Thrive don’t just Survive: Winning in D2C by Bharati Balakrishnan - EngageMint 2023 Bengaluru

Sure, thank you Apurva for starting us like that, and thank you everyone for being here. Good afternoon. I'm just here to share the wonderful story of Shopify. You probably know us very well as a global company, but I'd love to add some color in the India context, especially what we've been doing in the last couple of years here. Apurva, if we were to take a step back, we think of our journey in India in three phases. In the first phase, in the early 2010s, Shopify itself is only 17 years old, we've been in India for a large part of that, maybe 12 or 13 years now. From about 2010 to 2015, when we really started stepping out of Canada and North America, India's role in the Shopify ecosystem was really about the partners. As you may know, we're a product company and a lot of what we do is deliver to the end customer, in this case a merchant. We have partners who are typically agencies who run their own shops and are entrepreneurs in their own right, or developers and tech partners like you all. But I think around the mid-2010s, India started becoming a merchant market, primarily because e-commerce in India reached that $10 billion mark annually in GMV, and the first few D2C brands were born, which are all household names today like Boat, like Sugar. We're very proud that they've all grown up with us, we've grown up with them. We started working on making the product more relevant to India, including things like solving for cash on delivery, etc. In the last 5 years, we've really come into our own stride. Some of it obviously has been put on steroids by COVID. We find a lot of the traditional brands or the established brands have learned e-commerce now. Payments and shipping are solved problems, so the traditional brands have taken their brand.com very seriously now, whether it is to deliver an omnichannel strategy, or to reach new markets, or just to deliver a better discovery experience for the customer, because no matter where the customer is shopping, they come and look at you on your website first. The Duroflexes, Jockeys, Westsides have all become a part of the Shopify family. Today we are at a point where we only see this growing from stride to stride. The D2C ecosystem is thriving, there are new brands every day, and the traditional brands are starting to take their own website very seriously. Those are the tailwinds we're riding today in India.

Yeah, stage is the key word. Depending on the stage you're at, the challenges are very different, as would be true in any business, but especially while building a brand. There are about two or three that come to mind. Some of these are global. I think inflation is a real challenge today. The cost of making any product, regardless of category, has gone up especially after COVID. Whether to pass that on to a customer or not, whether to increase prices or not, whether to reduce margins are serious challenges across the board. So if you are grappling with some of that, know that you're not alone; we see this every day across brands. The second is that it's fiercely competitive. If you're building a new brand in India today, it's not like it was 5 years back. I think there's a very good D2C playbook. Whenever people ask me for a playbook, I tell them just go to LinkedIn, man, everyone's putting one out every day. This is a solved problem. If you want to build a D2C brand today, there's like two pages to read and get started. But building a big brand that outlives you and me is no trivial challenge. It wasn't even in the old world. By the way, I used to be at Big Bazaar before this, so I've seen many brands being built in the offline world. Building a brand takes time, it is not like building a tech platform, and rushing that process hasn't worked for anybody. Competition is real. As easy as it is to get started today, there are as many people like you or me who want to build a D2C brand. The third one that comes to mind is loyalty is a real challenge. I think people are very focused on acquisition, rightly so because you're just getting started, but there's very little focus on trying to get that customer to make the second purchase. You may be the best brand, you may have delivered on the exact promise that you offered on a banner, and it's still hard to get a customer back because in many categories, consumers are experimenting. I find a lot of brands don't do much between the first purchase and the second, or the second and the third; we're so rapidly focused on acquisition. So I think loyalty in general has become a big challenge across brands from where we sit. That's what we see.

