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Table of Contents
Foreword ....................................................................................................................... 1
Chapter 1: India’s D2C market is poised for rapid growth......................................... 3
1.1 Favourable macros will drive consumption growth ...........................................................3
1.2 Massive opportunity for mass & premium brand creation ............................................. 6
1.3 New age / D2C brands have leveraged online to challenge incumbent brands ....... 8
1.4 The next phase of D2C brands will be marked by 3 major themes...............................11
Chapter 2: D2C brands have thrived with the rise of a rich enabler ecosystem..... 14
2.1 D2C brands’ challenges evolve as they scale and mature............................................14
2.2 E-commerce enablers support D2C brands accelerate their growth journey........ 17
2.3 Logistics represents a major opportunity for D2C brands to differentiate on user
experience......................................................................................................................................19
Chapter 3: A new-age logistics landscape for new-age brands .............................. 20
3.1 D2C brands have specialized logistics needs.................................................................20
3.2 A variety of options have emerged for D2C brands ......................................................22
3.3 D2C brands have relied on aggregators as a one-stop solution ...............................24
3.4 3PL providers are innovating to cater to the needs of D2C brands ..........................25
3.5 3PL players dominate the logistics landscape, with a few players emerging as clear
winners........................................................................................................................................... 27
Glossary ...................................................................................................................... 28
Research Methodology............................................................................................... 29
Disclaimer.................................................................................................................... 30
About the Authors ...................................................................................................... 31
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1
Foreword
In recent years, India's direct-to-consumer (D2C) landscape has experienced remarkable
growth, driven by heightened private consumption.This surge in consumption hasgiven rise
to two distinct yet interconnected consumer segments: Bharat and India. These segments
are at the forefront of driving increased demand, shaping the narrative of D2C businesses.
As new-age D2C brands continue to expand, they encounter heightened operational
complexities, with logistics standing out as a significant challenge. Logistics not only
represents a substantial cost component for these brands but also directly influences the
customer experience. Establishing efficient logistics operations while keeping costs low is
therefore a crucial objective for these brands.
In this report, we delve into the evolving dynamics of the D2C landscape, with a particular
focus on how brands navigate the complexities of logistics. Third-party logistics enablers
emerge as indispensable partners in facilitating the growth journey of D2C brands, offering
cost-effective solutions tailored to their specific needs.
Join us as we explore how D2C brands leverage logistics partnerships to enhance their
operational efficiency and deliver exceptional experiences to their customers.
Anil Kumar
Founding Partner, Redseer Strategy
Consultants
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3
Chapter 1: India’s D2C market is poised for rapid growth
1.1 Favourable macros will drive consumption growth
India is the fifth-largest economy in the world with a nominal GDP of US$ 3.6 Tn in 2023. With
a nominal GDP growth of approximately 9%, India is one of the fastest growing economies
globally.
This growth has been fuelled by:
• Increased Capital Formation: India has seen significant uptick in capital formation
and currently ranks 4th in the world. In 2021, capital formation was US$ 0.98 trillion
and by 2022, it had surged to US$ 1.106 trillion. This has led to increase in production
capacity and consequent demand.
• Consumption enabled by demographic dividend: India is home to one of the largest
young populations in the world, with an estimated 970 Mn people in the age bracket
of 15-64 years. The median age of Indians is about 28.2 years in 2023, while that of
developed countries like USA and UK is about 38.1 and 40.1. This demographic
dividend drives economic growth through increased labour force, higher incomes
and savings, and increased consumption.
• Rapid urbanization: India hosts a large urban population, second only to China, with
an estimated 37% (528 Mn) of the population people living in cities & towns as of
2023. As per Niti Aayog’s estimates, this is expected to increase to 50% by 2050.
Urban areas, characterized by relatively higher-income residents serve as hotspots
for economic activity, driving consumption and thereby economic growth.
This has led to an increase in Private Final Consumption Expenditure (PFCE) in India. PFCE
grew at a CAGR of over 10% from US$ 1.2 Tn in FY18 to US$ 2.0 Tn in FY23. Consumption is a
major contributor to the economy with a share of 61% of the total GDP.
It has been observed in mature economies that crossing the GDP per capita mark of US$
2000 has signalled an inflection point in the growth of PFCE. Having crossed the GDP per
capita of US$ 2000 in 2021, it is expected that India will observe a similar surge in PFCE and,
consequently, discretionary spending.
4
Exhibit 1
Growth Drivers of GDP in India
Note(s): 1. E- estimated, P-projected,
Source(s): Economic and Social Commission for Asia and the Pacific (ESCAP), World Bank, Niti Aayog, Redseer analysis
5
Exhibit 2
GDP per capita (Current Prices) vs Consumption expenditure per capita
Note(s): 1. The PFCE has been represented respective to the GDP per capita for the first time that the respective economy
reached that particular level. 2. Data for FCE per capita for UK has been extrapolated when GDP per capita crossed 0.5k
Source(s): World Bank, Redseer analysis
6
1.2 Massive opportunity for mass & premium brand creation
In the last decade, two distinct consumer classes have emerged: Bharat & India. Of course,
this is an oversimplification of a very complex customer landscape. However, it is useful to
look at Bharat as the aspirational, newly created middle class, and India as the high-income
affluent class.
Bharat: The increase in income-levels across the country has led to an upward movement in
household incomes and consumption. Redseer estimates indicate that aspirational
households, which includes the lower middle-class (annual household income of US$ 3600-
9600) and upper-middle class (annual household income of US$ 9600-13250), will grow at
a CAGR of 2% and 6% respectively from 2023-28, accounting for a total of 57% of the
households in 2028. This evolution of Bharat from low-income households to the emerging
new middle class is expected to drive the demand for mass brands that cater to the quality
as well as cost requirements.
India: According to Redseer estimates, high-income households (annual household income
of US$ 13250+) are projected to grow at a CAGR of 7% between 2023 and 2028. The rise in
incomes and an upward movement in household pyramid signal a boost in discretionary
spending. Additionally, these affluent households account for 10% of the total PFCE,
highlightingtheirgreaterpurchasingpowerandreflectingtheir increasedpotentialtoinvest
in luxury and premium goods and services. Assured quality and the ability to customize and
provide sense of exclusivity has driven these affluent households towards luxury and
premium goods and services. Exposure to global trends and lifestyles too further catalyses
the increasing awareness of the luxury and premium goods.
Exhibit 3
Household Income Pyramid – India
2018, 2023, 2028P
Note(s): 1. Annual household income range: High-income (US$ 13250+), Upper-middle class (US$ 9600-13250), Lower-
middle class (US$ 3600-9600), and Low-income (<US$ 3600)
Source(s): Redseer estimates
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As the consumer landscape evolves, brands have the opportunity to meet the escalating
demand on both ends of the price spectrum. A major portion of this evolution is taking place
in the digital world, with consumption increasingly moving to online channels.
We believe that online consumption is increasingly democratized with equitable
representation of socio-economic shoppers – NCCS A, B and C – across categories. On the
other hand, this is skewed in favour of the affluent NCCS A households’ shoppers. As habit
building the aspiring lower middle-class shoppers find their internet feet, we expect their
shopping wallet to shift online.
