Brands are increasing their investment in direct-to-consumer space to drive growth and market share

Brands are increasing their investment in direct-to-consumer space to drive growth and market share

Brands are increasing their investment in direct-to-consumer space to drive growth and market share

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Over the last few years, direct-to-consumer channels have gained increasing prominence. Amid the rising consumer shift to online channels, brands are no longer limiting their spending on marketing products through e-commerce marketplaces or offline channels. Many have invested in the D2C space by creating their own e-commerce platforms with the aim to capture market share. Notably, such trends are visible all around the world, including in the United States, the United Kingdom, and India. In the United States, footwear brands have recorded a significant surge in online sales through their D2C platforms. For instance,

  • In October 2022, Skechers, one of the leading footwear brands, announced that the firm had recorded a sales growth of 12% through the D2C channel in Q3 2022 when compared to Q3 2021. As part of its long-term growth strategy, the firm has been making a significant investment in the D2C segment for the last few years, and this investment is now paying off with increased order volumes.
  • In Q3 2022, the D2C segment generated a total of US$686.8 million in revenue for the firm. Of the 12% growth recorded in D2C sales in Q3 2022, domestic sales represented a growth of 15%, whereas international growth came in at 9%. While the firm recorded strong growth in the United States, the pandemic outbreak in China affected its growth trajectory during the quarter.

Nike is another brand that has started to heavily invest in the D2C space. In September 2022, Nike announced that the firm is further building out its D2C capabilities after recording a growth of 8% in Q2 2022. According to the firm, the D2C business is becoming a bigger part of its overall sales and distribution channel.

For Deckers Brands, D2C investment is also paying off good results, with sales surging 15% to reach US$185 million in Q2 2022, as per earnings reported by the firm in July 2022. The firm also recorded a 48% growth in customer acquisition in the D2C space, while retention surged by 58%. This shows the clear benefits of implementing a D2C distribution channel. In August 2022, Crocs, the casual footwear maker, announced that the D2C revenues have increased by 22.8% in Q2 2022.

The trends are no different in the United Kingdom. Since the onset of the pandemic, more than half of the manufacturing businesses in the country have experienced an increase in their D2C revenue. Notably, one of the major reasons driving the D2C revenue and sales for brands is the change in consumer behavior. With many shoppers wanting to support manufacturers in the country, as they continued to struggle with the economic conditions caused by the pandemic outbreak, the D2C distribution channel generated more revenue for brands and businesses.

In India, the D2C distribution channel is projected to record high growth over the next three to four years. Notably, to reduce their reliance on e-commerce marketplaces, such as Amazon and Flipkart, many of the smaller brands have launched their own platforms. Furthermore, the growing access to the internet and digital payment capabilities has also supported the rise of the D2C channel in the country. As a result of these factors, the D2C market is expected to become a US$40.5 billion industry in India by FY 2026, according to a PayNXT360 estimates. 

Many of the leading brands such as ITC, Unilever, Marico, and Tata Consumer Products have increased their focus on the D2C distribution channels. These players, either through the acquisition of prominent D2C brands or building their D2C platforms, are targeting growth in the direct-to-consumer space.

According to PayNXT360’s Global Ecommerce Survey, Q4 2022, beauty and fashion categories experienced the highest growth in the D2C segment, with 73% year-on-year growth in FY 2022.  This trend is expected to further continue from the short to medium-term perspective in the country. From the global perspective, PayNXT360 expects more brands and businesses to keep investing in the D2C space over the next three to four years. This will subsequently drive the growth of the B2C e-commerce market from the short to medium-term perspective.

To know more and gain a deeper understanding of the global B2C e-commerce market, click here.

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