Micro-brands: Redefining the way the world shops

The past decade has celebrated brands like Walmart, Amazon and Tesco; brands that have been able to scale in size and dominate their categories. In contrast, the last couple of years have seen these behemoths battle not with other big brands but rather with thousands of tiny brands, each with low overheads and efficient customer acquisition tactics.

Through the ages, small companies typically have had profits that match their size, but modern technologies have allowed for a paradigm shift. ‘Micro-brands’ are the latest iteration of small brands that have been enabled by streamlined modes of production and access to a global market. The brands are using a combination of hyper-targeted marketing and small batch inventories to compete against the giants in their industries.

The Long Tail: Why the Future of Business is Selling More for Less authored by Chris Anderson back in 2016 is an illuminating read on this particular subject. His theory delves on the fact that the Internet created a platform for a plethora of retail sites that are cheap and easy to access to shoppers. On the supply side, the Internet also provides the same accessibility to an unlimited number of vendors and their services. This combination assisted a shift for consumer demand from the few ‘mass market’ brands to the millions of smaller niche brands. The chart below illustrates Chris’s theory with the narrow skyscraper of traditional gigantic retailers on the left and the long tail of micro-brands that seemingly extend infinitely into the distance.

Forbes refers to microbrands as “digital-first brands, direct-to-consumer brands, digitally native vertical brands, challenger brands and so on.”  Brands that are typically mobile-first, hyper-social, channel fluid and deliver the perfect buying experience to net-savvy consumers with extremely high expectations.

Companies such as Casper (mattresses), Warby Parker (spectacles), Dollar Shave Club (men’s razors) and Glossier (cosmetics) were once seen as oddities, new-age e-commerce brands that delivered directly to customers houses. Time has proven that these companies were able to shake up mammoth incumbents who had grown used to uninterrupted global domination.

Operating through a direct-to-consumer (DTC) model and shaped by a combination of customer centricity, ease, and convenience, micro-brands are able to by-pass the traditional middle man and reap the benefits of directly engaging with their shoppers on a global scale. Highly engaged digital communities and access to data streams that can, in turn, inform their strategies for product, pricing, design and market expansion. These differences highlight the gap between what consumers want and what traditional retail offers.

A study that looked at factors of success for brands from 2000-2013 and 2013-2018 illustrates a significant change in the mindset of the global consumer. A change from the established norms of brand equity, familiarity and scale; to a market that prefers innovation, speed, authenticity, personalisation and customer experience. These changes line up with key demographic characteristics of Millennials, reflecting a market that will not settle for the ‘same old’.

20th-century consumers once did trust big brand names, and this helped consolidate and boost the growth of national chain retailers, but today’s shopper is increasingly wary about big brands. According to the Edelman Trust Barometer in 2018, only 48% of people say they trust big brands, down from 58 percent just one year before.  This loss in trust is translating into shopping dollars shifting towards smaller brands who are seen as more authentic and trustworthy.

The table below by Nuxeo Research highlights 5 value drivers that consumer-packaged goods have traditionally benefitted from and their respective digital disruptors.

A look at some key factors that helped micro-brands be the successes that can be:

1. Low barrier of entry into the market place with social commerce platforms like Shopify allow them to sell anytime and anywhere

2. An efficient usage of social media has created the possibility to build authentic relationships through hyper-targeting shoppers and leveraging user-generated content

3. A key priority on customer experience enables them to build authentic relationships with customers

4. Designed with tightly managed supply chains, micro-brands carry low/no inventory and often produce small batches on demand

5. The ability to harness feedback and roll out iterations almost in real-time creates products that can evolve with the market

6. Being able to spot emerging niches and rapidly spinning off new product lines

A case study that is FashionNova: A brand that put its ‘social listening’ and influencer marketing strategy on steroids, producing fast-fashion through an Instagram first approach. It quickly identifies trends through its millions of followers and manufactures small orders on-demand which are then pushed out through a network of influencers. This results in its stocks selling out almost always. 2018 saw the brand launch 500 new styles every week, illustrating that the brand excelled at two key pillars – speed and scale.

As consumer tastes become more specialised, big businesses are being forced to accept that a certain percentage of the market will always be lost to agile micro-brands. The other alternative is that they too try to play the game of rapid innovation or buy out the smaller brands before they become unassailable – case in point Gillette buying Dollar Shave club for a billion dollars.

The bottom line is consumers are increasingly empowered and demanding, expecting that brands to wrap around their lifestyles and not the other way around. The world has become an accessible market of unlimited choice and the big brands of yesteryear can either change their established ways or watch microbrands of today become the household names of tomorrow.