Exhibit 4
Category-wise ATU split by NCCS
In Mn, 2023
Note(s): NCCS is given on the basis of (i) Education of the chief earner and (ii) Number of consumer durables (from a pre-
defined list) owned by a household. The list contains 11 items including – electricity connection, ceiling fan, LPG Stove, two-
wheeler, colour TV, refrigerator, washing machine, personal computer/laptop, car/jeep/van, air conditioner, agricultural land
Source(s): Redseer analysis
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1.3 New age / D2C brands have leveraged online to challenge incumbent brands
New age or D2C brands identified the digital opportunity before large incumbent brands and
created products to service niche customer use-cases. Leveraging digital platforms and
data analytics, these insurgent brands have disrupted and gained significant scale.
Consequently, incumbent brands have acknowledged the shifting consumer dynamics and
adapted their strategies to identify the same underexplored market segments.
D2C brands distinguish themselves by providing superior services, personalized care, and
meticulous attention to detail, setting them apart from traditional retail models. Therefore,
for brands aiming to capture India's expanding consumer market and shape the retail
landscape, D2C emerges as a strategic choice.
Between 2019 and 2023, the D2C market experienced significant growth of >40% CAGR. We
anticipate this momentum to continue, with the D2C market projected to reach a value of
$50 billion by 2028.
Exhibit 5
Indian D2C1
Market Opportunity (GMV)
US$ Bn, CY19-28P
Note(s): 1. D2CorDirect-to-consumer companies/brands areindependentcompanies/brandswhich have50%+ revenue from
online channels and have own website /app. 2. The market size here includes online and offline revenues of the D2C brands.
Source(s): Redseer IP
D2C brands are experiencing a growth rate double that of e-tailing. This difference arises
from the expansion of the middle and high-income consumer segments. While the former is
stillearly to theonline shopping game,D2C brands haveevolved largely tocaterto thelatter.
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High-income customers place a higher emphasis on convenience, and personalized
interactions — avenues where D2C brands outshine conventional e-commerce platforms.
Exhibit 6
Retail growth projections (2023-2028P) comparison
Source(s): Redseer analysis
With D2C brands been around for more than a decade now, go-to-market strategy
playbooks have been well established. D2C brands look for the right channel mix based on
their category and scale.
Exhibit 7
Channel Convergence for D2C brands
Note(s):WhileD2Cisachannel,weusethewordtolooselyrepresentnew-agebrandswhomayormaynotusedirectchannels
to access their customers.
Source(s): Redseer analysis
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Exhibit 8
Differences between Channels
Parameter Offline e-Commerce Platforms D2C
Brand
Control
Limited control, relies on
retailers
Brands create own
storefront, control
product presentations
Full control from
marketing to product
delivery
Margins Low to Moderate Lowest, but includes
cost of advertising and
logistics
Highest
Data Access No data with delayed
feedback loop
Detailed dashboards
with access to
aggregated sales data
Detailed dashboards
with access to
aggregated sales data
Customer
Relationship
Limited to no
engagement, possible
through physical
salespersons
Limited access to
customer data,
engagement through
platform ads
Personalized
communication, strong
customer relationships
Source(s): Redseer analysis
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1.4 The next phase of D2C brands will be marked by 3 major themes
New-age brands are achieving business milestones at an accelerated pace as compared to
their traditional counterparts. This exponential growth is influenced by three key themes,
each playing a significant role in the creation and expansion of these brands:
Exhibit 9
Next big themes for D2C brands
Source(s): Redseer analysis
Convergence of online channels. Online platforms that were once specialized in specific
verticalsarenow transforming intocomprehensivehubs,offeringa wide rangeof categories
beyond their initial focus. This is highlighted by the rise of quick commerce services, which
areexpanding theirofferingsbeyond food and groceries to includeelectronics,homedécor,
and other categories. For example, Blinkit now carries products like the PlayStation 5 Slim,
illustrating its evolution into a versatile marketplace catering to diverse consumer needs.
Similarly, data availability has expanded in both online and offline retail, there is increasing
scope for translating learnings from one channel into another.
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Rise of Massification & Premiumization. India is witnessing a growing demand for branded
products, characterized by rising incomes and elevated expectations on quality.
Urban India is driving the premiumization trend in D2C. These consumers seek immersive
and memorable shopping experiences and specialized products, prioritizing faster delivery,
niche platforms catering to specific needs (such as home or kids). GenZ, a unique consumer
cohort, seeks products reflecting their individuality and values. They reject traditional
options, preferring sustainable, cruelty-free, and individualistic products that align with
their identity. In response, brands are adapting to the evolving preferences of these
consumers.
For instance, Brands such as NewMeand 82E aretapping into this trend by offering premium
products and personalized experiences. Beauty brands are focusing on sustainable and
cruelty-free products, while fashion brands are embracing inclusivity and individuality.
Concurrently, a variety of D2C brands are catering to a more value-conscious customer.
These are tapping into the “masstige” opportunity, which offer a balance between
affordability and perceived quality. This marks a shift from unbranded to branded products
in consumption landscape in India.
Alternative Brand Creation. How D2C brands look at offline is undergoing a transformation
as brands with revenue <INR 50 crore, are rapidly entering offline channels. Departing from
“conventional” practice of online brand building, this shift aims to capitalize on the
advantages of a physical presence, including wider market reach and lower acquisition
costs resulting in accelerated sales growth. This enhances brand visibility and fosters
stronger consumer relationships through localized interactions, ultimately driving traction
online.
However, the value that this transition unlocks is largely category dependent. This trend is
observed in food & beverages brands which tend to move offline quicker due to the inherent
FMCG nature of the category. For example, True Elements, a digital-first brand, has now
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placed its products in most modern trade outlets. Beauty and personal care brands are also
increasingly experimenting with offline expansion, as seen in the case of Perfora and Vilvah.
Parallelly, D2C brands are actively embracing quick commerce as a channel for brand
discovery, expanding their market reach. Platforms such as Swiggy Minis or Insanely Good
provide customized areas for brands to exhibit their products, effectively reaching new
potential customers. Such a strategy enables D2C brands to elevate their visibility online
and interact with audiences actively seeking innovative offerings, thereby nurturing brand
awareness, and facilitating customer acquisition.
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Chapter 2: D2C brands have thrived with the rise of a rich enabler
ecosystem
2.1 D2C brands’ challenges evolve as they scale and mature
D2C operations present varying levels of complexity across the journey to Rs 50 crore, and
then crore. As revenue grows, brands progress from catering to localized markets to
reaching a broader customer base, enhancing market penetration, and gaining increased
control over manufacturing processes.
Stage 1 (Annual revenue <INR 50 Cr) – Early Adopters. The first phase of a brands’ growth
focuses on finding their product market fit and their early adopters, usually through the
online channel. In this phase, brands double down on the channels that are working and find
their hero product.
The first inflection point often arises as brands saturate their early adopters and growth
slows down.
Stage 2 (Annual revenue INR 50-250 Cr) – Extended Customers and Channel Expansion.
This transition involves diversifying channels, extending beyond online platforms to
establish brick-and-mortar retail outlets, and shifting from marketplaces to brand.com or
even quick commerce platforms. Examples include Boat and Mamaearth that expanded
from first selling via marketplaces then expanding to Brand.com, remaining online only to
then being available in offline retail stores, and now further expanding to quick commerce
platforms as well.
The second inflection point arises as brands saturate the market for their hero products and
want to expand their product / brand portfolio.
Stage 3 (Annual revenue > INR 250 Cr) – Scaling and Portfolio Expansion. Brands now want
to access new customer segments. At this stage, growth is propelled by portfolio
expansion, with brands introducing new sub brands and categories. For instance, Vellvette
Lifestyle, the parent company of Sugar Cosmetics, launched a Korean skincare brand,
Quench Botanics in 2023. The brand aims to capitalize on the rising popularity of Korean
skincare products, riding on the widespread influence of Korean pop culture and
endorsements and usage by online influencers.
