Mumbai: A lot is being written and said about direct-to-consumer (D2C) brands in general, and D2C beauty brands in particular. Low entry barriers, relative ease of consumer targeting through online channels, and a burgeoning beauty market overall have led to a veritable explosion of beauty brands that have followed an online-only (or online-first) approach to product marketing. Can these brands eventually replace some of the incumbents today as the market leaders of tomorrow? The answer (the easy one, as always) - it depends. On what? Three key factors:
Product strength and innovation capabilities
Marketing gets the customer; the product keeps her. Any amount of smart & shiny marketing (made all the easier through creator apps) will not substitute for the moment of truth when the consumer applies the product on face, lips, hair or body. And for the compliments, she gets from friends or family or colleagues, which is a key factor in driving overall delight with the product.
Being able to consistently deliver on interesting promises, while keeping up with rapidly evolving tastes and trends, is the top critical success factor for new-age brands looking to become market leaders. This takes a motley combination of agility, patience, long-term commitment, and the right innovation approach to get the marketing mix right - again and again.
Omnichannel expansion
Despite explosive growth, the online channel still accounts for 10 per cent or less of the overall beauty market in India. It is believed that the online share in China and the US is closer to 50 per cent, even with the post-Covid acceleration. It's clear, therefore, that in the medium term, any brand with scale ambitions has to be able to succeed in both online as well as brick-and-mortar distribution environment. The two could not be more different from each other and need diverse sets of skills and capabilities to be developed. The arrival and maturing of distribution aggregator apps might make this a little easier for newer brands, though.
Scalable systems and processes
Most of the (well-funded) emerging brands today are solving for speed and agility (defined as flexibility and speed of response). Sustainability of the approach, margin stability and resilience in the face of extreme market swings (on both supply- or demand-side) are yet being developed. Several brands are expected to reach a somewhat mature stage over the next 2-5 years, and those that are able to put in place scalable systems and processes across functions (marketing, distribution, supply chain etc) would be the ones poised to make the leap into the big league.
The landscape in 2026
The inherent strength of the incumbent brands in terms of brand, distribution and product capabilities notwithstanding, it can be safely said that the dynamics of the industry have changed forever. Consumers are open to (and in fact, hungry for) fresh ideas and delightful new experiences, and a lesser-known brand is no longer a barrier. The market is likely to be no longer dominated by a handful of brands but would indeed have a 'fat middle' of similar-sized brands, best known for a few categories each. To get there, and stay there, new-age brands have their work cut out along the above three dimensions.
(About Author: Shankar Prasad is the founder and CEO of Plum)
