Roll-Ups Propelling The Growth Of D2C Brands
D2C brands have gone from being a consumer industry buzzword to becoming a mainstay in our everyday shopping baskets. For every product, from luggage to toothbrushes, there is now a D2C brand that provides better customer experience, after-sales support, and increased transparency into the product. According to a recent report by Praxis, D2C is a $12 billion market currently and expected to grow to $60 billion by FY27.
One of the core drivers behind the incredible growth of D2C brands is the recently debuted roll-up e-commerce model. In the roll-up model, a company invests in e-commerce brands, infuses working capital and brings on an expert e-commerce team to scale their business.
In India itself, roll-up e-commerce companies have acquired 80+ brands in the last year. While these companies have a major presence on online marketplaces such as Amazon & Flipkart, roll-ups are paying special attention to bolstering their D2C presence as a brand push.
Compared to standalone D2C brands, roll-ups often have an added advantage of capital, expertise, and most importantly, a viewpoint of multiple brands from multiple industries. This set up helps them apply learnings from one brand to another. For example, a fitness equipment manufacturer can benefit from the insights of a shoe brand and vice-versa.
They’re also able to hire experts for key functions, as these resources can be shared between their acquisitions. Teams like customer support, digital marketing, design, supply chain, among others can benefit multiple brands at once, at no additional cost. This helps DTC brands to gain from expert operators, while keeping their bottom line lean.
Roll-ups also have access to the capital and expertise required to build out expansive tech and analytics capabilities. For example, UpScalio is building a central architecture that will be reused across brands, helping with speed, agility and scalability. For analytics, there’s a central data platform for aggregating data across brands that will help in cross-selling and upselling. Lastly, they’ve created personalisation engines to engage customers on the website and off the website via retargeting engines.
Additionally, most D2C brands take time to reach a large customer base and smaller traffic numbers make it difficult to attract lucrative partnership opportunities. Clubbing multiple D2C brands also allows the roll-up to negotiate better partnerships with ad platforms, logistic providers, and almost every other stakeholder.
Roll-ups also provide a lucrative exit opportunity to such founders, while ensuring that their brand goes on to grow over the years. The roll-up invests capital in the businesses, but also purchases stake from the entrepreneur - helping him or her unlock personal wealth - rewarding them for their years of hard work. This makes the presence of roll-ups a great tailwind for D2C founders to keep building their brands.
