However, analysts said, horizontal marketplaces such as Amazon India and Flipkart that sell a variety of products and services across categories, as well as vertical etailers like Myntra and Nykaa that specialise in a specific category like fashion, with their huge customer base will continue to have a majority share in online retail.
Senior executives at several direct-to-consumer (D2C) brands told ET that direct commerce has become an important part of their channel mix.
“Customers are looking out for more brands… and from our perspective, while marketplaces offer a huge customer base, there is little flexibility in how we can fine tune our offerings to our consumers and increase the rate of repeat buyers,” a senior executive at a top beauty and personal-care brand said.
The founder of a D2C fashion brand said while being available on marketplaces is important, maintaining a certain portion of sales traffic on the brand’s own websites is also key.
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“Vertical apparel marketplaces have become flooded with all kinds of brands today,” he said. “There is little space to stand out.”
ETtechEnabling factors
Increasing availability of tools such as payment gateways, logistics aggregators and access to marketing services using social networking apps have led brands to focus on selling directly to consumers. Ecommerce enablers such as Shopify and Unicommerce and logistics players like Delhivery, Xpressbees, Shiprocket and Blue Dart Express are helping brands do this.
“The biggest contributor is logistics … there has been a significant improvement and brands can actually compete with the speed and quality of Amazon or Flipkart,” said Satish Meena of retail advisory firm Datum Intelligence.
“In the last five years, we have seen brands focusing on their own websites because they’ve seen customer adoption changing … they are trusting the websites more, there are enabling tools available,” he said, adding that brands can now sell more profitably while also getting better consumer insights from their own channels.
Sumant Kakaria, cofounder and CEO of Fireside Ventures-backed footwear brand Solethreads, said: “Most consumer-centric brands have been investing consistently on D2C as that’s a captive audience, and this has started paying off.”
Not all smooth sailing
The rise of quick commerce in certain categories could also arrest the decline of dependence on ecommerce marketplaces, said industry insiders and experts.
“A lot of food brands are coming up because of quick commerce and they will scale up much faster because of this new channel. Quick commerce serves a different kind of demand…and these are also marketplaces,” Meena said.
Even for categories such as fast-moving consumer goods, including home care and beauty products, quick commerce has become the fastest growing channel.
While selling through their own channels brings a number of advantages for brands, it is so far only the larger brands that stand to gain from deleveraging themselves from marketplaces. To reach the consumer, the smaller brands still need the platform of an established ecommerce company.
“Typically, a brand would end up paying 20-30% to a marketplace … the best way to become profitable is to bring customers to your own website,” said Meena.
But they cannot avoid marketplaces because that is where a majority of the customers are. “We have seen brands like Mamaearth and Boat build on marketplaces first and are now focusing on their own websites,” he said.
Meanwhile, the Indian consumer space has witnessed the emergence of scores of small D2C brands across categories such as beauty and personal care, fashion, electronics and food products.
“We believe that in 3-4 years, the share of marketplaces will reduce further but not by much,” said Ashish Dhir, senior director of consumer and retail at market intelligence firm 1Lattice.
“The cost of acquiring customers remains very high especially for the newer brands. But when the brands mature, they want to reduce the dependence on marketplaces and bring more customers to their own websites. But in the earlier part of their journey … these brands will depend on marketplaces,” he said.
1Lattice estimates that for internet-first D2C brands, marketplaces contribute 64% to the channel mix, followed by direct ecommerce at 21% and offline at 15%.