15
Exhibit 10
Evolution of D2C Brands
Note(s): CM: Contribution Margin, LTV: Lifetime Value, CAC: Customer acquisition cost, ROCE: Return on capital employed
Source(s): Redseer Analysis
Exhibit 11
Non-exhaustive examples of D2C brands across stages
Note(s): Revenue as on March 31st
2023
Source(s): Redseer analysis
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Exhibit 12
Complexity of D2C brand operations
Source(s): Redseer analysis
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2.2 E-commerce enablers support D2C brands accelerate their growth journey
A decade ago, the internet was a different place. Brands had to organically build each part
of the e-commerce value chain, from the inception to expansion.
Today, vertical service providers have emerged as a critical factor in simplifying setup and
enhancing operational efficiency. Contemporary brands often choose to outsource
activities like ordering platforms, payment processing, and logistics to third-party providers,
enabling themto focus solelyon their coreservices. At eachstage of the value chain, brands
are faced with a wide array of service-provider options to choose from, each offering
specialized services.
This enabler ecosystem has expedited and streamlined the journey of new-age brands from
their creation to growth matching, and in some cases, surpassing the trajectory of their
traditional counterparts. This holistic collaboration is being enabled through the
advancements in vertical third-party players, which enables seamless integration across all
the services in the value chain.
Exhibit 13
Third-party enablers
Source: Redseer Research
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19
2.3 Logistics represents a major opportunity for D2C brands to differentiate on user
experience
As brands attain scale, they aim to achieve efficiency across all cost components. While
some costs are inevitable while others are highly category-dependent, logistics costs
continue to remain a significant component of most digital-first D2C brands. These costs
encompass various activities including transportation, warehousing, packaging, and
inventory management, typically vary with the scale of brands.
For smaller brands with an annual revenue of INR 50-250 Cr, logistics constitutes 10-18% of
the overall expense, but this tends to reduce to approximately 6-14% as brands attain a
scale of over INR 250 Cr.
This positions logistics costs as the third significant expense following Cost of Goods Sold
(COGS) and Advertising. While COGS primarily hinges on pricing and advertising focuses on
customer acquisition, logistics expenses are directly associated with enhancing the
customer experience. In particular for emerging brands aiming to solidify their presence and
cultivate a loyal customer base, high COGS and Advertising costs become inevitable with a
lowerscope for cost reduction. Therefore,optimizing logistics expensesbecomes essential
for brands seeking to enhance profitability while providing exceptional customer
experiences.
Exhibit 14
Cost Structure of D2C brands at different
revenue stages
N=20
Note(s): Cost components affecting Contribution Margin-2 have been considered for this analysis, i.e., other costs such as
wage bill, SG&A are excluded.
Source: Redseer analysis
Impact of Cost Components
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Chapter 3: A new-age logistics landscape for new-age brands
3.1 D2C brands have specialized logistics needs
As the demand for D2C products continues to rise, their logistics needs increase in parallel.
Annual D2C originated shipments have surged from ~0.1 billion in 2019 to ~0.6 billion in 2023.
Exhibit 15
D2C shipments volume
In Bn, 2019 – 2023, 2028P
Note 1. D2C shipments include shipments from Brand.com and marketplaces
Source(s): Redseer IP
During most of a direct-to-consumer (D2C) brand’s growth journey, marketplaces serve as
their primary channel. Platforms generally incentivize using their 1PL logistics platforms
(e.g., eKart for Flipkart, and Valmo for Meesho). For brand.com, however, D2C brands want
to find the right balance between cost and customer experience.
Exhibit 16
Fulfilment process for Brand.com
Source(s): Redseer analysis
21
D2C brands want their 3PL partners to solve for a variety of challenges:
• Technology Integration: D2C brands use e-commerce platforms such as Shopify and
WooCommerce to manage their online businesses. Integrating these platforms with
logistics services is crucial for efficient order management. D2C brands seek
seamless integration across their entire tech stack, including warehousing,
inventory management, shipment intelligence, and transportation.
• Warehousing: D2C brands require warehousing solutions that enable efficient
scaling of operations. Shared warehousing solutions offer both flexibility and cost-
effectiveness.
• Transportation: New age brands require comprehensive transportation solutions
across first, mid-, and last-mile services. Emerging brands are volume constrained
and rely on options like Partial Truckload (PTL). PTL allows brands to share truck
space and pay only for the space occupied, making it affordable in the case of goods
that don’t require a Full Truckload (FTL).
• Expedited delivery times: Driven by customer expectations and heightened
competition across all product categories, there’s a rising demand for same-day or
next-day deliveries.
• Value-added services: D2C brands also seek value-added services like returns
handling, customized packaging, predictive analytics, real-time order tracking, MIS
tools, barcode scanning, etc. to streamline their support functions while they focus
on their core activities.
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3.2 A variety of options have emerged for D2C brands
The rapidly growing direct-to-consumer (D2C) market in India has led to the emergence of
specialized logistics providers. These new-age companies offer tailored solutions for
specific supply chain segments, making them crucial partners for young D2C brands. D2C
brands can access advanced logistics infrastructure without the need for significant capital
investment.
Exhibit 17
D2C Focused e-Logistics Landscape (non-exhaustive)
Service
Providers
Offering Key Players
Full stack 3PL
End-to-end logistics
solutions
Aggregators
Unified platform for logistics
services
Vertical
Service
Providers
Same day delivery/ Next day
delivery
Fulfilment-focussed logistics
providers
Hyperlocal
Cross-border logistics
SaaS
Source(s): Redseer analysis
23
24
3.3 D2C brands have relied on aggregators as a one-stop solution
Aggregators are intermediaries that integrate various logistics service providers onto a
unified platform, connecting them with businesses. Aggregators cater to businesses with
smaller shipment volumes – D2C brands, SMEs, and local businesses – which do not have
the scale to partner with 3PL providers directly. For these services, aggregators will typically
charge a premium to the rates available with 3PL directly.
Exhibit 18
Delivery process through an aggregator
Source(s): Redseer analysis
Despite a cost disadvantage, D2C brands typically choose to partner with aggregators for
the following reasons:
• Consolidation of services: Aggregators offer services beyond transportation. They
offer a full suite of services, including warehousing, shipping software, packaging,
and marketing. By seamlessly integrating with brands’ tech stacks, aggregators
improve order management and enhance the overall customer experience. For
newer brands concentrating on core functions, aggregators provide an accessible
entry point to non-core support services.
• Access to multiple 3PL providers: Aggregators provide access to various shipping
carriers and adjacent services, enabling brands to choose the best options through
price comparison and peer reviews for different product categories and customer
requirements without having to negotiate separate contracts. This flexibility lowers
the risk for new-age brands, allowing them to adapt quickly as their business needs
change.
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3.4 3PL providers are innovating to cater to the needs of D2C brands
3PL providers offer end-to-end outsourcing solutions for logistics and supply-chain
management, inclusive of warehousing, order and warehouse management systems and
inbound and outbound logistics.
