In workplaces, when someone leaves for good we have a practice called the 'notice period'. It's not just about the time it takes to transition responsibilities but also about preparing everyone emotionally for the void, however temporary it is. Closures are hard.
When someone like Kobe leaves abruptly, the mentee, the striver, the fighter, the dad, the daughter, the spouse, the fan in you refuses to recuperate. We don't follow the NBA that much but it felt inappropriate to hit you with a newsletter when you were probably finding it hard to process the news on Sunday. If anything, it is Monday. The routine, however unprepared you'd be is here. We gently nudge you with the newsletter to begin the routine.
Brand Extension 101
One more thing: We are meeting brands and retailers in Shoptalk2020 in March (for some good reasons we will reveal soon). Let us know if you plan to be there!
Brand Extension 101: Have a brand, to begin with!
Away wants to be the 'travel' company. Casper wants to be the 'Sleep economy' company.
People want a good sleep. Mattresses get the job done. So do ambient lights, sounds, mindfulness apps and apparently, dog beds so that the furry ones don't wag their tails on your face while you are asleep. Aspirational vision statements and north stars are good. They help companies avoid the trap of stagnation. They set companies apart from their competition. But there is also a small problem - you don't announce your way into creating a category brand.
Brand extensions are a product of the success of the first brand. Buying mattresses for cheap and selling them for a loss isn't how brands are created. Taking that (loss-making) template to launch brand extensions isn't how you create or own a category. Somebody suggested that Away launches an airline. I hope they don't take it seriously.
There is more than one playbook to gaining the customer's attention. Building a 'better-living economy' or 'better-eating economy' as a single company is a very expensive, time-consuming and often perilous proposition that only Softbank-funded IPO-aspiring companies could dream of. That dream has never become a pleasant reality though.
The novel categories of today become the norm tomorrow. When people buy clean cosmetics or organic, cold-pressed coconut oil today they reflect their intent to live and eat healthily. It is as much virtue-signalling (or vice-signalling) as it is about doing what is good for oneself. As brands capitalize on these mega-trends, the 'once' coveted superfoods simply become food. Commodi-fication of categories is the norm. Building a brand in the age of transient trends and low-entry barriers takes more than performance marketing. It takes profits to fund R&D, surprisingly!
Amazon is a dependable brand than it is a loved brand. The ruthless efficiency, price promise, convenience, and predictability are the brand. We don't 'vice-signal' a purchase on Amazon but we cannot live without it either. As the newness of the categories that D2C brands create or ride on wears out, what makes the brand is boring things like how widely they are distributed, how quickly they deliver and how empowered their customer support is. Doing all of those right, along with a winning anchor product merely allows them the ticket to relevance. Category dominance comes from rinsing and repeating the same boring playbook for brand extensions. Only that, it becomes easier to launch and the results are relatively more predictable with every extension.
Another reason we are not very bullish on D2C brands doing category expansion is that it goes against the very reason why such brands originally became popular. Big CPG and big fashion did not have authenticity and consumer trust. D2C brands exploited that dynamic. Authenticity comes from building products and communicating the value to a community that deeply cares about the purpose. Try stretching that authenticity to 50 products. It's essentially big CPG all over again! There is nothing wrong with it, except that the big CPG companies took several decades to create and own categories. They did it by nailing ubiquitous distribution, sustainable COGS, clever marketing and packaging. Look at their cash reserves when in doubt. Its the innovator's dilemma that is killing them. In other words, their failure is the product of their success. D2C companies need their first success yet.
For every ambitious D2C brand with category-owning aspirations, there are companies like Verishop and Thrive Market that are curating authentic product experiences across chosen categories. They are more likely to win because their value (curation and efficiency) accrues more as they add new products and categories. They can expand a category to multiple brands without diluting their equity. Multiple such marketplaces and curated speciality online retailers will emerge to aggregate D2C brands. The Amazon of D2C will be unbundled mini-Amazons like Verishop and they will be owning specific categories.
D2C mega-brands that aim to ride mega-trends have no escape from being boring, ruthless efficiency machines that ride many mini-waves profitably to invest in the future.
- Ashwin Ramasamy & Sujay Seetharaman
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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