Customization is the new buzzword in the direct-to-consumer world, and venture capitalists are betting it will be the next growth driver for startups.
Online-first brands like Traya, Ravel, Bombay Shirt Company, CloudTailor, Make Your Own Perfume, Flo, The Pant Project, K-KIX and WomanLikeU cater to specific customer needs.
Customization is no longer limited to gifting or occasional use. Consumers are seeking personalized items over one-size-fits-all products across categories such as hair care, apparel, furniture, furnishings, cosmetics, footwear, jewelry and more.
According to a Deloitte report, millennial and Gen Z consumers prefer customization 60% more than Gen X. Additionally, one in five consumers are willing to pay 20% more for an exclusive, custom product.
According to Tracxn, India
Leading D2C and e-commerce companies like Nykaa, Giva, Mokobara, and Purplle are also joining the trend. However, they offer customization as an add-on service at an extra cost and not for all SKUs. For example, PeakXV Partners-backed Mokobara offers a simple and popular customization: engraving a name or phrase on a metal logo plate.
VCs believe that customization will play a major role in driving growth as the D2C and e-commerce sectors evolve. “A few years ago, customization was limited to T-shirts and mugs. But today’s consumers expect everything, including their shopping experience, to be personalized to their specific interests,” Yagnesh Sangrajka, founder and CFO, 100X.VC, told FE.
The company invested in WomanLikeU, a clothing brand for women that allows customers to customize products online in a few easy steps. The startup, which launched in May 2022, sells to more than 25,000 women. Last year, monthly sales increased from Rs 1.5-2 million to around Rs 7 million.
Customised brands saw the highest increase in furniture and apparel, followed by haircare, footwear and accessories. Customised furniture platform WoodenStreet’s operating revenue grew 48.1% to Rs 1,940 crore in FY23 from Rs 1,310 crore in FY22. In February, clothing brand Bombay Shirt Company raised Rs 540 crore in a Series B funding round led by Singularity. Last week, The Pant Project raised $4.25 million in a Series A funding round led by Sorin Investments.
Perfume is another fast-growing category. Founded in 2017, Kerala-based Make Your Own Perfume currently has 23 stores across Kerala and in Bangalore.
Fireside Ventures, one of the early backers of many D2C companies like MamaEarth, boAt, and Bombay Shaving Company, believes that with the right customization, more online-only brands will scale faster. The firm has invested in Traya, a holistic haircare platform that offers personalized solutions. The Rs 3,000 crore online-only brand recently raised an equity round of Rs 750 crore from private equity firm Xponentia Capital.
“When we invested in Traya two-and-a-half years ago, it was a Rs 70 crore per annum business. The brand has grown so much because of its unique model which focuses on the efficacy of the solution and not just the sale of the product,” VS Kannan Sitaram, co-founder and partner, Fireside Ventures, told FE in an earlier interaction.
“There is a market
Moreover, customization solves one of the biggest pain points in e-commerce today: returns. According to Unicommerce’s India E-commerce Index Report 2023, return orders accounted for 10.4% of total orders in FY23, with apparel standing out as the online purchase category with the highest returns, with return rates ranging from 25-40%.
“When you do personalisation, you are capturing customer information, which comes at a cost, but that information is reused for future purchases, thereby ensuring repeat purchases, fewer returns and increased brand loyalty,” Praveen Govindu, partner, Deloitte India, told FE.