Traditionally D2C brands preferred to partner initially with aggregators owing to their tech-
integration capabilities and one-stop solution approach. Upon attaining scale, thesebrands
often negotiated contracts directly with 3PL providers. However, there is now a significant
shift in strategy among new-age D2C brands which are increasingly collaborating directly
with 3PL providers from an early stage. This shift is driven by the need for better operational
control and attaining cost efficiencies and is being enabled by proactive measures from 3PL
providers that acknowledge the dependency of these new age brands on them. Some of the
services offered by 3PL providers to enhance engagement with D2C brands include:
Tech-stack for brand.com
• 3PL players offer integrated technology solutions, crucial for young brands using
multiple software across their value chain. They provide integration across OMS and
WMS, essential for optimizing the operations for young brands.
• 3PL providers are investing in technology and infrastructure to offer expedited
shipping options, same-day or next-day delivery services, real-time tracking, non-
delivery reports (NDRs), data-driven RTO predictors, better returns experience etc.
SLA parity between brand.com and marketplaces
• 3PL providers are maintaining consistency in SLAs including uptime, delivery times,
response, and claim resolution times, among other factors, across both brand.com
and various marketplaces. This ensures a uniform brand experience for consumers
regardless of where the order originates- marketplaces or emerging brand websites.
Favourable SOPs for new age brands
• Young D2C brands often have a high rate of COD (cash-on-delivery) shipments,
typically until they establish customer trust. Recognizing the importance of
individual payments for the working capital of smaller brands, 3PLs provide
favourable COD solutions, ensuring quick and easy remittance of cash collected
(typically within 48 hours)
• 3PL players arealso adapting to the varying weight specifications of new age brands,
accommodating shipments of various weights and sizes.
26
Facilitating offline expansion of young D2C brands
• 3PL partners enable D2C brands to extend their reach into offline markets by
providing part-truck and full-truck load solutions and streamlining distribution.
• By centralizing last-mile logistics and coordinating distribution, 3PLs simplify the
expansion to offline sales channels for D2C brands.
Superior account management and servicing experience
• 3PL offers personalized account servicing experience to brands, particularly in the
case of dispute management, which leads to enhanced customer experience. They
offer convenient dispute resolution by facilitating direct communication with brands
for any issues encountered during the delivery process.
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3.5 3PL players dominate the logistics landscape, with a few players emerging as
clear winners
For new age D2C brands, selecting the right partners and services is vital for achieving
operational efficiency and delivering exceptional customer service. To excel in these areas,
brands need support from third-party logistics (3PL) providers across seven coreareas. The
brand and customer experience are influenced by factors such as shipment protection,
returns management, account management, technological capabilities, and
comprehensive service offerings provided by the logistics partner. On the other hand,
operational efficiencies can be assessed using metrics such as reach and availability, time
reliability, and pricing offered by the 3PL providers. Together, these metrics form a
comprehensive framework for evaluating the suitability of logistics providers in meeting the
essential needs of these brands, with companies like Delhivery and Blue Dart delivering
exceptional service across both experiential and operational dimensions.
Exhibit 19
3PL ratings by D2C brands
Note(s): 1. Based on survey results of N=62 D2C brands with annual revenue < INR 50 Cr.,conducted in May 2024 2.Results
are directional and include error margin of +/- 10% at 90% confidence interval. 3.Methodology details are mentioned in
“Research Methodology” section.
Source(s): Redseer analysis
3PL providers are continuously innovating to offer value beyond mere order fulfilment. With
the rapid expansion of the D2C market, effective logistics are essential for enhancing
customer experience and ensuring operational and cost efficiencies. Rather than serving
solely as support partners, 3PLs are revolutionizing how brands operate and connect with
their customers in the fast-paced D2C landscape.
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Glossary
Term Definition
D2C D2C or Direct-to-Consumer companies/brands are independent
companies or brands which have 50%+ revenue from online
channels and have own website or app
Brand.com Brand’s own website, serving as a digital storefront, to sell
directly to customers
COD Cash-on-delivery
Logistics Aggregator Consolidates shipping services from multiple logistics
companies into a single platform or application for customer
access
E-Logistics Using technology to optimize traditional logistics for efficient
procurement, warehousing, inventory management, demand
forecasting, distribution, and other activities
Service Level
Agreement (SLA)
An SLA is a contract between a service provider and a customer
defining the service to be provided, performance expectations,
measurement criteria, and consequences for non-compliance
Third-party logistics
(3PL)
Typically a full-stack logistics service, managing various aspects
of procurement and fulfilment activities for brands
Quick commerce Vertical e-commerce where emphasis is on quick deliveries,
typically in less than an hour
NCCS New Consumer Classification System is a tool that is used to
classify households in India based on their socioeconomic status
High-income
Households
Combined annual income greater than INR 1.1 Mn or USD 13,250.
Upper Middle-class
Households
Combined annual household income between INR 0.8 to 1.1 Mn or
USD 9,600 to 13,250
Lower middle-class
Households
Combined annual household income between INR 0.3-0.8 Mn or
USD 3,600-9,600
Low-income
Households
Combined annual household income lesser than INR 0.3 Mn or
USD 3,600
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Research Methodology
Our research methodology involved a three-pronged approach to understand thedirect-to-
consumer (D2C) brand ecosystem comprehensively. First, we engaged with Private Equity
(PE/VC) firms that manage diverse portfolios of digital-first D2C brands. These discussions
covered trends, growth strategies, and logistics needs within the evolving brand landscape.
Second, we interviewed CEOs and founders of D2C brands to gain insights into their brand
positioning, operational support ecosystem, and specific logistics requirements. Lastly, we
interacted with third-party logistics providers serving both incumbent and insurgent D2C
brands. These engagements provided a holistic view of the intricate logistics framework
supporting the D2C ecosystem.
For our 3PL ratings matrix, we evaluated the 3PL providers based on two primary criteria
alignedwith D2C brand requirements: Experience&Features, andOperational Performance.
Various metrics were considered for each criterion. Under Experience & Features, we
assessed account management, technological capabilities, shipment protection, returns
management, and full-stack offerings. For Operational Performance, we examined time
reliability, pricing and payment terms, and reach and availability of t.
30
Disclaimer
Copyright ©Redseer Strategy Consultants Private Limited (“Redseer”). All rights reserved.
While we have made every attempt to ensure that the information contained in this report
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31
About the Authors
Kanishka Mohan,
Partner at Redseer
Kanishka brings over 11 years of experience in research-backed
consulting and entrepreneurship. He specializes in advising
internet startups and investment firms, having delivered over 200
projects in the last decade. He holds an MBA from IIM Calcutta
and a B. Tech from IIT Roorkee.
He's reachable at kanishka@redseer.com
Shivreet Majithia
Senior Consultant at Redseer
Shivreet has over 5 years of experience in serving clients across
BPC, consumer tech, healthcare, and education on multiple
projects spanning growth and go-to-market strategies and
through leadership reports. She holds an MBA degree from ISB
Hyderabad and a B. Tech from Symbiosis International.
She’s reachable at shivreet.m@redseerconsulting.com
Chinmayi Lanka
Associate Consultant at Redseer
Chinmayi has worked on growth strategy projects and market
narrative reports primarily across mobility, FMCG, and insurance.
She also has exposure to cost optimization and operations
management. She holds an MBA degree from XLRI Jamshedpur,
and a B. Tech from NIT Trichy.
She’s reachable at chinmayi.l@redseerconsulting.com
Acknowledgements
The authors extend their gratitude to all who contributed to this report; in particular to
Tanishka Maheshwari (Associate Consultant Intern) and other Redseer colleagues for their
support while developing this report.
The authors also extend sincere gratitude to the esteemed professionals whose insights
and industry experience greatly enriched this report.

