From Speed to Survival: What India's Challenger Brands Need to Compete Now
India's digitally native brands - we have to stop calling them D2C brands - have had an extraordinary run. In 2020, when lockdowns pushed consumers online, these agile upstarts spotted an opening: while legacy FMCG giants were still figuring out e-commerce, challenger brands could move fast, speak directly to customers, and own entire niches - beauty products free of harmful chemicals, snacks for specific dietary preferences, apparel cut for Indian body types.
The results speak for themselves. Some brands crossed ₹100 crore revenue in four years, a feat that took incumbents two decades. The broader sector grew at 40% annually between 2021 and 2024, almost four times faster than traditional FMCG. Today, the market sits at roughly $60 to $80 billion and is projected to reach $200+ billion by 2030.
But something shifted in 2025. The conversation stopped being "can these brands grow?" and started being "can they actually survive till scale?". We work with a lot of such brands and have seen that brands that thrived on speed and cheap customer acquisition are now facing a harder reality: unit economics matter. Supply chain sophistication matters. And the old playbook of "grow fast, optimize later" doesn't work anymore.
Why the Dynamics Changed
1. FMCG woke up. Large incumbents have moved fast - launching premium sub-brands, investing in digital capabilities, and most significantly, acquiring proven challenger brands at scale. Two-thirds of FMCG acquisitions in the last five years targeted digitally native players, primarily in personal care. Some acquired brands have seen revenue double or triple post-acquisition, gaining scale while retaining operational autonomy. This is classic consolidation led growth, which is making scale-up narrower.
2. Customer acquisition just got expensive. Between 2021 and 2025, the cost to acquire a customer through digital marketing has almost jumped by 2-3X. Why? Over 800 brands are now chasing the same eyeballs on Meta and Google. Influencer marketing is professionalized. Apple's privacy changes made it harder to track what actually works. The math is brutal and the gross margins, CAC and LTV do not triangulate.
3. Tier 2 and Tier 3 cities ,i.e. the next frontier, are operationally harder. Sixty percent of India's e-commerce demand now comes from outside metros. But reaching these customers at profit is a genuine challenge. Poor address standardization means 20% of deliveries fail on the first attempt. Cash-on-delivery preference (60–70% of orders in these regions) drives return rates three to six times higher than prepaid. For every ₹1,000 order with a 30% return rate, a ₹87 reverse logistics tax is levied due to the overall
4. Omnichannel is the baseline. Successful brands now sell across their own website, multiple marketplaces, quick commerce (Blinkit, Instamart), and increasingly offline, with an additional pressure to launch their own quick commerce offering. Each channel has different economics, pack sizes, and inventory needs. Many brands, still built for a single channel, are struggling with stock outs in one place and overstocks in another. Managing inventory across four or five simultaneous channels without unified systems is chaos.
5. Customer Experience as an Acquisition and Retention function. Gone are the days when brands could have afforded to make mistakes since the assumption was that customers would "understand". The competition is cut-throat, market is not forgiving and one small mistake by brand is an entry point for tens of rivals. With global exposure, good customer service is table stake. What's important is a differentiating customer experience that makes customers stick.
The Real Competitive Edge: Supply Chain
Here's what's becoming clear: the brands that will still be independent and profitable in 2030 are not the ones that raised the most money or have the slickest Instagram presence. They're the ones that got serious about the supply chain.
This might sound boring. But think about it from first principles. If you're burning ₹1,850 to acquire a customer, the only way you survive is if they become profitable over their lifetime. That requires solving retention, repeat economics, and fulfillment reliability. A customer who has to return an order because it arrived late, or with wrong items, isn't coming back. A brand that can't keep inventory in the right place at the right time loses sales and frustrates customers. A fulfillment operation that bleeds 25–30% of orders to returns in Tier 2 cities won't scale profitably.
Supply chain excellence becomes the deal breaker as far as economics is concerned. It's where retention is actually decided.
1. Real-time visibility. You can't optimize what you can't see. The first requirement is knowing, in real time, where your inventory is, what's in transit, what's selling through which channels. This replaces the old model of periodic reports and manual reconciliation. When you have live data on stock levels, delivery status, and channel-specific demand, you can make decisions fast - rerouting delayed shipments, triggering replenishment before stockouts, realizing a pincode is too high-risk for COD before you're losing money there.
2. Demand forecasting that actually works. Seventy-two percent of stockouts result from guessing wrong about what customers will buy. Better forecasting means integrating historical sales, seasonality, promotional calendars, even local events or weather patterns into predictions at the SKU-channel-warehouse level, not just in aggregate. Overstocking ties up cash; understocking loses sales. Getting it right is hard, but it's a lever that compounds over time.
3. Strategic supply chain partnerships, not just transactional ones. Last mile eats 53% of your total shipping cost. Brands are moving from "let's use 10 different couriers" to "let's have 1-2 core 3PL partners who get our business and we work together to solve problems." In Tier 2 and Tier 3, this might mean routing through regional specialists instead of always defaulting to national players. It might mean pincode-level risk scoring to decide which orders go COD and which need prepayment nudges. These aren't one-time optimizations; they're ongoing partnerships.
4. Disruption Playbooks. Supply Chain is both an art as well as a science. Formulae can capture science but it is playbooks that capture the art, along with the science. Outcomes matter and big needle movers that disrupt the status quo is a prerequisite of one's GTM strategy
5. Unified omnichannel systems. If your own website, Amazon, Flipkart, Nykaa, and quick commerce app are all siloed, you're fighting yourself. Real omnichannel means when a customer orders through any channel, the system finds inventory from the most efficient location (could be a warehouse, could be a store nearby, could be a dark store). It means inventory levels update across all channels instantly, so you're not overselling. This requires platform thinking, not channel thinking.
6. RTO (return-to-origin) is a profit killer that's fixable. High RTO rates in Tier 2 and Tier 3 - sometimes 25–35% in fashion - aren't inevitable. They're mostly addressable: address validation at checkout, OTP confirmation before delivery, COD nudges toward prepaid (small discounts, faster delivery), real-time tracking in local languages. Brands that nail this see 3-5 percentage point improvements, which translates directly to 8-15% gross margin improvement.
7. Mentorship. There is a certain romanticism about experiencing struggles, solving with first principles and failing before rising; a classic hero's journey. But, if you do not have the luxury of time, you need to look for mentors who can give you a crash course into what needs to done right, at the very first time. After all, the market has evolved in the last two decades anf there are enough battle scars to learn from.
A Simpler Way to Think About This
The old playbook was: spend on marketing, acquire customers cheap, scale fast, figure out operations later.
The new playbook is: obsess over unit economics, nail one or two channels before adding more, invest in operations as hard as you invest in marketing, and treat supply chain as the thing that either makes your retention story work or breaks it.
This isn't pessimistic. The market is still growing at 20%+ annually. Tier 2 and Tier 3 are massive greenfields. FMCG consolidation, while creating headwinds, also validates the model - they wouldn't be buying if these brands weren't real.
But the margin for operational sloppiness has shrunk to zero. The brands that recognize this and act on it - investing now in real-time visibility, forecasting infrastructure, and 3PL partnerships designed for profitability - will be the ones defining Indian consumer categories in the next decade.
The question isn't whether challenger brands can compete anymore. It's whether they can compete with the operational bar the market is now setting. And for those willing to make that shift, the opportunity remains enormous.