Yeah, it's a good question. I don't think there's one answer again; it really goes back to the stage. I find brands abroad do it really well more so. I think there are younger brands in India who do it well. Look at the early stage: the founder is so involved in the brand. Very often, the brand is an extension of the founder's personality. That little thing about sending a note to your customer, or doing those five calls a day as the founder or a senior member of the team, those things really matter because the trust is actually built with you as an individual and less with the brand. It's true for any startup by the way. A very long time back, I started a company; I was employee number two, and I think most people who I sold to bought because they met me versus who we stood for. That's just how all businesses start, all relationships start. So at the early stage, it's very important for the founder to sort of almost be the face of the brand, if you will. But as you grow up, putting processes in place are very important. I think we are so focused on when something goes wrong that we rarely do a lot when something goes right. As an example, there are small brands on Shopify who use something called Flows. I don't know if some of you here are Shopify merchants, but there's a very simple feature called Flows which lets you basically write an if-then statement. If the customer comes back for the third time, ship them a freebie from the warehouse. These are little things that create delight that you can use technology to do that maybe you were doing individually when you were 10 orders a day. So focus on your super customer at the early stage, delight them so they go and talk to many people. As you scale up, operational efficiency is very important. I cannot underline it more. I'll give you an example of a very big brand like Duroflex, who runs their enterprise business online on Shopify, but recently Duroflex also integrated their Shopify POS with all their EBOs, which I think now are about 40 or 50, I'm not sure. So when you go into a Duroflex store now, if you've ever shopped online, I know exactly what you bought, I know when you bought it. Similarly, for someone who came in and placed a query offline, I'm able to collect information that goes back. These sound like things that we've been talking about for many years, but technology today has made it quite simple to do these things. Being thoughtful in how you use technology from day one really goes a long way in how you eventually differentiate in front of the customer. Keeping all this aside, a brand ultimately survives because it differentiates, and D2C is no different. I think unlike North America, I've not seen brands truly be D2C only here; there are very few. You can be D2C first because it's always easy to learn from the channel, you get firsthand customer feedback which you don't get on the marketplaces, you don't get in GT or MT. But beyond that, any brand that reaches 100 crores in India, whether today or yesterday or 20 years back, has always been in more than one channel. That's just reality. So from day one, planning for that and then thinking about what your product is that transcends these channels is very important. I find that the best founders globally spend all their time on the product and the value prop and very little time on everything else. Maybe that's something to learn from.

So one example we spoke about: the single view of customer for established brands. I would highly recommend from day zero you got to be there, because you are sitting on a gold mine of data versus D2C brands. You have so many customers who have already bought from you. So setting up your POS to collect data, sending it to a common data lake, making sure your inventory data is flowing there as well, making sure your online data is flowing there as well—this feels like a big mountain to climb, but it's really worth climbing. Beyond that, if I were to give you some other examples, I think it's really about focusing on who your customer is. One merchant in Malaysia comes to mind, called Flower Chimp. They're a flower delivery service. I remember when Nicholas, the founder, was talking about how they think about their business and how they use data. He said, 'One of the numbers I watch is what percent of my marketing spend goes into retention technology and then retention marketing.' I was a little bit like, really? You know, you're still in growth mode, you're acquiring customers, but he said, 'Look, I sell flowers. The average household uses flower delivery twice a year, probably much more, four or five. My obsession is how do I get X percent of my customers to shop from me twice a year? What does that add up to, and does that get my growth?' It feels like something very simple but something you can really lose sight of in the everyday. This answer is different by category, and when you're very early, focusing on this answer may not get you to your target growth. But to know how much of the growth can come from this, to obsess over getting that, and to use the right technology to do that is really important. So something like Flows on Shopify just lets you do that on day zero, or eventually, use someone like Web Engage because it gets more complex with time, you want to create different journeys, but also focusing on what exactly you're saying between purchases. You've come today and gone, and I've forgotten you till you come back again, or I'm just torturing you with nonstop remarketing. But what am I really saying to you? What do I really want to say to you? Do I have a view on what you're likely to buy next, and how do I graduate you to that purchase? Making sure your content reflects all that, being a little thoughtful, goes a long way. Using data to leverage what is a low-cost transaction for you should feed into how much money you open up for acquisition. Another example: we always tell traditional brands to have an app on day one. If you're a D2C brand, take your time because you may not even be at 100,000 customers yet. But with a traditional brand, you have people coming every day to your stores and they're leaving, and you have no way to engage with them beyond an SMS or an email if they've given you that. But if they're on a mobile app and they start talking to you, there's so much more you can do with them. Little things like that capture data and thoughtfully use them in low-cost ways to do more with the customer, then let you put more money into really expensive acquisition channels.

Yeah, I'd like to reiterate a lesson I've learned, and honestly, I've been a merchant far longer than I've been on the platform side: you always have to think of India in slices. The day you think it's a billion people market is the day you make the biggest mistake, and many brands have come and made that mistake in the decades that have seen retail grow in India. At a very high level, we see two broad buckets. There are brands who are selling at a 1,500 plus price point, 2,000 rupees plus price point, regardless of category. Obviously, there's mobile phones and electronics which always operate at higher price points, but broadly speaking, you should know that you're in the premium bucket when it comes to the Indian consumer and know exactly who that market is. That's where a lot of brands are starting to use cross-border as a way to reach the Indian diaspora, if not a wider audience. A lot of fashion brands in India typically cater to what we'd call India 1, people with high disposable income in India, unlikely shopping on the marketplaces, usually going to brand.com, but also then servicing the Indian diaspora globally. Many brands today are highly profitable and they ship to Australia, Canada, UK, GCC. I must say we make it really easy with Shopify Plus; you could set up 10 expansion stores at the same time with the relevant payment methods and do it. So we see that's one trend. The second trend is if you're more mass and really operating in a whitespace, what's happened is, we were talking about this Apurva a while back, around 2007-08. I used to be on the platform side, I was running a bunch of categories at Paytm. There were many categories we didn't take seriously because at that point the market was at about $15 billion, so very few categories crossed the billion dollar mark that then became a market attractive to actually start a brand online. Today, that has completely changed. At $40-50 billion, depending on the data source, there are several billion dollar categories. Categories like fitness accessories, health accessories, fashion accessories, a lot of brands like Bliss Club, a Shopify brand again, are born because these categories have become meaningful online. So finding that whitespace and leveraging online channels, not just your brand.com but marketplaces as well, and then quickly moving offline where it makes sense, is key. Honestly, even in the 2010s or the '90s, when an Allen Solly was built or many of the iconic Indian brands were built, they were not built in one channel. They were built in their EBOs, in the Big Bazaars and the Reliances, and they were also built eventually online. I don't think that has changed. D2C makes it easy to get started, but depending on which cohort of consumer you're chasing, you have to be very careful to make sure you're entering all the channels at the right stage that your consumer is in.

