Money x d2c

Hey readers,

Welcome to the first edition of D2C Cents by Merito!

Whether you’re a founder, investor, agency owner, or an aspiring founder, you have our promise that you’ll take away something from each edition (and when you do, we’d love a reply on what you did/feedback)

In today's edition:

• The Monsoon P&L Storm: How India's rainy season destroys D2C unit economics (and the math behind it)

• Category Intelligence: Which products surge 50-90% during monsoons vs. what crashes

• 3 Battle-Tested Strategies: Monsoon-proof your logistics, marketing, and inventory management

• ROI Analysis: Why 5-15% monsoon prep investment delivers 30%+ profit protection per order

• 3 Case Studies: Farmley's ₹350Cr infrastructure-first approach, Pepperfry's PnL-over-growth pivot, and Snitch's ₹338Cr omnichannel validation

Context:

Over 44% of D2C brands identify logistics as their major operational challenge. During monsoons, India's $100B D2C market faces its biggest operational test.

Logistics become hell → Delivery costs spike and margins die a slow death → Some product categories explode with demand while others crash.

The Monsoon Math

Let's talk numbers that directly hit your contribution margins (CM).

Essentially your CM1 & CM2 can take a beating:

• CM1 (Revenue - COGS): Stays stable, but revenue drops from failed deliveries. Also logistics costs spike 15%

• CM2 (Revenue - Variable Costs (COGS + Marketing)) : Further compressed as you spend more to acquire customers you can't deliver to

India's logistics costs sit at 16% of GDP - double of what developed countries manage. Monsoons? We know it now. Makes it worse.

But wait…that’s not the whole story. There’s more to it…

The Hidden BAU Cost Killers:

• Remote area deliveries require Indian Post despite high charges when no other logistics partner reaches those pin codes during monsoons

• Infrastructure deficiencies in tier-2/3 cities create 25% higher operational costs

• Poor road connectivity adds hidden costs - think real-time tracking minus the actual linkage

Working Capital Drain: D2C startups spend heavily on inventory financing, performance marketing, and payroll during fluctuating sales cycles. Monsoons amplify all these costs simultaneously.

Rain equals increased online activity. Simple math: People stay home → They shop online → Your delivery costs spike while demand surges.

3 Strategies to Win the Monsoon Game

1. Monsoon-Proof Your Unit Economics

Advanced Inventory Intelligence:

• Build 2-3x inventory for winning categories pre-monsoon

• Geographic redistribution based on regional rainfall patterns. Mumbai gets hammered differently than Delhi. Look at drier regions to get an edge.

• Multi-layer waterproof packaging to reduce damage rates

RTO Management:

• Prepaid incentives drop RTO from 40% to under 5%

• IVR verification for COD orders

• BNPL integration to reduce COD dependency

2. Weather-Responsive Marketing

Dynamic Campaign Triggers:

• Flash sales triggered by real-time weather conditions

• Geo-targeted promotions for different rainfall regions

• Category-specific messaging: "Monsoon-proof your makeup," "Comfort food for rainy days"

3. Smart Logistics Intelligence

Tech-Forward Solutions:

• Weather forecasting integration with delivery scheduling

• Multi-carrier partnerships with local monsoon experts

• Proactive communication with realistic delivery expectations

ROI of Monsoon Preparedness

Bottom Line: Monsoons are a stress test for your unit economics. The brands that prepare for the storm don't just survive it; they use it to pull ahead of competitors who get caught unprepared.

What did you think of our first D2C Cents Newsletter edition? Let us know by replying to this email :)

See you again next time,
Abhishek