Offline sampling will help you solve this. Go where your target consumer is and let them experience the products. For us at Koparo, COVID has not allowed us to do this but given how we are targeting the premium urban households, setting up stalls in societies would have been a great way to connect with our TG.
- You'll need to be a tech-first company eventually. There are many web platforms such as Shopify and Mailchimp that help you with different aspects of the business and it makes sense to leverage them at a low cost when setting up. But as time will pass, you'll realise their limitations. If you are in it for the long haul, it will be frustrating as circumventing the limitations will be very difficult to implement and will cost you a fortune. If you can instead build your own infrastructure and systems from scratch, you'll have a lot of freedom to experiment with different custom functionalities. You'll also be able to make sense of consumer behaviour better. This is a costly proposition as well because having in-house developers and paying for servers will require a lot of money so I won't recommend starting off with this. But once you have product-market fit and have probably raised a round, you should start thinking about the migration.
- You'll need plenty of high-agency to survive. The thing with D2C businesses is that in most cases you don't control the production or the logistics. You are just a seller dependent on various other systems. This lack of control manifests in frustrations because your drive to build your company is not matched by every other service that you are reliant on. You'll need a lot of persistent follow-ups to get even simple things done and it will be very draining. Conquering this will require setting your ego aside and not giving in till the moment what you want is done. For instance, it took us 8 months and 100s of emails to start conversations with BigBasket. And this is just one example. I have faced this despair almost every day for the last year.
These are some high-level takeaways from the experience. If you're someone who works at a D2C company or is looking to start one and would like to chat about this in detail, you can drop me an email.