Is your profit shrinking with every sale?

Is Your Profit Shrinking with Every Sale?

In today’s fast-paced e-commerce landscape, profitability is a major concern for many Indian brands. With marketplaces taking a significant cut of each sale and paid ads becoming increasingly expensive, it’s no wonder that margins are shrinking for many businesses. However, there is a way for Indian brands to improve their per-unit profitability and gain a competitive edge in the market.

The answer lies in Direct-to-Consumer (D2C) e-commerce, also known as brand-owned e-commerce. By cutting out the middlemen and selling directly to customers, D2C brands can increase their profit margins and reinvest those funds in growth, customer experience, and product development.

In this blog post, we’ll explore the reasons why Indian brands are switching to D2C e-commerce and how it can benefit their bottom line.

The Challenges of Selling Through Marketplaces

When Indian brands sell through online marketplaces like Amazon, Flipkart, or Paytm Mall, they have to contend with several challenges that eat into their profit margins. Here are a few:

1. Commission fees: Marketplaces charge a commission fee on each sale, which can range from 5% to 20% depending on the category and the brand’s agreement with the marketplace.
2. Advertising costs: To increase visibility and drive sales, brands have to pay for advertising on these platforms, which can be expensive and unpredictable.
3. Competition: With so many brands competing for attention on marketplaces, it can be difficult to stand out and differentiate your brand.

By selling through marketplaces, Indian brands are essentially giving away a significant portion of their revenue to the middlemen. This can make it difficult to maintain profitability, especially for smaller brands with limited resources.

The Advantages of D2C E-commerce

So, what are the benefits of switching to D2C e-commerce? Here are a few:

1. Increased profit margins: By cutting out the middlemen, D2C brands can increase their profit margins and retain more revenue.
2. Better customer engagement: With D2C, brands can build a direct relationship with customers, which can lead to increased loyalty and retention.
3. Greater control: D2C brands have more control over the customer experience, product development, and pricing, which can help them to differentiate themselves from competitors.
4. Reduced advertising costs: By building a direct relationship with customers, D2C brands may not need to spend as much on advertising, which can reduce their costs and increase their profitability.

Why Indian Brands Are Switching to D2C

So, why are Indian brands switching to D2C e-commerce? Here are a few reasons:

1. Increased competition: With the rise of e-commerce, Indian brands are facing increasing competition from global brands and new entrants.
2. Shifting consumer behavior: Indian consumers are becoming increasingly savvy and demanding, seeking unique and personalized experiences from brands.
3. Need for differentiation: With so many brands competing for attention, Indian brands need to find ways to differentiate themselves and stand out in the market.
4. Desire for control: By selling directly to customers, Indian brands can regain control over their business and make data-driven decisions to drive growth and profitability.

The Retained Margin Advantage

So, what happens when Indian brands switch to D2C e-commerce and increase their profit margins? The retained margin advantage is a powerful concept that can have a significant impact on a brand’s long-term success.

When a brand retains a higher margin on each sale, they can reinvest those funds in growth, customer experience, and product development. This can create a compounding effect over time, allowing the brand to build a strong moat around their business and make it difficult for competitors to catch up.

For Indian brands, the retained margin advantage can be a game-changer. With more funds to reinvest in their business, they can:

1. Expand their product offerings: By retaining more revenue, Indian brands can invest in new product development and expand their offerings to meet changing consumer demands.
2. Improve customer experience: With more funds to invest in customer experience, Indian brands can build strong relationships with their customers and create a loyal customer base.
3. Drive growth: By retaining more revenue, Indian brands can invest in marketing and advertising to drive growth and increase their visibility in the market.

Conclusion

In today’s competitive e-commerce landscape, Indian brands need to find ways to improve their profit margins and gain a competitive edge. By switching to D2C e-commerce, Indian brands can increase their profit margins, build a direct relationship with customers, and regain control over their business.

As the retained margin advantage demonstrates, the benefits of D2C e-commerce can compound over time, allowing Indian brands to build a strong and sustainable business that can compete with global brands.

So, if you’re an Indian brand looking to improve your profitability and gain a competitive edge, it’s time to consider switching to D2C e-commerce.

Source:
https://www.growthjockey.com/blogs/why-indian-brands-are-switching-to-d2c