Sure.

Yeah, I mean we look at that as merchant growth. I think there continues to be tremendous growth in India on merchants adopting digital tools, including people like us. COVID definitely helped accelerate that journey. We see merchants start to use someone like us earlier. They would start with their social group on WhatsApp or Instagram or a Facebook Marketplace, and then once they see a certain flow of orders, they would do this full-time and then come online to us. But we see that journey is definitely started earlier now. Also, things have become simpler. I think a good product should compound, and that's happened to us as well. So there are many merchants who today aspire to sell globally. Because payments and shipping is solved in India, it's much easier to start a business today than it was 5 years back. We also have a startup plan; I don't know if you've seen that, it's like 399 a month or something. So it's really easy to get started and try things. Definitely we see a lot of small single entrepreneurs or hackers start much earlier today than before.

Yeah, I feel someone who is running a business today is probably in a better position than me to answer. I've not been running a brand now for two or three years. But to be honest, I feel a strong focus on loyalty which I've never seen in my... I've been here almost 3 years now, I did not see that about a year back. Good brands are very focused on building how they need to grow bottom-up. The brands who are at, let's say, 100 crores plus a year overall, I see them do the math on how much they're going to get from their repeat customers and at what cost, and then budget what they're going to put into acquisition. Even with influencers, I think there's far more maturity in the industry today on when you're doing it for awareness and when you're doing it for trial and purchase. There's things like Shopify Collabs, I don't know if you've tried it, you should try that, it makes it easy to manage influencers now, which wasn't there even two years back. So it shouldn't cost you a lot to try something; that's our goal. I see a lot of good brands use Collabs to work with 100 influencers easily where earlier they had to do it back and forth on email and hire a resource, which constrains how much you do. A lot more influencers are willing to work on a variable model than before. I don't know how long it'll last, but today I see that trend. The last one I'd say is absolutely brands are going offline earlier. If you ask me, that should have happened even 5 years back. For some reason it didn't. I mean, India's always been this retail-dense market, and you can never be, even if you're in one city, you need to be in more than one channel. We see that but also there's something called B2B as an offering we have now, we didn't have that two years back in the same manner. We see a lot of brands use that to extend their distribution. For example, I might be a very metro-focused brand, but I'm seeing demand come in from Ujjain or Indore. It doesn't make sense for me to set up a store or even a distributor; I'm worried I may not be able to feed them, but I can orient them to the Shopify B2B store and do that business. So we're also seeing brands get into B2B much earlier, in line with getting into offline.

Yeah, support is a very layered level of service. I have to start by saying, look, we are a product company. We put out product as a platform that people can build on and take further. When we try to build a commerce product that serves 175 countries, we are the first to acknowledge that we can't build all the features ourselves, because then we wouldn't be able to service 175 countries. Tax, like you mentioned, is a great example. If we had to build tax for every country, it would become incredibly complex, and I'm quite sure we wouldn't do the best job of it. That's why we have plugins like WebPlanex or a GST app, I forget the name, who work with us. We're a big fan of partners like Web Engage and other tech partners who work in our ecosystem. India actually has the biggest ecosystem, I think globally. We have about 8,000 apps at Shopify, and India is the second biggest contributor to that. So for us, the app partners are as much a part of our stack as we are. Without them, we're not a complete solution. In terms of reaching Shopify support, we're a global company with global support, and mostly we've been very responsive. But I'd always encourage merchants, especially in India where we're not big fans of doing it ourselves, we like to have someone hold our hands, to work with partners. We have a very wide partner network. Happy to introduce you to a few offline. You can find them easily online, on Reddit. It's a very thriving ecosystem. Typically, merchants who are very successful with Shopify in India will always work with a partner. That's a good starting point.