Your Brand’s New Challenger: The Online Market Place


There is a silent revolution emerging in the market place and it is taking established brands and retailers by surprise. A broad shift is taking place in how consumers are buying and getting products delivered. Firstly, it’s all moving on-line and secondly on-line business models have been quick to offer fast, easy and hassle-free shopping experiences. Thus challenging established brands and retailers alike on their existing value proposition.

Online businesses are offering same day deliveries, subscription based models and customization to appease the new generation of consumers. All of which is helping online brands reach consumers directly, obviating the need to share margins with middlemen, sales staff, and retailers. While this is all good news for the online businesses that are paving the way, it’s posing a real challenge for established brands.

Category leaders like P&G have been caught off balance as the market for razor blades, diapers, and other everyday staples move on-line. Newer companies such as the Dollar Shave Club and Honest Company are offering monthly subscriptions; free trial kits and often promotions such as free shipping. Therefore making it super convenient for consumers to receive everyday staples in the comfort of their homes, at great prices.

Take the shaving market for example; WSJ recently reported that web sales of men’s shaving gear in the US have nearly doubled to $263 million in just twelve months. While P&G commands more than 60% of the retail market, in the online world it controls only a fifth of the pie. The online leader Dollar Shave Club started three years ago and already makes $140 million in sales or almost 40% of the online sales. Its proposition is simple – it provides monthly mailings of blades in plain cardboard envelopes, with the promise that a subscription will save consumers money over the leading brands. Thus, completely skipping all the marketing costs companies like P&G invest in to build Gillette’s premium market position.

The online world is finding a subscription and home delivery model for everything , even something as mundane as samples. Challenging malls and retailers as well. Thus, no industry is spared. One of the biggest draws to hitting the malls is the tons of free samples. Who doesn’t love samples? Birchbox, an online company has found a way to commoditize it and steal sales from brick and mortar cosmetic companies. Birchbox is a popular online retailer that ships beauty box samples custom tailored to their consumer’s preferences on a subscription basis. Armed with the insight that while consumers love to ‘try before you buy’, they also want to do so in the comfort of their home.

But online retailers don’t provide such services. So consumers have to go in crowded malls to try before buying. Birchbox addressed that barrier by shipping out beauty samples, neatly packaged in the company’s cardboard boxes with a monthly subscription of $10 or $110 for a year. Just as the online retailer intended, the samples lead plenty of shoppers to buy full-sized goods from its own online store. According to Slice Intelligence, that ran a three month survey of online spending on Birchbox and other competitors such as Ulta and Sephora, consumers increased spend by 38% on Birchbox.

Even the pet industry is being challenged. Pet friendly services are also being offered online via BarkBox. With what started out as a simple means of providing a variety of new and different toys, treats, and grooming supplies for dogs has taken off with gusto. With 200,000 subscriptions and over 100 different types of boxes a month this brand has provided the essentials: consistency, convenience, variety and specifically geared products for the consumer, both man and pup. So how does it work? Consumers are given an interactive opportunity to build their box based on their pet size, thus offering a personalized experience for the owner.

These online companies (Dollar Shave Club, Birchbox, BarkBox) are onto something, in that not only must your brand be simple and convenient, it also must be able to customize itself based on consumer’s individual needs. One size doesn’t fit all. It’s how you can unite and empower different consumers by their purchase of products that will not only make them happy, but also have a positive effect on others afterwards.

So how should established brands combat this new online enemy that’s eroding their market share? Below are a few tactics your brands can consider:

Understand Your Consumers Buying Journey

Given that over 80 percent of buyers are starting and completing their journey before they even interact with your brand, brands need to invest in understanding where consumers are researching their products – is it search engines, social media, blogs etc? Many companies balk at the cost of investing in agencies that can help them understand the buyer’s journey in-depth.

But it’s pivotal to understand where to intercept the buyer. This is the first step to understanding how your brand should evolve. As in the case with the beauty industry, if consumers are scouring Pinterest and Instagram for inspiration, your brands need to intercept them there, catching their eye long before they even set foot in-store or shop online.

Invest In E-Commerce Platforms That Delight

As more and more customers start their buying journey online, companies can also encourage them to finish that journey online – by investing in e-commerce platforms that not only replicate offline shopping experiences, but enhance them as well.

Brands can explore subscription based business models for everyday staples, provide suggestions for complimentary items, provide reviews, help customize and personalize a customers shopping journey by only sending relevant promotions and even automating paying methods. All of which companies like Amazon and eBay are already providing. Thus making the buying process seamless for consumers. All of this isn’t possible to replicate offline.

If You Can’t Fight Them, Join Them

Established brands cannot fight the online duel alone , thus they need to partner with companies and start-ups that are able to deliver against expectations of online consumers. For example, as customers expect same day delivery, brands need to consider partnering with start-ups, like TaskRabbit, who offer the last mile delivery service. Last flu season Walgreens partnered with TaskRabbit to deliver medicines to their customers who couldn’t go in-stores.

In another example, as Gap struggled with sagging sales, it looked for fresh ways to energize its brand. Gap recently partnered with online retailer Birchbox to encourage shoppers to try their beauty products by signing-up for samples in Gap stores. Thus bringing the online in-store and the in-store in home.

Customize, Customize, Customize

It’s clear that the millennials want customization and personalization. Online brands such as Birchbox and BarkBox are offering this to customers. It’s also clear that the consumers care less about brands and more about individual brand expression. Thus, brands must go beyond stereotypes, drill down and figure out what is important to their consumers and customize every aspect of the brand interaction. Established brands like Coke have cracked the code when it launched ‘Share a Coke’ campaign and found a way to print individual names on bottles.

The reality is that the internet has rapidly transformed shopping behavior and companies like Amazon who have been early adopters (started 16 years ago), have further altered consumer expectations – offering customer reviews, automatic payments, product suggestions, two day shipping, and convenience with Amazon Mom, Student, and Prime subscriptions.

While established brands across categories like P&G, Gap etc. have been swift to create an online presence these brands haven’t fully unlocked the potential of online shopping and how to surprise and delight customers in the crowded, noisy online marketplace.

It seems foolish that in 2015 we are still talking about e-commerce, when mobile is the next big wave. But the reality is that many established brands who have historically sold through retail channels or brick and mortar stores, are for the first time experiencing selling directly to the consumers. This is a huge shift in mindset and requires brands to re-engineer their thinking, value proposition and delivery.

If brands don’t revisit how they approach online consumers, they are missing the chance to engage with their customers and create brand advocacy, leading to declining sales.

One-thing brands shouldn’t forget is that losing online means losing offline in the long run.

Resources:
http://www.bloomberg.com/news/articles/2015-06-10/beauty-startup-birchbox-is-boosting-the-sales-of-competitors
http://www.wsj.com/articles/SB12147335600370333763904581058081668712042
http://www.pymnts.com/in-depth/2015/ecommerce-is-going-to-the-dogs/#.VYx29xNVikp