The fintech startup Velocity has recently made headlines with its announcement of allocating ₹400 crore to meet the financing needs of Direct-to-Consumer (D2C) and e-commerce brands in India. This significant investment is particularly aimed at empowering brands during the busiest sales period of the year—October and November—when festive season sales traditionally contribute to a large portion of annual revenue.
The Importance of the Festive Season for E-commerce Brands
For online brands, the festive season, encompassing the months from September through December, is a crucial time. It is during this period that brands typically see a 1.5X to 2X surge in sales. The increased consumer spending during festivals like Diwali, Dussehra, and Christmas creates an opportunity for e-commerce and D2C brands to significantly boost their revenue. According to industry estimates, this festive season alone accounts for 40-50% of the annual sales for these brands, underscoring the importance of effective financial planning and inventory management during this period.
Recognizing this, Velocity has increased its allocation by over 60% compared to the ₹250 crore it earmarked in 2023. This decision reflects the industry’s optimistic outlook for the 2024 festive season, anticipating a substantial uptick in consumer demand and sales.
Velocity’s Innovative Financing Model: Fueling Growth without Diluting Equity
Velocity’s financing model is centered around cash flow-based debt financing, a strategic approach that allows brands to meet their working capital needs—such as inventory stocking, marketing campaigns, and operational expenses—without having to dilute equity. This model is particularly advantageous for D2C and e-commerce brands, which often operate with tight margins and require substantial upfront investment to capitalize on peak sales periods.
By focusing on cash flow rather than collateral, Velocity enables brands to access the necessary funds quickly and efficiently. This is crucial during the festive season when timing can be everything. Brands need to build up their inventory, launch aggressive marketing campaigns, and streamline operations to meet the heightened consumer demand. Velocity’s financing ensures that these brands are well-equipped to maximize their sales potential during this critical period.
The Role of Quick Commerce in the 2024 Festive Season
In addition to traditional e-commerce platforms like Amazon, Flipkart, Myntra, and Shopify, quick commerce is expected to play a significant role in the 2024 festive season. Quick commerce platforms such as Blinkit, Instamart, and Zepto, which promise rapid delivery times, have seen a surge in popularity, particularly among urban consumers who value convenience and speed.
Abhiroop Medhekar, Founder and CEO of Velocity, highlighted the impact of quick commerce on festive season sales, noting that brands listed on these platforms are observing a significant sales boost of 20-30%. This trend is indicative of the evolving consumer preferences in India, where the demand for faster delivery options is reshaping the retail landscape.
As quick commerce continues to grow, it presents both opportunities and challenges for brands. On one hand, it allows them to tap into a new segment of consumers who prioritize speed. On the other hand, it requires brands to be more agile in their supply chain management to meet the shorter delivery timelines. Velocity’s financing solutions are tailored to help brands navigate these challenges, providing the necessary capital to optimize their operations for quick commerce platforms.
Anticipated Growth in the E-commerce Sector
The 2024 festive season is expected to be particularly strong for e-commerce in India. According to a report by Redseer, e-commerce sales during this period are projected to grow by 20%, building on the 13% growth in e-commerce gross merchandise value (GMV) recorded in 2023. This growth is driven by several factors, including increased internet penetration, rising disposable incomes, and a growing preference for online shopping.
Moreover, Invest India forecasts that India’s e-commerce sector will attract 500 million shoppers and reach $325 billion by 2030. This presents a tremendous opportunity for D2C and e-commerce brands to expand their market share and scale their operations. However, to capitalize on this opportunity, brands need access to capital, particularly during the festive season when competition is fierce, and consumer expectations are high.
Velocity’s ₹400 crore allocation is a timely intervention that will help brands meet the increased demand and position themselves for long-term growth. By providing flexible financing solutions, Velocity is enabling brands to scale their operations, invest in marketing, and manage their cash flows effectively during the peak sales period.
Velocity’s Track Record and Future Outlook
Founded in 2020 by Abhiroop Medhekar, Atul Khichariya, and Saurav Swaroop, Velocity has quickly established itself as a leading fintech player in the D2C and e-commerce space. To date, the company has successfully financed ₹1,000 crore across 2,000 deals, with an average ticket size of around ₹50 lakh. This impressive track record speaks to the company’s deep understanding of the needs of e-commerce brands and its ability to provide tailored financing solutions.
In 2023 alone, Velocity deployed around ₹400 crore in financing, and the company is on track to double that amount to around ₹800 crore in 2024. This growth trajectory is indicative of the increasing demand for Velocity’s services as more brands recognize the value of cash flow-based financing in scaling their operations.
Velocity’s portfolio includes well-known brands such as Chumbak, Koskii, Power Gummies, Bella Vita Organic, and Blaupunkt. These brands have benefited from Velocity’s financing solutions, which have enabled them to scale their operations, invest in growth initiatives, and ultimately increase their market share.
The Broader Impact of Velocity’s ₹400 Crore Allocation
The ₹400 crore allocation by Velocity is not just a significant milestone for the company; it also has broader implications for the D2C and e-commerce sectors in India. By providing much-needed capital to brands during the festive season, Velocity is helping to drive the growth of these sectors, which are critical to the Indian economy.
The D2C and e-commerce sectors have seen exponential growth in recent years, driven by changing consumer preferences, technological advancements, and the increasing availability of online shopping options. However, this growth has also brought with it new challenges, particularly in terms of managing cash flows and financing inventory and marketing expenses.
Velocity’s financing solutions address these challenges head-on, providing brands with the flexibility they need to navigate the complexities of the festive season. This, in turn, helps to ensure that brands are able to meet consumer demand, generate revenue, and continue to grow their businesses.
Moreover, Velocity’s focus on cash flow-based financing is particularly relevant in the current economic environment, where many brands are looking to scale their operations without diluting equity. By providing non-dilutive financing options, Velocity is enabling brands to retain control of their businesses while still accessing the capital they need to grow.
The Future of D2C and E-commerce in India
As India’s D2C and e-commerce sectors continue to evolve, the role of fintech companies like Velocity will become increasingly important. These sectors are expected to see continued growth in the coming years, driven by factors such as increased internet penetration, rising disposable incomes, and a growing preference for online shopping.
However, this growth will also bring with it new challenges, particularly in terms of financing and managing cash flows. As competition intensifies and consumer expectations continue to rise, brands will need to be more agile and responsive in their operations. This will require access to flexible financing solutions that can help them navigate the complexities of the market and capitalize on opportunities for growth.
Velocity is well-positioned to meet these needs, thanks to its innovative financing model and deep understanding of the D2C and e-commerce sectors. As the company continues to expand its portfolio and increase its allocation, it will play a key role in shaping the future of these sectors in India.
Conclusion
Velocity’s ₹400 crore allocation for the 2024 festive season is a testament to the company’s commitment to supporting the growth of D2C and e-commerce brands in India. By providing flexible, cash flow-based financing solutions, Velocity is enabling brands to meet the increased demand during the festive season, invest in growth initiatives, and ultimately scale their operations.
As India’s D2C and e-commerce sectors continue to grow, the role of fintech companies like Velocity will become increasingly important. With its innovative financing model and strong track record, Velocity is well-positioned to help brands navigate the complexities of the market and capitalize on opportunities for growth.
The 2024 festive season is shaping up to be a critical period for D2C and e-commerce brands, and Velocity’s allocation is a timely intervention that will help these brands maximize their sales potential and position themselves for long-term success.