Varun Alagh, CEO and co-founder of skincare company, Mamaearth, discusses the challenges faced by D2C startups in the current market. The podcast explores the rise and fall of D2C brands, the unsustainability of the D2C boom, the shifting landscape of digital-first D2C brands, and the contrasting narratives regarding the future of Indian D2Cs.
D2C brands need to explore offline sales and distribution channels to grow beyond a certain point.
Equity funding for D2C beauty brands is on a decline, signaling a challenging market.
Deep dives
D2C brands face challenges in the post-pandemic market
The post-pandemic market has brought challenges for digital first direct to consumer (D2C) brands, both in India and globally. Consumer goods sales in brick and mortar stores have rebounded, leading to decreased reliance on online shopping. To grow beyond a certain point, D2C brands need to explore offline sales and distribution channels. Mama Earth, a prominent D2C beauty brand, has shifted its focus towards offline sales and plans to open physical stores. This shift indicates a need for D2C brands to adapt their models to remain relevant in the market.
D2C brands struggle for survival and profitability
Despite the initial success and popularity of D2C brands, many are now facing a struggle for survival and profitability. The demand for funding and the acquisition of D2C brands by big FMCG companies have decreased significantly. Equity funding for D2C beauty brands is on a decline, signaling a challenging market. This change in course poses a dilemma for D2C brands as they try to balance their direct-to-consumer identity while also exploring offline sales and competing with established FMCG giants.
Consolidation and uncertain future for D2C brands
The future of D2C brands remains uncertain as they navigate the changing market dynamics. While some industry experts anticipate a boom for new-age brands in the next five years, others predict a wave of consolidation that may leave the industry smaller and more compact. The Mama Earth IPO serves as a possible exit route for venture capitalists who have invested in D2C brands but also highlights the challenges and risks associated with scaling the business beyond the initial hype.
Varun Alagh, the CEO and co-founder the skincare company, Mamaearth, likes to think of his brand as an outlier. Just a day after Mamaearth’s parent company went public, on October 31, Alagh told The Economic Times that the company’s IPO was not going to meet the same fate as other new-age startups in the recent past.
The public market has been quite hostile lately and investors are especially steering clear of digital companies and startups. But despite this Mamaearth went ahead with its plan and became the first D2C brand to go public. Unfortunately though, its shares have been falling ever since.
What happened to Mamaearth is not isolated. It is the beginning of the end of the D2C gold rush.