A recent survey conducted by MMA India and Publicis Commerce reveals that 80% of direct-to-consumer (D2C) businesses have not achieved profitability, with 63% reporting zero profitability.
The survey released on Wednesday added that only 12% of the D2C businesses have reported being profitable, while 25% of the D2C businesses said that they don’t measure profitability since they are part of larger ecosystems.
Anupriya Acharya, CEO for South Asia at Publicis Groupe, highlighted that ecommerce has emerged as the fastest-growing segment for the company, driven by the rising number of shoppers and increased consumer spending on e-commerce platforms. Acharya emphasized that the launch of the D2C Toolkit Advantage report aligns with the growing significance of commerce as a key agenda for clients.
“A lot of our clients are seeking our expertise for their D2C strategy. Many of our clients have traditional infrastructure. They have moved to marketplaces, and now they want to move into D2C,” she added.
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Direct-to-consumer (D2C) is emerging as a prominent ecommerce channel, with 43% of e-commerce funding in 2022 directed towards these businesses. This surpasses marketplaces, making D2C the most funded e-commerce sub-sector.
According to Lalatendu Das, CEO of Performics India, only a handful of companies have successfully figured out how to operate a profitable direct-to-consumer (D2C) business. This challenge is primarily attributed to the high costs associated with customer acquisition, uncertainty surrounding return on investment, and the intricate operational complexities involved.
“Our survey shows that nearly 80% of D2C businesses are yet to attain profitability. About 12% of them are profitable, 63% are not profitable at all, and 25% said the D2C business is part of a bigger ecosystem, therefore they don’t measure profitability,” he noted.
Das noted that successful D2C ventures are excelling in four key areas.
“If these four things are done right, you are looking at an operating profit of roughly 8%,” he said.
This encompasses investing in consumer insights and leveraging them across various channels to boost sales, gathering first-party data for enhanced consumer understanding, fostering brand loyalty, and innovating products based on consumer feedback.
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