India is one of the world's largest consumer markets. Private consumption accounts for an extraordinary 60% of the GDP. The FMCG market grew from $33B in 2012 to $110B in 2019. Statista estimates it to touch $220B this year. The online commerce market already hit $10B in 2023, and its growth will outpace even the robust offline sales.
Hence, it doesn't come as a surprise to see VCs bullish on the Indian D2C sector. We are sitting in one of the largest and fastest-growing online and offline consumer markets. India boasts 600+ venture-funded D2C startups and the number of new founders who want to build D2C brands is exploding every year.
D2C startups are both easy and difficult.
It's relatively easy to launch a D2C brand because you can outsource everything (production, marketing, warehousing, shipping, website design, online payments, etc.). Launching a consumer brand doesn't require any coding or technical expertise. The entry barriers are non-existent.
This ease of launching D2C brands makes it a double-edged sword because it makes growing them incredibly difficult. You have to face immense competition from scores of equally smart and motivated people. Every category is already crowded.
This competition makes the job of first-time D2C founders to raise capital, especially in the early stages, almost impossible. VCs want strong customer validation before investing a dime.
What are the top KPIs (metrics) to track for your D2C startup?
1. AOV (Average Order Value): An increasing AOV means buyers trust your brand and want to try other products.
2. Repeat rates: High and improving repeat rates equals consumer satisfaction.
3. ROAS (Return on Ad Spend): Higher than the industry ROAS means your marketing plan is working and you aren't wasting marketing dollars.
4. GM (Gross Margin): Finally, the holy grail – Gross Margins. It's a great sign if you can maintain or increase your GM with an increase in sales. Even the best hashtag#founders struggle with it. GM invariably comes down as you launch more products and try to grow quickly.
One final point – It is critical to analyse any KPI over time. Improving KPIs suggests your initiatives are working and vice versa. VCs want to know if you have identified the right levers that can increase revenue without burning money on discounts. Once you have figured out the right levers, you can invest money in them and grow quickly.
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