The Questionable “Direct” Shift
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The Questionable “Direct” Shift

Insurgent organizations across the globe have been at the forefront of innovation by either laying the groundwork for new technologies or leveraging them to implement ideas that would come out to revolutionize our way of life. Apple, one of the only 2 companies in the globe with more than 2 Trillion USD valuation is the biggest tech giant out there all through leveraging on the idea of making software more secure, faster and efficient.

Mark Cuban broke the glass ceiling on how sports reached audience by setting up, worlds first ever online radio company and now is a venture capitalist with a 4.8 billion USD hedge fund. Many such stories out there showcase how one rightfully identified trend could pave the roadmap to more such future innovations.

The new age shopping
In the most recent times, Direct to Consumer or D2C brands have been able to successfully challenge the status quo of branding and customer reach. The fundamental idea behind taking the D2C route of market entry is the multi-pronged impact it delivers. Firstly, it allowed a budding organization to reach its desired set of customers directly without paying hefty commissions to third party retail platforms.

Also, it was a much more convenient mode to deliver products while catering to customers’ expectations as it allowed them to ensure last mile delivery through dedicated focus on one trade channel rather than spending their energy building multiple channels. This would help the companies plan out their finances judiciously in terms of supply chain related costs as well, especially in a geography like India.

This is highly beneficial for organizations in their nascent or growth stage and are yet to gauge their major market areas since most products are first movers in the space and in a nascent stage.

Another incentive to take this path is from a marketing and brand positioning perspective. Operating from your own platform allows the company to uniquely position their brand or product to customers as per their vision and at the same time have access to real time data on the impact of the campaigns.

Data is the pivotal in determining the success of any product or campaign run by any organization but the one thing which very limited organizations get access to. This level of visibility is something even the conglomerates have struggled to achieve. All these factors together have not only helped shape many insurgents in the field of consumer goods; may it be fashion or food, but also made the conglomerates question their very own way of functioning.

Challenging the status quo
Most FMCG companies operate as house of brands like Unilever, Procter and Gamble, Marico & Nestle among many others have always functioned in the traditional way of leveraging onto the established Modern and General trade channels to reach their customers. As the name suggests, A House of Brands is an umbrella brand which is a home to many brands, each independent in its own target audience, branding and sometimes even the trade channels.

The D2C revolution has changed customers buying journey and way of approaching a brand even they want a piece of this growing pie. They have realised that their competition no longer lies with each other but in an online battle ground where they are not even participating as significantly despite the financial, operational and strategic edge from the new age brands.

Looking at the market closely you see the different dynamics at play. Marico has recently acquired majority stakes in 2 growing D2C brands: True Elements and Beardo. Whereas Unilever has taken the route of inhouse brand creation and nurturing from the base by setting up of brands like Find Your Happy Place and Simple among many others targeting the D2C space. There are many such examples of brands being curated for tapping into the new market space and being future ready.

The house of brands have an added advantage as they are in the phase of setting up and promoting of their D2C websites.

For years all the brands under an umbrella have operated in silos barring some exceptions, but through this consolidation on one shopping page they have an opportunity for exploring “integrated branding” like never in past to achieve better market penetration and connecting with their loyal customers. The scope for such cross branding is limited in an offline setup, ITC has been able to do this with Sunfeast and Aashirwad Atta where Sunfeast biscuits have a mention of Aashirwad as their ingredient. But in the online space they can do it much more easily, even for the otherwise unrelated products.

A Challenge in Camouflage
At the same moment, this is a sword that cuts both ways. The cross branding is also derives impact in case of any negative sentiment that might float for any specific product and potentially damage its sister brands. Under the present circumstances, a majority of the population is oblivious to the idea of house of brands and multiple brands being operated by a single organization. But with this approach of unification of brands on a single page will expose them to the risk of negative brand image of one brand impacting all other brands as well.

The core idea of building multiple brands and products under the same organization name is to have a diversified & distinct portfolio, build unique brand voices and leverage on economies of scale. The principle of independent functioning and risk moderation through diversification of categories could potentially be threatened. Consider the present day scenario, where the consumers are unaware of the fact that say brands A and B are jointly operated by a single organization Z. Now a consumer who lands up on the website will a negative sentiment for “B” will this new piece of information will be apprehensive to try “A” as well.

The conventional trade channels have always shielded firms from such negative brand impacts as to the general consumer these brands are in fact independent entities. Another aspect to be looked at is with respect to the brand positioning of the house as an entity.

Operating independently the brands are free to build their own positioning and target audience but once consolidated on a single non-aggregator platform the challenge is to build a common brand statement for the house that will cater to all customers.

At present, companies have the luxury of having both premium and generic brands under the same portfolio since the customer is unsuspecting to the parent or holding company but now this could lead to consumers to draw perceptions on the basis of the other sister brands too.

There is no debating the fact that FMCGs have faced a challenge in terms of getting real time information with respect to consumer behaviour and trends which can now be efficiently achieved through D2C channels with a high level of reliability and certainty. Looking from a birds eye view it is also imperative to understand that in a demography and geography like India, the last mile presence can only be achieved through the general trade stores; atleast with our present capabilities.

But the highway to future has much more pitstops and we are yet to witness the full potential of this shift. D2C although effective for growing brands is still to prove its strategic viability when coming to mature brands or house of brands. On the other hand, deployment of Digital Twins and Control towers is something that needs to be evaluated for it has the ability to deliver similar managerial implications while having application feasibility across all brands.

It begs to challenge some of the fundamental rules and perceived advantages of having a house of brands in counter to a branded house. Another outlook to the same can be breaking the glass ceiling associated with building a house of brands and actually witness a shift in overall branding landscape for better or worse.

Raghav RalhanStudent at SPJIMR (PGDM 2023 Batch)

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