Indian e-commerce start-ups’ total funding was $4 billion in 2022 : MMA Global India x Publicis Commerce

As per the D2C Advantage X Toolkit: Guide to Maximise ROI of E-commerce Investments, between 2014 and 2022, Indian e-commerce received a total funding of $ 31 billion, with an annual peak of $ 10.7 billion inflow in 2021.

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| March 6, 2024 , 10:34 am
As per QCO (Quality Control Order), organisations should not publish reviews that lack authenticity or have been purchased, or written by individuals hired by suppliers, or third parties etc. (Representative Image: Mark König via Unsplash)
As per QCO (Quality Control Order), organisations should not publish reviews that lack authenticity or have been purchased, or written by individuals hired by suppliers, or third parties etc. (Representative Image: Mark König via Unsplash)

On March 5, MMA Global India in association with Publicis Groupe’s Publicis Commerce launched the D2C Advantage X Toolkit: Guide to Maximise ROI of e-commerce Investments.

Given the robust GDP growth, increased disposable income, and growing rural consumption, e-commerce in India is positioned to be a substantial beneficiary, the report stated. In the e-commerce space, India is projected to expand at a rate of 19 percent, reaching $ 400 billion by 2030.

In terms of the online shopper audience, India follows China, which has over 900 million shoppers. The US ranks third with more than 200 million online shoppers.

Emerging consumer trends, such as a more balanced gender ratio (45:55 male to female), shifting geographical preferences towards tier-2/tier-3 towns, and comparable spending power in smaller towns and larger cities, are expected to fuel continued e-commerce growth.

Tier-2+ cities are poised to be the next growth engine for Indian e-commerce, highlighted the report. This growth will be driven by supply-side innovations like vernacular-based user interaction and voice and visual search.

The report also stressed upon the rapidly improving digital literacy. India now boasts of 700+ million internet users. As per the report, ~350 million have used digital payments,~220 million have shopped online, ~65 million have ordered food online, and ~80+ million households have paid utility bills online.

The Government of India has developed a set of technology building blocks, known as digital public infrastructure, for safely and efficiently delivering economic opportunities and social services to all residents. The key elements include DigiLocker, Sahamati, Authentication-on-demand and payment-on-demand.

India has a start-up ecosystem with 750+ funded start-ups operating in the e-commerce space, revealed the report. Between 2014 and 2022, Indian e-commerce received a total funding of $ 31 billion, with an annual peak of $ 10.7 billion inflow in 2021. While 2022 has seen a funding winter, the total funding for Indian e-commerce start-ups has been $ 4 billion.

With the advent of smartphones and high-speed internet connectivity, online shopping has become more accessible to people across all age groups and regions.

As per the report, the integration of AI and machine learning algorithms has helped these platforms personalise the shopping experience for customers. Over the past few years, major players such as Amazon, Flipkart, and Paytm Mall have emerged.

Furthermore, advancements in logistics and supply chain management have made it possible for commerce companies to offer faster delivery times and better inventory management.

Co-existence of D2C and Omnichannel

The report recommended that D2C must coexist alongside other channels such as marketplaces and omnichannel approaches since each channel plays a distinct role in boosting sales.

The report cited the example of Bombay Shaving Company which was launched in 2016 as a digital-only route for the premium grooming segment. Later in 2021, after establishing product-market fit and obtaining a critical mass, they adopted an omnichannel strategy with both digital and offline sales channels.

Many of the traditional retail or FMCG players have started to launch their D2C businesses. Newer business models are being enabled by digital public infrastructure such as the Open Network for Digital Commerce (ONDC).

For example, Hindustan Unilever Limited (HUL) launched the Shikhar Seller app to connect consumers to their kirana network over ONDC. Consumers can order HUL products through any ONDC buyer app and local kiranas in their vicinity will deliver the product to the consumers.

Based on the survey, among D2C businesses in India, nearly 80 percent of D2C businesses are yet to be profitable. The other challenges are high customer acquisition cost, unclear ROI and operational complexity.

D2C and first-party data

As part of the research, successful D2C companies and their use of first-party data was analysed. A few specific themes emerged. They are targeting or cross-selling other products, running look-alike campaigns, profiling consumers, and using research to provide improved consumer experience (personalised customer journeys), and providing value-added services and product innovation.

For example, HUL has established a centralised team dedicated to overseeing first-party data across its brands.

This approach involves analysing consumer behaviour patterns across various categories, enabling the personalisation of consumer experiences. The primary objectives include enhancing engagement, fostering loyalty, and increasing market share, in addition to improving transactional performance, states the report.

Another example. For a campaign with the objective of driving trials of a new category in homecare, first party data delivered 150 percent better efficiency and 2.2x higher CTR (click-through-rate) vs second party data.

When done right, first-party data has the potential to deliver ~4 percent + lift in the overall D2C revenue.

D2C channel: How effective?

Based on their primary survey of established traditional businesses having their own D2C channels, 60 percent of respondents noted that revenue from standalone D2C businesses were less than five percent of their overall e-commerce revenue.

The D2C channel is an effective test bed to not only understand consumer preferences but also drive product innovations, revealed the report. For example, Yogabar (part of ITC Foods) launched a “Protein Peanut Butter” variant in response to market gaps.

Successful D2C businesses consistently analyse end-to-end consumer journeys, identify breakages or pain points, and devise ways to address those. As per the report, the latest innovations in artificial intelligence, augmented or virtual reality, and live video are opening up newer avenues to deliver seamless customer experience in digital.

One pertinent example is Caratlane, an online jewellery retailer. In their digital journey, they identified a significant gap in the customer journey, where consumers could not gauge the size of the jewellery they were buying online.

To address this problem, Caratlane introduced a virtual 3D jewellery try-on app. The app uses facial recognition and 3D imaging technology to help consumers visualise how the piece of jewellery looks on them.

In 2018, L’Oréal acquired ModiFace – an AR company that specialises in building consumer experience tools in the beauty category such as virtual try-ons, skin diagnostics, and smart mirrors in stores amongst others.

In 2020, L’Oréal launched new AR-based digital services like virtual try-ons during live streams, beauty consultations, and Live Shopping.

ModiFace, implemented on 23 brands in 80 countries, achieved significant results: 1 billion consumer visits, 2X-5X users during the lockdown, and a 1.25X to 2X increase in conversions based on 50 million try-ons across 50+ countries.

D2C and personalisation

In the current retail landscape, consumers expect personalisation at every phase of their shopping journey. Over time, these expectations encompass various factors such as gender and skin type, highlighted the report. ‘For me’ queries have grown 3X over the last few years.

As per the report, the pre-purchase trends include searches related to a consumer need/issue (e.g. face wash for dry skin, face wash for daily use etc), gathering information about the kind of product available (e.g. Moisturiser for face, charcoal peel-off mask) and comparisons (e.g. Best face wash, best face wash for dry skin, etc) and comparing prices (e.g. Nivea body lotion 400 ml, Biotique face wash below Rs 1000).

Read More: MMA Global India & Publicis Commerce launches ‘D2C Advantage X Toolkit – Guide to Maximise ROI of eCommerce Investments’ report

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