Personal Care D2C brands and their way forward, a perspective (2024)

Nearly two D2C brands have raised money every week since the pandemic started last year . That's 146 firms cumulatively raising $500 million since the start of 2020, almost equalling the amount raised by them in the previous five years. D2C e-commerce is a digital business model where product manufacturers can sell their products directly to consumers through their websites without relying on intermediaries. This way, they don't have to rely on traditional stores for marketing and selling. India currently has over 80 D2C brands across beauty, personal care, cosmetics, and men’s grooming segments. Some of the beauty & personal care brands that have gained popularity over the last few years include - Nykaa, Sugar, Mamaearth, Wow Skin Science, JustHerbs, The ManCompany, MyGlamm, Skinkraft, Plum and Beardo.

As the D2C playbook evolved, so did the kind of companies going D2C. Beauty, makeup and personal care turned out to be the largest segment in the market and drove maximum interest. Product differentiation is becoming key in this crowded market. In addition to the affordable prices, clean beauty and sustainability are important checkboxes for increasingly conscious customers. Effects on the skin and product fragrance matter most to online shoppers. As new-age customers are more knowledgeable, a product’s effects on the skin (the top delighter) is a major concern for people looking to buy beauty and personal care items. That is why many D2C brands in the beauty and personal care space focus on providing a wide range of products with natural ingredients and ensure that these are certified organic products, toxin-free and chemical-free. Although most companies are price-conscious, it is not a priority among online shoppers who buy beauty and personal care products.

The global beauty and personal care market is expected to touch $725 billion by 2025, according to a report by Avendus. India has added 80 million online shoppers in the last three years alone to reach 130 million. As per the Avendus report, the estimated Beauty and Personal Care market size in India is expected to reach $28 billion in 2025.

While e-commerce penetration, technology awareness, internet expansion, diverse offerings, and reasonable product cost are some of the major reasons behind the success of D2C brands, the Covid-19 pandemic gave the ultimate push. The pandemic triggered a dramatic shift in shopping behavior. Instead of hopping to multiple stores in search of that perfect red lipstick or that aqua eyeshadow or the perfect serum for flawless skin, now everything is available at the click of a button! According to Invesco, more than 50 percent of the consumers opt to visit D2C brand websites than retailer websites because they offer more comprehensive information and guides. “Brand websites have witnessed 88% order volume growth as compared to 32% order volume growth on marketplaces,” according to a Unicommerce report titled ‘E-commerce Trends Report 2020’.

As per an IAMAI-Kantar Cube report, internet users grew by 4 percent in urban India -- reaching 323 million users in 2020. And the D2C brands found the perfect opportunity to capitalize on the wave. As per Unicommerce, Tier II and beyond cities contribute around 66% of the total online consumer demand in India currently, and this share is expected to rise in the coming years. Whereas Tier III and beyond cities witnessed 53% growth, making it the fastest-growing region.

According to a recent report by Praxis Global Alliance (PGA) Labs and Knowledge Capital, between 2014 and 2020, investors pumped in $1.4 billion into D2C brands, of which 54% went into the beauty and fashion segment. This trend has continued into 2021 as well. As per the Avendus report, product margins in the beauty and personal care category is one of the highest – about 70%, making these D2C startups an obvious choice for investors. FMCG major Marico acquired a 100 percent stake in the grooming startup Beardo in 2020 to connect with millennials and Gen Z. MyGlamm also acquired POPxo, an online community startup for women, in August 2020. Whereas Nykaa in April this year announced the acquisition of online jewelry brand Pipa Bella to capture the growing market for contemporary fashion jewelry in India.

India is home to many D2C beauty brands, and quite a few of them, including mCaffeine, Khadi Essentials, Arata, SUGAR, WOW Skin Science, Plum Goodness, Nua, My Carmesi, Pee Safe, PeeBuddy, The Man Company, Beardo, and The Moms Co., have emerged as major players in the online beauty and personal care space. For instance, popular beauty brands such as Revlon and Lotus took around 20 years to reach the INR 100 Cr revenue mark, but new-age brands Mamaearth and SUGAR took four and eight years, respectively, to reach that milestone. The growth of D2C beauty brands has been enormous and the icing on the cake is that Nykaa is on its way to its IPO.

With the increase in demand, D2C (direct-to-consumer) has been exploiting all marketing possibilities like global distribution, price tactics, understanding customer needs and habits, and offering customized solutions and points of sale. It is sure to see a forward growth with more businesses shifting to D2C strategically and intelligently to tap the potential of knowing their customer better, reducing dependencies, and having more control over the brand. Branding and marketing are really important for a booming industry like this and various brands are utilizing every aspect of data and digital to reach it to its goal. In the next part, we will witness how social media and influencer marketing have helped this industry to reach heights at a very lesser time.

Conclusion

• Effectiveness is above the price for the consumer
• Retaining a customer is a key challenge for a brand
• Brands prefer their own E-Commerce platform
• The personal care and cosmetics industry saw a surge during the pandemic
• Tier II & III and non-metropolitan cities are in focus for new age D2C brands
• Adaptation to tech in smaller cities
• Consumers are aware of the product and the ingredients