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Direct-to-consumer beauty brands go offline to expand reach

Online-first brand mCaffeine began physical sales in August this year after offline retailers and distributors started asking for its products, Tarun Sharma, the company’s co-founder and CEO, said in an interview. The company plans to get its products to 1,000 stores and eventually scale it to over 10,000 outlets.

“That’s when our offline activations will start giving us the yield of investment which we are making right now,” said Sharma.

View Full ImageUnorganized stores, on the other hand, account for nearly 87% of the share of FMCG sales.  (Photo: Getty)

D2C beauty brand MyGlamm, part of the Good Glamm Group, opened an experience centre in Mumbai last year. The company’s beauty products currently reach 30,000 outlets.

These numbers, however, are minuscule when compared to India’s vast network of 8-10 million retail outlets used by the traditional fast-moving consumer goods companies (FMCGs) to sell their beauty and personal care products. mCaffeine hopes offline revenues will contribute to 20% of its business in the next 12 months.

Why the sudden leap towards physical retail? According to V.S. Kannan Sitaram, venture partner at Fireside Ventures, consumers in these categories want to touch and feel the product and check out the packaging. “So, D2C brands want to create the brand experience for their consumers,” he said.

Darpan Sanghvi, CEO, Good Glamm Group, agreed: “Consumer perception of a brand available in physical stores is elevated and significantly disproportionate to revenues generated by offline. Besides, when you want to advertise on TV—which is still an important medium to build a brand—it has a direct impact on sales in physical stores where you should be present,” he said.

Clearly, offline presence drives scale. In an earlier interview, Sumit Keshan, managing partner, Wipro Consumer Care Ventures, had explained that companies get from ₹100 crore to ₹300 crore or even hit ₹500 crore through the D2C route.

“Can they take it to ₹2,000 crore—I think that question we have not really dealt with, yet. So, e-commerce can definitely help you create a very strong business till a certain size, and after that you want to go offline as an additional strategy—I don’t see any problem in that because it is an opportunity for you to grow and scale further,” he had said. Wipro Consumer Care Ventures has invested in male grooming companies Ustraa and LetsShave.

Online-first has helped in terms of understanding the customer well, getting the product-market fit and building the brand online using social media, said Hitesh Dhingra, director and founder, The Man Company. “But now, to scale, you need to start exploring offline,” he said. The brand, backed by FMCG company Emami Ltd, plans to “actively” go to general trade in the next fiscal, Dhingra said.

mCaffeine’s Sharma said brands need to be present where the consumer is. “If our consumers are shopping in a certain modern trade format, beauty shop or a medical store, brands like us should be available there,” he said.

To be sure, India’s retail trade is still largely offline, and online FMCG sales on the internet make up less than 5% of overall trade. Unorganized stores, on the other hand, account for nearly 87% of the share of FMCG sales.

“When 90% of sales are happening offline, you have to be present in that channel,” said Aditya Goel, co-founder of Love in Store, a trade activation and execution company that works with FMCG companies and retailers in 300 cities.

In-store availability also helps brands with better product discovery, he added.

Beauty and personal care brand Plum has announced plans to open 50 exclusive branded outlets by 2023. Plum, which began as an internet-first brand in 2014, has physical presence in more than 225 towns and cities across India.

Shankar Prasad, CEO and founder, Plum Goodness, said the economics of stand-alone stores works well given the price point Plum operates at. “We’re able to draw in the footfalls and get decent conversions and make enough to make good on the rentals,” he added.

More than 60% of Plum’s sales come from e-commerce, while the rest from its offline channels, including more than 10,000 third-party retail outlets.

Himanshu Gandhi, CEO and co-founder at Mother Sparsh, a baby, mother and kids’ personal care brand, said an “omnichannel” approach is best if brands plan to boost sales. “Besides, relying on any one channel is not wise in the continually evolving market space,” he added.

However, the task will be challenging as companies try and navigate a retail environment dominated by heavyweights such as Hindustan Unilever Ltd, P&G, Dabur India and LO’real, which sell their products through millions of mom-and-pop stores.

Goel said most internet-first brands will want to tap top modern trade and general trade stores pan-India but will need to acquire talent, make significant investments in the channel and have visibility in stores.

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