The $70 Billion D2C Explosion in India: How Can FinTechs Redefine the Retail Landscape? 

The retail space has transitioned from a time of turbulence to that of resurgence. 

The E-commerce industry in India is on an upward trajectory to hit $300 billion by 2030. 

The stars of this revolution have been Direct-to-Consumer (D2C) brands. 

D2C brands have stolen the show with a rapid climb up the ladder—evolving from digital newcomers to powerful disruptors in the consumer and retail space.

The D2C growth wave has caught the eye of FinTech players in India. How are they capitalising on the opportunity? We’ll find out. 

But first, let’s take a quick look at factors that have led to India’s phenomenal D2C success. 

What’s driving the growth of India’s $70 billion D2C market? 

New platforms are emerging. Customer expectations are shifting. Markets are transforming.

Digital commerce has changed the way we shop. Today, the bulk of spending power resides with the ‘native digital’ generation, for whom experience is everything. 

The key is to create personalised, authentic, and transparent shopping experiences that Generation Z (Gen Z) will not cancel. 

Case in point: 62% of Gen Z customers are willing to pay extra for personalised experiences—and D2C brands are here for it.

Brands have taken a direct-to-consumer digital strategy to come out on top of this disruption and lead the retail market in the future. The D2C E-commerce market size in the country is projected to be at USD 70 billion in 2024. 

There are several factors that are reducing entry barriers for D2C across the value chain: 

• Social media offers targeted, budget-friendly marketing channels for rapid brand growth 

• Analytics provide real-time insights for inventory and business decisions 

• Payment data guides immediate adjustments in products and strategies 

• Platforms like Shopify lower barriers for brands entering the E-commerce space 

Despite this, D2C brands struggle to secure financing

Though the pandemic years saw a surge in D2C funding, the segment recorded an 82% decline in funding in 2023. The funding winter hit D2C startups particularly hard. Last year, between January and September, D2C brands raised only $162 million, a sharp decline compared to $913.6 raised in the same period in 2022. 

While the global funding slowdown made it more difficult for D2C brands to secure working capital, the struggle to secure timely financing intensified owing to inherent challenges like: 

• Lack of credit history or collateral: Many D2C brands are relatively new and may not have a strong credit history or adequate assets to offer as collateral. The lack of credibility makes traditional lenders wary and oftentimes leads to lesser traditional financing options and high interest rates. 

• Extended payment terms from marketplaces: Most D2C brands rely on large E-commerce platforms to reach their customers. Considering how these large platforms operate on long payment cycles of 30 days (at times even 60 days), cash inflows get considerably delayed. 

• Upfront costs for inventory: Upfront costs incurred for inventory, packaging, and shipping end up depleting the cash reserves of these brands. 

• Pressure from returns and refunds: Given how returns and refunds are common in this space, processing them can lead to additional cash flow crunches. 

FinTechs are stepping in to help D2C brands build momentum

With innovative financing models, FinTechs are helping D2C brands unlock much-needed working capital financing to sustain their growth. 

Many manufacturers in the country are taking the D2C E-commerce route as it equips them with end-to-end control, ranging from packaging to marketing.  

The Indian D2C market is poised for growth to reach USD 270 billion by 2029.

The ‘Quick Commerce’ frenzy is now taking over the retail space. Characterised by ultra-fast delivery times and the success stories of Zepto, Blinkit, and Swiggy Instamart—the quick commerce model is proving to be a game-changer for D2C brands. 

Consequently, we’re also witnessing E-commerce and hyperlocal logistics firms dive into the rapid delivery trend. Backed by Warburg Pincus, Flipkart, and Tiger Global—Ecom Express, Shadowfax, and Loadshare are making their way into the fast delivery market to meet growing demand.

FinTechs have spotted an opportunity

D2C brands need flexible, on-time working capital financing to manage the rapid shifts in their business models. 

New-age FinTechs in the country recognise this need and have developed innovative working capital financing solutions that are designed to provide quicker, data-driven funding options to meet the dynamic needs of D2C brands. 

FinTechs rely on advanced algorithms to assess a brand's creditworthiness based on: 

• Cash flow 

• Transaction data 

• Real-time sales 

This allows D2C brands to access funds faster to support pivots, whether launching a new product line, scaling marketing efforts, or expanding logistics. 

RBF and cash flow-based lending: The power duo doubling D2C growth

What makes FinTech-enabled financing ideal for D2C brands? 

FinTechs offer agility. 

A much-needed aspect for D2C brands that need to react immediately to tap into market changes and opportunities. 

The Revenue-Based Financing (RBF) and cash flow-based lending models offered by FinTechs are empowering D2C brands to: 

• Raise capital without giving up equity or facing rigid repayment terms 

• Utilise real-time transaction data to secure timely financing 

• Meet fluctuating revenues or seasonal demand

FinTechs are backing high-velocity D2C growth with scalable platforms

With cutting-edge platforms, FinTechs are powering D2Cs to step into new markets with better working capital controls and payment methods.

Here are a few cases where FinTechs really shine through for D2C brands: 

• Faster access to capital: FinTechs are capitalising on machine-driven underwriting and minimal paperwork to speed up the application to disbursal process.  

• Minimises over-leverage: Brands secure financing that matches their actual financial situation, reducing risk for the parties involved. 

• Investors share the stakes in revenue-based financing: With fees tied to the brand's growth, a dip in earnings means a dip in fees. As a result, financiers are invested in the brand's success. 

• Keeps operations lean: Without large equity stakes or long-term debt, brands can stay agile. They can pivot and adjust without being weighed down by heavy financing obligations. 

• Open doors to bigger opportunities: Initial RBF, or cash flow-based funding, can stabilise operations. With a proven track record, brands can then attract larger investments from banks or venture capitalists, positioning them for even greater expansion. 

Will FinTechs be the hero in the D2C growth story?

FinTechs, as we’ve seen, are uniquely positioned to support the agile and nimble nature of D2C brands. 

As D2C brands continue to expand their market share, the synergy between FinTechs and D2C brands will only grow stronger.

In line with this growing trend, CredAble’s next-gen credit line—Revolving Short-Term Loans is designed to aid the growth of D2C brands with flexible, pay-as-you-use financing. A solution as agile as the businesses it serves, the Revolving Short-Term Loans solution allows D2C brands to scale up easily by speeding up credit disbursements, lowering the costs of financing, and recharging credit levels on repayment.

Think Working Capital… Think CredAble!