The Secret Sauce to the Success of D2C: Ace Investor Kunal Bahl talks about what makes for a D2C success story

Team Shadowfax

The Delivery Delight Index is the most comprehensive toolkit for brands and supply chain leaders  today. At the launch of the 3rd edition of the report, Titan Capital & Snapdeal's Kunal Bahl in conversation with Shadowfax' Abhishek Bansal shared insights on the D2C space. Our team captured excerpts from the fireside chat here.

AB: Today's focus is going to be D2C brands, and I’ll start with a fundamental question. Where do you expect to see a lot of action coming in, in the next 3-5 years?

KB: It's a great question. At some level D2C has become this gold rush of sorts. At present there are many breakout D2C companies and they are very attractive businesses because they have high margins, are usually profitable, and in many cases there is minimal dilution for the founders and the early investors. So there's a tremendous amount of value creation in a short period of time.

I would turn your question on its head and ask, which sectors will not see action from a D2C standpoint? I’ve been saying for some time that by 2025 we likely have more than 100 $1mn+ D2C brands. If you look around, almost every category is getting disrupted.

AB: Often, when I am talking to some of the founders, an interesting question comes in - should you go deep and pick up a single category to build products in, or go wide and pick up a wide range of a catalogue and try to build on that? What do you think works the best in the Indian market?

KB: 70% - 80% of brands I've seen succeed have taken a sharp, limited, and strong point of view of a particular category and how it will evolve and they would start with very few products, try and find product - market fit, both for the unit economics, and the pricing.

So for the most part, it is critical to identify what the customer needs. More than getting caught up with should you go horizontal should you go very deep, if you find a need, you create a product suite, hopefully a limited one. Once that sees success, then you expand the product suite. This is a very competitive space that often gets crowded within months.

AB: How would you guide our listeners right now in terms of what is something that you should never outsource, or some aspect which you should never do in-house? What is it that people should definitely take at the core of the business?

KB: I feel that tech like the platform itself, you can use off the shelf, like Shopify or similar platforms for a long period of time. Figs and Oakley - they are large D2C brands - went public, and they operate on Shopify. If public companies with multi-billion dollar market caps can operate on Shopify, I’m sure a D2C brand starting up can also feel some degree of confidence in using Shopify or similar platforms.

I feel that the internal team of a D2C brand should focus on the product, brand, and marketing. These are essentially product and marketing businesses right. Tech is a mere enabler. Obviously, an efficient, prudent use of tech will deliver better results, but it's not going to be a major differentiator.

AB: What is your advice, what are the areas one should be aware of, as they plan to expand 10X?

KB: I think the answer varies from category to category. Some will not become 10X that fast, and some will, by virtue of their frequency of purchase, the size of the market, the incumbents that are already there, or the behaviour shift in demands.

The trajectory of most of these D2C brands generally starts with some amount of insight that this is a white space coming up, with a high margin product that is very high quality and then using digital marketing as an arbitrage while there is still a white space.

AB: We have a question from one of our listeners. With the upcoming festive season, what are some ideas that companies can dig in to create customer delight, especially with respect to D2C space?

KB: I feel, in the end, while one can do a lot of delight around packaging and post-purchase customer support and CRM, the key driver of growth of a D2C brand is the product itself. I would say that is probably the single biggest driver - just have a great selection of fresh products, use the insights from the consumers and, obviously, deliver quickly.

AB: I think fast delivery is a space where we are seeing a lot of action; if you are building a D2C brand, how can you enable same-day or next-day deliveries.

This kind of a delivery creates incredible customer delight. This is one space where a lot of third party support has also come in, a lot of companies are solving this problem for brands. This is something which is helping brands acquire customers, so that's a specific thing I see a lot of brands actually preparing for, this upcoming season.

KB: yeah.

AB: Thank you all for joining in. It's been a pleasure having you with us. To all the D2C founders, you know who to reach out to raise capital.

Download the 3rd RedSeer Shadowfax Delivery Delight Index here: https://www.shadowfax.in/rsddi

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