Credit from Hacker Noon
Established consumer brands have a good run for decades, servicing the majority share of increasing consumer demand. It’s no news to anyone that first the emergence of Amazon and then the emergence of DTC brands has completely disrupted the playbook of established brands.
The need for brands and the value they create is both changing. Established brands in some categories will be replaced by no-name brands and in some other categories by DTC brands. This will change where the brand value accrues.
Many no-name brands will be either Amazon’s private label brands or new Chinese brands selling on Amazon, and Amazon obviously will capture most of the value in these cases. Also, by being the virtual equivalent of a physical retailer’s shelf-space, it will capture most of the value for established brands as well, probably outside luxury brands.
In this post, I will focus on other entities that can expect to see significant value accruing to them as part of the changing brand landscape. These entities are:
Platforms enabling DTC brands
Secondary goods marketplaces
“Social brand-network” focused on building communities around brands
1. Platforms enabling DTC brands
There is a lot that DTC brands have to get right when they are starting off. Mostly, there isn’t a lot of value in trying to recreate the technology (commerce) stack for selling to the customer. Platforms such as Shopify have made that commerce stack easily accessible.
This evolution of Shopify from helping small businesses get online to helping venture funded DTC brands disrupt their markets is fascinating. They are helping brands create their own virtual shelf space, not dependent on any retailer. As the needs of DTC brands grow, so will the tools that Shopify or other platforms offer to meet them, becoming the infrastructure layer for a part of the consumer brand economy.
2. Secondary goods marketplaces
Before the internet, brands were a proxy for trust. Buying from a known brand meant that you could trust what you were buying, short-circuiting the complexity of the buying process. So, it was enough for brands to just stand for trust. Today, Amazon has centralized trust, changing what it means to be a brand. Larger brands need to do more than just build trust. They need to stand for something to make consumers choose them over a no-name or a DTC brand.
This means adopting strategies that these brands would have scarcely used historically. Two come to mind, both centered around creating spikes of activity around the brand.
Taking a stance on social/political issue: An example of this is Nike’s ad campaign with Colin Kaepernick which led to significant increase in sales.
Engaging in product drops: Streetwear brand Supreme pioneered it many years back and now more and more brand are adopting it. It creates scarcity for marquee products released in limited volume, giving the brand an opportunity to make itself aspirational and amplify what it stands for.
In acknowledgement of these trends, Shopify has launched an app “Frenzy” to make it easier for consumers to know about upcoming drops and “buy at retail, not resale”. eBay’s new ad campaign “It’s happening” speaks to this evolving strategy of brands.
The question then, as posed in this article around Supreme, is why would a brand let secondary goods marketplaces capture a significant part of the value it is creating. The answer is that secondary goods marketplaces help brands extend the buzz around them, increasing the brand value. They create a virtuous cycle in which both they and the brands benefit.
Secondary goods marketplaces have historically struggled at capturing the most value that brands create because of concerns around trust of the authenticity of the products. However, marketplace-provided authentication services (e.g. eBay Authenticate) are increasingly becoming a standard part of their commerce stack, resolving most of the trust issues.
With trust as a barrier mostly addressed, there is an opportunity for secondary goods marketplaces to more proactively participate in this trend.
3. “Social brand-network” focused on building communities around brands
One of the biggest elements that makes brands valuable is the is sense that the customers of the brand get around belonging to the community. There is a need for non-luxury brands to explore ways to build a network/community in a scalable way; this article articulates this very well.
Internet has unique potential to help brands do that. Till date, social networks such as Instagram and Pinterest have been primarily helping DTC brands get off the ground by getting them in front of people. They haven’t built tools to continuously engage people around conversations with a brand.
Instagram is the most likely candidate to build something like that with their new Shopping app but I am skeptical if they will be able to move beyond ads. Whoever ends up building such a destination, which I call a social brand-network, will accrue a lot of value that DTC brands are building.
As with any fundamental shift in any industry, there are winners and losers. Winners understand how the value chain is changing and how they are positioned to capture a large part of the value. The landscape of consumer brands is changing faster than expected.