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State of D2C in India: A Logistics Update

  • 1. ``
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  • 3. Table of Contents Foreword ....................................................................................................................... 1 Chapter 1: India’s D2C market is poised for rapid growth......................................... 3 1.1 Favourable macros will drive consumption growth ...........................................................3 1.2 Massive opportunity for mass & premium brand creation ............................................. 6 1.3 New age / D2C brands have leveraged online to challenge incumbent brands ....... 8 1.4 The next phase of D2C brands will be marked by 3 major themes...............................11 Chapter 2: D2C brands have thrived with the rise of a rich enabler ecosystem..... 14 2.1 D2C brands’ challenges evolve as they scale and mature............................................14 2.2 E-commerce enablers support D2C brands accelerate their growth journey........ 17 2.3 Logistics represents a major opportunity for D2C brands to differentiate on user experience......................................................................................................................................19 Chapter 3: A new-age logistics landscape for new-age brands .............................. 20 3.1 D2C brands have specialized logistics needs.................................................................20 3.2 A variety of options have emerged for D2C brands ......................................................22 3.3 D2C brands have relied on aggregators as a one-stop solution ...............................24 3.4 3PL providers are innovating to cater to the needs of D2C brands ..........................25 3.5 3PL players dominate the logistics landscape, with a few players emerging as clear winners........................................................................................................................................... 27 Glossary ...................................................................................................................... 28 Research Methodology............................................................................................... 29 Disclaimer.................................................................................................................... 30 About the Authors ...................................................................................................... 31
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  • 5. 1 Foreword In recent years, India's direct-to-consumer (D2C) landscape has experienced remarkable growth, driven by heightened private consumption.This surge in consumption hasgiven rise to two distinct yet interconnected consumer segments: Bharat and India. These segments are at the forefront of driving increased demand, shaping the narrative of D2C businesses. As new-age D2C brands continue to expand, they encounter heightened operational complexities, with logistics standing out as a significant challenge. Logistics not only represents a substantial cost component for these brands but also directly influences the customer experience. Establishing efficient logistics operations while keeping costs low is therefore a crucial objective for these brands. In this report, we delve into the evolving dynamics of the D2C landscape, with a particular focus on how brands navigate the complexities of logistics. Third-party logistics enablers emerge as indispensable partners in facilitating the growth journey of D2C brands, offering cost-effective solutions tailored to their specific needs. Join us as we explore how D2C brands leverage logistics partnerships to enhance their operational efficiency and deliver exceptional experiences to their customers. Anil Kumar Founding Partner, Redseer Strategy Consultants
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  • 7. 3 Chapter 1: India’s D2C market is poised for rapid growth 1.1 Favourable macros will drive consumption growth India is the fifth-largest economy in the world with a nominal GDP of US$ 3.6 Tn in 2023. With a nominal GDP growth of approximately 9%, India is one of the fastest growing economies globally. This growth has been fuelled by: • Increased Capital Formation: India has seen significant uptick in capital formation and currently ranks 4th in the world. In 2021, capital formation was US$ 0.98 trillion and by 2022, it had surged to US$ 1.106 trillion. This has led to increase in production capacity and consequent demand. • Consumption enabled by demographic dividend: India is home to one of the largest young populations in the world, with an estimated 970 Mn people in the age bracket of 15-64 years. The median age of Indians is about 28.2 years in 2023, while that of developed countries like USA and UK is about 38.1 and 40.1. This demographic dividend drives economic growth through increased labour force, higher incomes and savings, and increased consumption. • Rapid urbanization: India hosts a large urban population, second only to China, with an estimated 37% (528 Mn) of the population people living in cities & towns as of 2023. As per Niti Aayog’s estimates, this is expected to increase to 50% by 2050. Urban areas, characterized by relatively higher-income residents serve as hotspots for economic activity, driving consumption and thereby economic growth. This has led to an increase in Private Final Consumption Expenditure (PFCE) in India. PFCE grew at a CAGR of over 10% from US$ 1.2 Tn in FY18 to US$ 2.0 Tn in FY23. Consumption is a major contributor to the economy with a share of 61% of the total GDP. It has been observed in mature economies that crossing the GDP per capita mark of US$ 2000 has signalled an inflection point in the growth of PFCE. Having crossed the GDP per capita of US$ 2000 in 2021, it is expected that India will observe a similar surge in PFCE and, consequently, discretionary spending.
  • 8. 4 Exhibit 1 Growth Drivers of GDP in India Note(s): 1. E- estimated, P-projected, Source(s): Economic and Social Commission for Asia and the Pacific (ESCAP), World Bank, Niti Aayog, Redseer analysis
  • 9. 5 Exhibit 2 GDP per capita (Current Prices) vs Consumption expenditure per capita Note(s): 1. The PFCE has been represented respective to the GDP per capita for the first time that the respective economy reached that particular level. 2. Data for FCE per capita for UK has been extrapolated when GDP per capita crossed 0.5k Source(s): World Bank, Redseer analysis
  • 10. 6 1.2 Massive opportunity for mass & premium brand creation In the last decade, two distinct consumer classes have emerged: Bharat & India. Of course, this is an oversimplification of a very complex customer landscape. However, it is useful to look at Bharat as the aspirational, newly created middle class, and India as the high-income affluent class. Bharat: The increase in income-levels across the country has led to an upward movement in household incomes and consumption. Redseer estimates indicate that aspirational households, which includes the lower middle-class (annual household income of US$ 3600- 9600) and upper-middle class (annual household income of US$ 9600-13250), will grow at a CAGR of 2% and 6% respectively from 2023-28, accounting for a total of 57% of the households in 2028. This evolution of Bharat from low-income households to the emerging new middle class is expected to drive the demand for mass brands that cater to the quality as well as cost requirements. India: According to Redseer estimates, high-income households (annual household income of US$ 13250+) are projected to grow at a CAGR of 7% between 2023 and 2028. The rise in incomes and an upward movement in household pyramid signal a boost in discretionary spending. Additionally, these affluent households account for 10% of the total PFCE, highlightingtheirgreaterpurchasingpowerandreflectingtheir increasedpotentialtoinvest in luxury and premium goods and services. Assured quality and the ability to customize and provide sense of exclusivity has driven these affluent households towards luxury and premium goods and services. Exposure to global trends and lifestyles too further catalyses the increasing awareness of the luxury and premium goods. Exhibit 3 Household Income Pyramid – India 2018, 2023, 2028P Note(s): 1. Annual household income range: High-income (US$ 13250+), Upper-middle class (US$ 9600-13250), Lower- middle class (US$ 3600-9600), and Low-income (<US$ 3600) Source(s): Redseer estimates
  • 11. 7 As the consumer landscape evolves, brands have the opportunity to meet the escalating demand on both ends of the price spectrum. A major portion of this evolution is taking place in the digital world, with consumption increasingly moving to online channels. We believe that online consumption is increasingly democratized with equitable representation of socio-economic shoppers – NCCS A, B and C – across categories. On the other hand, this is skewed in favour of the affluent NCCS A households’ shoppers. As habit building the aspiring lower middle-class shoppers find their internet feet, we expect their shopping wallet to shift online. Exhibit 4 Category-wise ATU split by NCCS In Mn, 2023 Note(s): NCCS is given on the basis of (i) Education of the chief earner and (ii) Number of consumer durables (from a pre- defined list) owned by a household. The list contains 11 items including – electricity connection, ceiling fan, LPG Stove, two- wheeler, colour TV, refrigerator, washing machine, personal computer/laptop, car/jeep/van, air conditioner, agricultural land Source(s): Redseer analysis
  • 12. 8 1.3 New age / D2C brands have leveraged online to challenge incumbent brands New age or D2C brands identified the digital opportunity before large incumbent brands and created products to service niche customer use-cases. Leveraging digital platforms and data analytics, these insurgent brands have disrupted and gained significant scale. Consequently, incumbent brands have acknowledged the shifting consumer dynamics and adapted their strategies to identify the same underexplored market segments. D2C brands distinguish themselves by providing superior services, personalized care, and meticulous attention to detail, setting them apart from traditional retail models. Therefore, for brands aiming to capture India's expanding consumer market and shape the retail landscape, D2C emerges as a strategic choice. Between 2019 and 2023, the D2C market experienced significant growth of >40% CAGR. We anticipate this momentum to continue, with the D2C market projected to reach a value of $50 billion by 2028. Exhibit 5 Indian D2C1 Market Opportunity (GMV) US$ Bn, CY19-28P Note(s): 1. D2CorDirect-to-consumer companies/brands areindependentcompanies/brandswhich have50%+ revenue from online channels and have own website /app. 2. The market size here includes online and offline revenues of the D2C brands. Source(s): Redseer IP D2C brands are experiencing a growth rate double that of e-tailing. This difference arises from the expansion of the middle and high-income consumer segments. While the former is stillearly to theonline shopping game,D2C brands haveevolved largely tocaterto thelatter.
