Is Mamaearth Torn between Offline and Digital
According to speculation, Mamaearth plans an IPO with a value of $3 billion
7 January 2023
Mamaearth's digital origins can't be denied, but lately it's been betting big on brick and mortar"
"As it prepares for IPO, Mamaearth plans to double down on offline expansion with 35 brand outlets and 430+ modern trade locations"
"Despite the company's self-proclaimed 'digital-first' approach, offline sales have actually driven revenue in recent years"
Mamaearth, a digital-native brand, has faced criticism for its shift towards offline expansion as it approaches its IPO. While the company has traditionally positioned itself as a digital-first brand, it has recently opened 35 brand outlets and expanded to 430 modern trade locations.
This shift, along with a lack of new product launches and muted marketing efforts, has raised questions about the company's long-term sustainability.
Many D2C brands in India have adopted lean, sustainable approaches and prioritised online sales, but Mamaearth's offline expansion strategy aligns with its product development approach, which emphasises quick iteration and launches to stay ahead of competition and capitalize on trends.
In fact, the company has launched 2.6 times the median number of new SKUs in the industry, according to its DRHP. While online sales still make up over 60% of total sales, offline sales have contributed significantly to revenue in recent years.
This transition from a digital-native brand to a more traditional approach highlights the challenges and dilemma faced by D2C brands in India, which must find a balance between online and offline channels to succeed.
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Mamaearth's D2C Crisis
The company has stated that it may pursue a pre-IPO round of INR 80 crore, or $10 million, to cover the higher costs associated with retail expansion. However, the majority of its IPO proceeds will be directed towards offline marketing and expansion.
To fund this growth, Mamaearth plans to allocate roughly 10% of its IPO proceeds, or INR 35 crore, to opening 44 new EBOs each year until 2026. In addition, INR 186 crore will go towards marketing and advertising expenses and INR 28 crore will be invested in BBlunt expansion.
While the emphasis on offline sales and presence is clear, it remains to be seen if this approach is sustainable in the long term.
The profit margins for Mamaearth are thin, and the company relies heavily on a single flagship brand. In order to break through the clutter of physical retail and compete with other D2C giants, it may need to diversify its brand offerings and consider automation to drive sustainability.
Additionally, it remains to be seen if the company can continue to pump out new products and expand its offline footprint without overleveraging its production lines.