From B2C to D2C-A $100 Bn opportunity
Startup
Direct-to-Consumer businesses have taken the world by storm and therefore have seen significant interest from investors and entrepreneurs alike. It is likely to become a USD 100 billion opportunity by 2025.
Traditional methodology: Every business model needs a moat
To deter new entrants, B2C companies had built these three moats around their business models as entry barriers:
Shelf space
If the consumers can’t find you in the stores they buy from, you can bid farewell to your product idea. Moreover, getting shelf space was never easy!
Manufacturing
The science of deciding what to manufacture, how to manufacture and then building those manufacturing units required huge investments.
Traditional Marketing
Largely, traditional marketing had a spray-and-pray approach, and thus successful MNCs like HUL, Colgate, P&G, L’Oréal etc. would spend huge amounts of money on advertising their products on TV — an important medium, but one that made sense only at scale.
Traditional moats have been shaken: Democratisation of consumer
Moats of the past have been shaken, and this has allowed new brands the much-desired access to consumers. Broad themes that accelerated this were:
E-Commerce
It gave small brands an unlimited shelf space and minimised investments in inventory, distribution and logistics.
Contract Manufacturing
As brands started identifying white spaces, suppliers started to see an opportunity to sell white-labelled goods*, therefore, saving brands the huge investments required in R&D and/or manufacturing.
*White-label products are products produced by one company that other companies rebrands and sells.
Digital Marketing
This enabled targeting and required lesser upfront investment. In fact, it enabled authentic storytelling because of which many brands have gone viral, saving them precious marketing dollars.
Everyone wants a D2C play
The route to a consumer’s home and the distance to their wallet are getting shorter and shorter, and at the same time, the number of shopping occasions has exponentially increased.
All incumbents want a pie of this D2C fairytale, and this is evident in the choices they make around organic and inorganic growth. One can credit the boAts, Mamaearths and Lenskarts of the world.
New buzz in D2C — Mensa Brands!
Mensa Brands, founded by Ananth Narayan (ex-CEO Myntra) and boasting angels like Kunal Shah and Mukesh Bansal, is set to change the space of D2C. Let us see what it is, and how it plans to change this space.
What?
It aims to invest in other new age digital-first consumer brands under its ‘House of Brands’ initiative and help them thrust into the e-commerce segment.
How?
By acquiring majority stakes of around 60% in other profitable D2C brands that generate a turnover of at least INR 10–70 crore. By providing them with growth marketing, operational improvement and working capital.
The future is Mensa!
Over the next 3 years, Mensa plans to acquire more than 50 brands across categories including home, garden, apparel, personal care and beauty. This basically makes them an innovative VC with an intent to actively run their portfolio companies, and not just play the valuation game and wait for an exit.
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