  • 13. 9 High-income customers place a higher emphasis on convenience, and personalized interactions — avenues where D2C brands outshine conventional e-commerce platforms. Exhibit 6 Retail growth projections (2023-2028P) comparison Source(s): Redseer analysis With D2C brands been around for more than a decade now, go-to-market strategy playbooks have been well established. D2C brands look for the right channel mix based on their category and scale. Exhibit 7 Channel Convergence for D2C brands Note(s):WhileD2Cisachannel,weusethewordtolooselyrepresentnew-agebrandswhomayormaynotusedirectchannels to access their customers. Source(s): Redseer analysis
  • 14. 10 Exhibit 8 Differences between Channels Parameter Offline e-Commerce Platforms D2C Brand Control Limited control, relies on retailers Brands create own storefront, control product presentations Full control from marketing to product delivery Margins Low to Moderate Lowest, but includes cost of advertising and logistics Highest Data Access No data with delayed feedback loop Detailed dashboards with access to aggregated sales data Detailed dashboards with access to aggregated sales data Customer Relationship Limited to no engagement, possible through physical salespersons Limited access to customer data, engagement through platform ads Personalized communication, strong customer relationships Source(s): Redseer analysis
  • 15. 11 1.4 The next phase of D2C brands will be marked by 3 major themes New-age brands are achieving business milestones at an accelerated pace as compared to their traditional counterparts. This exponential growth is influenced by three key themes, each playing a significant role in the creation and expansion of these brands: Exhibit 9 Next big themes for D2C brands Source(s): Redseer analysis Convergence of online channels. Online platforms that were once specialized in specific verticalsarenow transforming intocomprehensivehubs,offeringa wide rangeof categories beyond their initial focus. This is highlighted by the rise of quick commerce services, which areexpanding theirofferingsbeyond food and groceries to includeelectronics,homedécor, and other categories. For example, Blinkit now carries products like the PlayStation 5 Slim, illustrating its evolution into a versatile marketplace catering to diverse consumer needs. Similarly, data availability has expanded in both online and offline retail, there is increasing scope for translating learnings from one channel into another.
  • 16. 12 Rise of Massification & Premiumization. India is witnessing a growing demand for branded products, characterized by rising incomes and elevated expectations on quality. Urban India is driving the premiumization trend in D2C. These consumers seek immersive and memorable shopping experiences and specialized products, prioritizing faster delivery, niche platforms catering to specific needs (such as home or kids). GenZ, a unique consumer cohort, seeks products reflecting their individuality and values. They reject traditional options, preferring sustainable, cruelty-free, and individualistic products that align with their identity. In response, brands are adapting to the evolving preferences of these consumers. For instance, Brands such as NewMeand 82E aretapping into this trend by offering premium products and personalized experiences. Beauty brands are focusing on sustainable and cruelty-free products, while fashion brands are embracing inclusivity and individuality. Concurrently, a variety of D2C brands are catering to a more value-conscious customer. These are tapping into the “masstige” opportunity, which offer a balance between affordability and perceived quality. This marks a shift from unbranded to branded products in consumption landscape in India. Alternative Brand Creation. How D2C brands look at offline is undergoing a transformation as brands with revenue <INR 50 crore, are rapidly entering offline channels. Departing from “conventional” practice of online brand building, this shift aims to capitalize on the advantages of a physical presence, including wider market reach and lower acquisition costs resulting in accelerated sales growth. This enhances brand visibility and fosters stronger consumer relationships through localized interactions, ultimately driving traction online. However, the value that this transition unlocks is largely category dependent. This trend is observed in food & beverages brands which tend to move offline quicker due to the inherent FMCG nature of the category. For example, True Elements, a digital-first brand, has now
  • 17. 13 placed its products in most modern trade outlets. Beauty and personal care brands are also increasingly experimenting with offline expansion, as seen in the case of Perfora and Vilvah. Parallelly, D2C brands are actively embracing quick commerce as a channel for brand discovery, expanding their market reach. Platforms such as Swiggy Minis or Insanely Good provide customized areas for brands to exhibit their products, effectively reaching new potential customers. Such a strategy enables D2C brands to elevate their visibility online and interact with audiences actively seeking innovative offerings, thereby nurturing brand awareness, and facilitating customer acquisition.
  • 18. 14 Chapter 2: D2C brands have thrived with the rise of a rich enabler ecosystem 2.1 D2C brands’ challenges evolve as they scale and mature D2C operations present varying levels of complexity across the journey to Rs 50 crore, and then crore. As revenue grows, brands progress from catering to localized markets to reaching a broader customer base, enhancing market penetration, and gaining increased control over manufacturing processes. Stage 1 (Annual revenue <INR 50 Cr) – Early Adopters. The first phase of a brands’ growth focuses on finding their product market fit and their early adopters, usually through the online channel. In this phase, brands double down on the channels that are working and find their hero product. The first inflection point often arises as brands saturate their early adopters and growth slows down. Stage 2 (Annual revenue INR 50-250 Cr) – Extended Customers and Channel Expansion. This transition involves diversifying channels, extending beyond online platforms to establish brick-and-mortar retail outlets, and shifting from marketplaces to brand.com or even quick commerce platforms. Examples include Boat and Mamaearth that expanded from first selling via marketplaces then expanding to Brand.com, remaining online only to then being available in offline retail stores, and now further expanding to quick commerce platforms as well. The second inflection point arises as brands saturate the market for their hero products and want to expand their product / brand portfolio. Stage 3 (Annual revenue > INR 250 Cr) – Scaling and Portfolio Expansion. Brands now want to access new customer segments. At this stage, growth is propelled by portfolio expansion, with brands introducing new sub brands and categories. For instance, Vellvette Lifestyle, the parent company of Sugar Cosmetics, launched a Korean skincare brand, Quench Botanics in 2023. The brand aims to capitalize on the rising popularity of Korean skincare products, riding on the widespread influence of Korean pop culture and endorsements and usage by online influencers.
