As the business world continues its march towards e-commerce and digital connectivity, household names once synonymous with brick-and-mortar dominance are embracing a new era of consumer engagement. Legacy brands, the timeless titans of the industry, are making their foray into the Direct-to-Consumer (D2C) category.
Brands like Hindustan Unilever, Tata Consumer Products, Marico, Procter & Gamble, Nestlé and more have recognized the winds of change, opting to rewrite the rulebook and connect with customers directly, forging a path that merges their legacies with the possibilities of the online realm.
Most recently, Kolkata-based FMCG firm Emami picked up 26% of D2C brand Axiom Ayurveda, marking its entry into the packed juice business.
Chairman RS Goenka at the company’s 40th AGM, held in August 2023 said, "Your company is well aware that the future is increasingly becoming digital and this space will witness many battles. In view of this, D2C and e-commerce will play a key role in your company’s growth with an omnichannel distribution network.”
In 2022 as well, Goenka shared that the company, with an overall focus on digital business, was now increasingly looking at D2C segments. The conglomerate has in the past acquired a 20.65% in D2C brand TruNativ and picked a 30% stake in Cannis Lupus Services which operates D2C petcare brand Fur Ball Story.
exchange4media has reached out to Emami for a comment about the increasing D2C focus but is yet to hear back.
However, it is not new to the D2C space, that large established conglomerates are making their way into it. This could be either by acquisitions or even coming up with new brands under its own portfolio, that are especially focused on D2C. Or even, converting its traditionally established brands into a more digitally savvy brand.
Let’s look at one of the largest spenders in FMCG – Hindustan Unilever and the beauty brand under its portfolio, called Lakme. Now most of us who grew up in a pre-D2C/digital era, remember seeing Lakme products majorly in stores and on television ads. But today, this beauty brand has become one of the forerunners in the digital curve.
Lakme India is one of the most followed Indian beauty brands on Instagram with around 2.3 million followers, has over 20 lakh D2C website visits per month and 30% of sales taking place digitally.
Now compare this with D2C brands that essentially started off as digital-first. For instance SUGAR Cosmetics. The brand started off on digital and then went omnichannel later, but today is at a point where more than half of its sales happen on offline retail and merely 20-22% happens on D2C.
New Age Startups: The 'Main Characters' or 'Acquisitions'?
It's not a race, legacy brands are surely dashing to the top, taking a majority of the pie in the D2C space as well, while maintaining their dominance as they did.
If one were to talk Gen Z lingo here, the new age startups were supposed to be the ‘main characters’ of the D2C story. Instead, all one sees are acquisitions. Should new-age startups be threatened?
Abhishek Shah, Founding Team, D2C Insider feels that as big established brands venture into the D2C space, it can have both positive and negative implications for new-age D2C brands. “On one hand, it validates the D2C model and can provide validation and credibility for emerging brands. They may benefit from strategic partnerships and investments from established players. However, it could also pose a threat as big brands may have more extensive resources and marketing power, potentially squeezing smaller D2C brands out of the market,” he said.
Neha Kulwal, Managing Director, APAC & India, Mitgo believes that maybe conglomerates are not a threat to D2C brands, but it's the other way round. For pioneer FMCG brands, according to Kulwal, the local D2C brands might turn out to be a threat. “That is probably why they are buying the D2C brands, because later once they grow big, things will get difficult,” she says.
She also feels that the go-local wave that India is seeing at the moment is a key driver of this trend where conglomerates are ramping up their D2C strategies. “Consumers are now adapting to brands which are homegrown, as opposed to what used to happen earlier where they preferred foreign based products.”
Parul Bhargava, Co-founder & CEO, vCommission Media added that after Covid, consumers are all online. “They are willing to explore & experiment online, with so many new brands & concepts. Hence, legacy brands are also eyeing this segment majorly, to reach their once traditional consumers on digital channels,” she said.
Shah mentioned that big brands may initially face resistance to change within their organizations and need to adapt to the faster pace and different business model of D2C.
“Managing inventory and supply chain logistics for direct sales can be complex and may require significant adjustments. Apart from this, building an effective online presence and understanding digital marketing channels can be a learning curve. Balancing the needs of existing retail and distribution networks with D2C can also be a challenge,” he added.
Speaking of maintaining a distinction between the legacy and the D2C curve, Bhargava says that legacy brands have an established brand value, to gather eyeballs. So, it wouldn’t really be a problem for them to get traction as they move online. “However, it is equally important for them to keep up with the increasing influencer marketing and other new age marketing tactics, if they want to succeed in D2C,” she said.