  • 19. 15 Exhibit 10 Evolution of D2C Brands Note(s): CM: Contribution Margin, LTV: Lifetime Value, CAC: Customer acquisition cost, ROCE: Return on capital employed Source(s): Redseer Analysis Exhibit 11 Non-exhaustive examples of D2C brands across stages Note(s): Revenue as on March 31st 2023 Source(s): Redseer analysis
  • 20. 16 Exhibit 12 Complexity of D2C brand operations Source(s): Redseer analysis
  • 21. 17 2.2 E-commerce enablers support D2C brands accelerate their growth journey A decade ago, the internet was a different place. Brands had to organically build each part of the e-commerce value chain, from the inception to expansion. Today, vertical service providers have emerged as a critical factor in simplifying setup and enhancing operational efficiency. Contemporary brands often choose to outsource activities like ordering platforms, payment processing, and logistics to third-party providers, enabling themto focus solelyon their coreservices. At eachstage of the value chain, brands are faced with a wide array of service-provider options to choose from, each offering specialized services. This enabler ecosystem has expedited and streamlined the journey of new-age brands from their creation to growth matching, and in some cases, surpassing the trajectory of their traditional counterparts. This holistic collaboration is being enabled through the advancements in vertical third-party players, which enables seamless integration across all the services in the value chain. Exhibit 13 Third-party enablers Source: Redseer Research
  • 22. 18
  • 23. 19 2.3 Logistics represents a major opportunity for D2C brands to differentiate on user experience As brands attain scale, they aim to achieve efficiency across all cost components. While some costs are inevitable while others are highly category-dependent, logistics costs continue to remain a significant component of most digital-first D2C brands. These costs encompass various activities including transportation, warehousing, packaging, and inventory management, typically vary with the scale of brands. For smaller brands with an annual revenue of INR 50-250 Cr, logistics constitutes 10-18% of the overall expense, but this tends to reduce to approximately 6-14% as brands attain a scale of over INR 250 Cr. This positions logistics costs as the third significant expense following Cost of Goods Sold (COGS) and Advertising. While COGS primarily hinges on pricing and advertising focuses on customer acquisition, logistics expenses are directly associated with enhancing the customer experience. In particular for emerging brands aiming to solidify their presence and cultivate a loyal customer base, high COGS and Advertising costs become inevitable with a lowerscope for cost reduction. Therefore,optimizing logistics expensesbecomes essential for brands seeking to enhance profitability while providing exceptional customer experiences. Exhibit 14 Cost Structure of D2C brands at different revenue stages N=20 Note(s): Cost components affecting Contribution Margin-2 have been considered for this analysis, i.e., other costs such as wage bill, SG&A are excluded. Source: Redseer analysis Impact of Cost Components
  • 24. 20 Chapter 3: A new-age logistics landscape for new-age brands 3.1 D2C brands have specialized logistics needs As the demand for D2C products continues to rise, their logistics needs increase in parallel. Annual D2C originated shipments have surged from ~0.1 billion in 2019 to ~0.6 billion in 2023. Exhibit 15 D2C shipments volume In Bn, 2019 – 2023, 2028P Note 1. D2C shipments include shipments from Brand.com and marketplaces Source(s): Redseer IP During most of a direct-to-consumer (D2C) brand’s growth journey, marketplaces serve as their primary channel. Platforms generally incentivize using their 1PL logistics platforms (e.g., eKart for Flipkart, and Valmo for Meesho). For brand.com, however, D2C brands want to find the right balance between cost and customer experience. Exhibit 16 Fulfilment process for Brand.com Source(s): Redseer analysis
  • 25. 21 D2C brands want their 3PL partners to solve for a variety of challenges: • Technology Integration: D2C brands use e-commerce platforms such as Shopify and WooCommerce to manage their online businesses. Integrating these platforms with logistics services is crucial for efficient order management. D2C brands seek seamless integration across their entire tech stack, including warehousing, inventory management, shipment intelligence, and transportation. • Warehousing: D2C brands require warehousing solutions that enable efficient scaling of operations. Shared warehousing solutions offer both flexibility and cost- effectiveness. • Transportation: New age brands require comprehensive transportation solutions across first, mid-, and last-mile services. Emerging brands are volume constrained and rely on options like Partial Truckload (PTL). PTL allows brands to share truck space and pay only for the space occupied, making it affordable in the case of goods that don’t require a Full Truckload (FTL). • Expedited delivery times: Driven by customer expectations and heightened competition across all product categories, there’s a rising demand for same-day or next-day deliveries. • Value-added services: D2C brands also seek value-added services like returns handling, customized packaging, predictive analytics, real-time order tracking, MIS tools, barcode scanning, etc. to streamline their support functions while they focus on their core activities.
  • 26. 22 3.2 A variety of options have emerged for D2C brands The rapidly growing direct-to-consumer (D2C) market in India has led to the emergence of specialized logistics providers. These new-age companies offer tailored solutions for specific supply chain segments, making them crucial partners for young D2C brands. D2C brands can access advanced logistics infrastructure without the need for significant capital investment. Exhibit 17 D2C Focused e-Logistics Landscape (non-exhaustive) Service Providers Offering Key Players Full stack 3PL End-to-end logistics solutions Aggregators Unified platform for logistics services Vertical Service Providers Same day delivery/ Next day delivery Fulfilment-focussed logistics providers Hyperlocal Cross-border logistics SaaS Source(s): Redseer analysis
  • 27. 23
  • 28. 24 3.3 D2C brands have relied on aggregators as a one-stop solution Aggregators are intermediaries that integrate various logistics service providers onto a unified platform, connecting them with businesses. Aggregators cater to businesses with smaller shipment volumes – D2C brands, SMEs, and local businesses – which do not have the scale to partner with 3PL providers directly. For these services, aggregators will typically charge a premium to the rates available with 3PL directly. Exhibit 18 Delivery process through an aggregator Source(s): Redseer analysis Despite a cost disadvantage, D2C brands typically choose to partner with aggregators for the following reasons: • Consolidation of services: Aggregators offer services beyond transportation. They offer a full suite of services, including warehousing, shipping software, packaging, and marketing. By seamlessly integrating with brands’ tech stacks, aggregators improve order management and enhance the overall customer experience. For newer brands concentrating on core functions, aggregators provide an accessible entry point to non-core support services. • Access to multiple 3PL providers: Aggregators provide access to various shipping carriers and adjacent services, enabling brands to choose the best options through price comparison and peer reviews for different product categories and customer requirements without having to negotiate separate contracts. This flexibility lowers the risk for new-age brands, allowing them to adapt quickly as their business needs change.
  • 29. 25 3.4 3PL providers are innovating to cater to the needs of D2C brands 3PL providers offer end-to-end outsourcing solutions for logistics and supply-chain management, inclusive of warehousing, order and warehouse management systems and inbound and outbound logistics. Traditionally D2C brands preferred to partner initially with aggregators owing to their tech- integration capabilities and one-stop solution approach. Upon attaining scale, thesebrands often negotiated contracts directly with 3PL providers. However, there is now a significant shift in strategy among new-age D2C brands which are increasingly collaborating directly with 3PL providers from an early stage. This shift is driven by the need for better operational control and attaining cost efficiencies and is being enabled by proactive measures from 3PL providers that acknowledge the dependency of these new age brands on them. Some of the services offered by 3PL providers to enhance engagement with D2C brands include: Tech-stack for brand.com • 3PL players offer integrated technology solutions, crucial for young brands using multiple software across their value chain. They provide integration across OMS and WMS, essential for optimizing the operations for young brands. • 3PL providers are investing in technology and infrastructure to offer expedited shipping options, same-day or next-day delivery services, real-time tracking, non- delivery reports (NDRs), data-driven RTO predictors, better returns experience etc. SLA parity between brand.com and marketplaces • 3PL providers are maintaining consistency in SLAs including uptime, delivery times, response, and claim resolution times, among other factors, across both brand.com and various marketplaces. This ensures a uniform brand experience for consumers regardless of where the order originates- marketplaces or emerging brand websites. Favourable SOPs for new age brands • Young D2C brands often have a high rate of COD (cash-on-delivery) shipments, typically until they establish customer trust. Recognizing the importance of individual payments for the working capital of smaller brands, 3PLs provide favourable COD solutions, ensuring quick and easy remittance of cash collected (typically within 48 hours) • 3PL players arealso adapting to the varying weight specifications of new age brands, accommodating shipments of various weights and sizes.
  • 30. 26 Facilitating offline expansion of young D2C brands • 3PL partners enable D2C brands to extend their reach into offline markets by providing part-truck and full-truck load solutions and streamlining distribution. • By centralizing last-mile logistics and coordinating distribution, 3PLs simplify the expansion to offline sales channels for D2C brands. Superior account management and servicing experience • 3PL offers personalized account servicing experience to brands, particularly in the case of dispute management, which leads to enhanced customer experience. They offer convenient dispute resolution by facilitating direct communication with brands for any issues encountered during the delivery process.
  • 31. 27 3.5 3PL players dominate the logistics landscape, with a few players emerging as clear winners For new age D2C brands, selecting the right partners and services is vital for achieving operational efficiency and delivering exceptional customer service. To excel in these areas, brands need support from third-party logistics (3PL) providers across seven coreareas. The brand and customer experience are influenced by factors such as shipment protection, returns management, account management, technological capabilities, and comprehensive service offerings provided by the logistics partner. On the other hand, operational efficiencies can be assessed using metrics such as reach and availability, time reliability, and pricing offered by the 3PL providers. Together, these metrics form a comprehensive framework for evaluating the suitability of logistics providers in meeting the essential needs of these brands, with companies like Delhivery and Blue Dart delivering exceptional service across both experiential and operational dimensions. Exhibit 19 3PL ratings by D2C brands Note(s): 1. Based on survey results of N=62 D2C brands with annual revenue < INR 50 Cr.,conducted in May 2024 2.Results are directional and include error margin of +/- 10% at 90% confidence interval. 3.Methodology details are mentioned in “Research Methodology” section. Source(s): Redseer analysis 3PL providers are continuously innovating to offer value beyond mere order fulfilment. With the rapid expansion of the D2C market, effective logistics are essential for enhancing customer experience and ensuring operational and cost efficiencies. Rather than serving solely as support partners, 3PLs are revolutionizing how brands operate and connect with their customers in the fast-paced D2C landscape.
  • 32. 28 Glossary Term Definition D2C D2C or Direct-to-Consumer companies/brands are independent companies or brands which have 50%+ revenue from online channels and have own website or app Brand.com Brand’s own website, serving as a digital storefront, to sell directly to customers COD Cash-on-delivery Logistics Aggregator Consolidates shipping services from multiple logistics companies into a single platform or application for customer access E-Logistics Using technology to optimize traditional logistics for efficient procurement, warehousing, inventory management, demand forecasting, distribution, and other activities Service Level Agreement (SLA) An SLA is a contract between a service provider and a customer defining the service to be provided, performance expectations, measurement criteria, and consequences for non-compliance Third-party logistics (3PL) Typically a full-stack logistics service, managing various aspects of procurement and fulfilment activities for brands Quick commerce Vertical e-commerce where emphasis is on quick deliveries, typically in less than an hour NCCS New Consumer Classification System is a tool that is used to classify households in India based on their socioeconomic status High-income Households Combined annual income greater than INR 1.1 Mn or USD 13,250. Upper Middle-class Households Combined annual household income between INR 0.8 to 1.1 Mn or USD 9,600 to 13,250 Lower middle-class Households Combined annual household income between INR 0.3-0.8 Mn or USD 3,600-9,600 Low-income Households Combined annual household income lesser than INR 0.3 Mn or USD 3,600
  • 33. 29 Research Methodology Our research methodology involved a three-pronged approach to understand thedirect-to- consumer (D2C) brand ecosystem comprehensively. First, we engaged with Private Equity (PE/VC) firms that manage diverse portfolios of digital-first D2C brands. These discussions covered trends, growth strategies, and logistics needs within the evolving brand landscape. Second, we interviewed CEOs and founders of D2C brands to gain insights into their brand positioning, operational support ecosystem, and specific logistics requirements. Lastly, we interacted with third-party logistics providers serving both incumbent and insurgent D2C brands. These engagements provided a holistic view of the intricate logistics framework supporting the D2C ecosystem. For our 3PL ratings matrix, we evaluated the 3PL providers based on two primary criteria alignedwith D2C brand requirements: Experience&Features, andOperational Performance. Various metrics were considered for each criterion. Under Experience & Features, we assessed account management, technological capabilities, shipment protection, returns management, and full-stack offerings. For Operational Performance, we examined time reliability, pricing and payment terms, and reach and availability of t.
  • 34. 30 Disclaimer Copyright ©Redseer Strategy Consultants Private Limited (“Redseer”). All rights reserved. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, all data and information provided in this report is intended solely for information purposes and general guidance on matters of interest for the personal use of the reader, who shall accept full responsibility for its use. Redseer does and seeks to do business with companies covered in its research reports. As a result, readers should be aware that Redseer may have a conflict of interest that could affect the objectivity of the report. All information in this report is provided “as is”, with no guarantee of completeness, accuracy, of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in the information contained in this report. Accordingly, the information in this report is provided with the understanding that the authors herein are not engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional advisers. This report cannot be sold for consideration, within or outside India, without the express written permission of Redseer. In no event shall Redseer or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any errors, omissions, or delays in the content of this report or any losses, injuries, or damages including any incidental or any consequential, special or similar loss or damages, arising out of, or in connection with the use of this report.
  • 35. 31 About the Authors Kanishka Mohan, Partner at Redseer Kanishka brings over 11 years of experience in research-backed consulting and entrepreneurship. He specializes in advising internet startups and investment firms, having delivered over 200 projects in the last decade. He holds an MBA from IIM Calcutta and a B. Tech from IIT Roorkee. He's reachable at kanishka@redseer.com Shivreet Majithia Senior Consultant at Redseer Shivreet has over 5 years of experience in serving clients across BPC, consumer tech, healthcare, and education on multiple projects spanning growth and go-to-market strategies and through leadership reports. She holds an MBA degree from ISB Hyderabad and a B. Tech from Symbiosis International. She’s reachable at shivreet.m@redseerconsulting.com Chinmayi Lanka Associate Consultant at Redseer Chinmayi has worked on growth strategy projects and market narrative reports primarily across mobility, FMCG, and insurance. She also has exposure to cost optimization and operations management. She holds an MBA degree from XLRI Jamshedpur, and a B. Tech from NIT Trichy. She’s reachable at chinmayi.l@redseerconsulting.com Acknowledgements The authors extend their gratitude to all who contributed to this report; in particular to Tanishka Maheshwari (Associate Consultant Intern) and other Redseer colleagues for their support while developing this report. The authors also extend sincere gratitude to the esteemed professionals whose insights and industry experience greatly enriched this report.