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Are Big Brands Just Buying Time with Millennials?

Maybe you blame it on the Amazon effect, but if you’ve been keeping up with the retail and consumer packaged goods industry- the future is bleak. Struggling to innovate, large corporations in consumer and retail have suffered a steady decline in market share.

Today, consumer packaged goods (CPG) represent a $770 billion industry and online CPG sales are projected to grow to $36 billion by 2018. However, according to investment banking firm Jefferies, big brands have lost share to smaller brands in 42 of the top 54 most relevant food categories in the past five years (from “Food: The Curse of the Large Brand”).

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The old giants of the CPG industry, like Proctor & Gamble and their household brand names, have been losing share to innovative startups that are offering laser-focused products that either solve a direct consumer need or change consumer preferences and behaviors.

A perfect example of this is Brandless, the San Francisco based startup (with over $50M raised in only 3 funding rounds) with a mission to disrupt the status quo in the stodgy CPG industry. Brandless sells and delivers the staple items for household products; beauty and personal care, and nonperishable food products- but they do it at a set cost of three dollars under their private label.

Brandless Story: “Everyone deserves better! Who says better needs to cost more?”

Like most startups, founders Tina Sharkey and Ido Leffler crafted the Brandless idea after closely studying millennial buying behaviors. With the rise in pricing transparency (Everlane is a great example of this) consumers are moving away from the large, trusted, big-name brands to more of what people are viewing as a “better value”.

The irony of Brandless is that it is a brand (just one with a story focused around being anti-big-brand). They’ve been able to accelerate their Story at a fraction of the cost of their competitors by crafting a targeted, customer-focused strategy.

The Brandless Strategy of focusing on the customer is what lies at the heart of their early success. Below are some examples of the behaviors that Brandless has crafted its success around:

  • Spend Shift – Most people today are “hybrid” shoppers – using both online and physical retail locations as part of their buying journey. Physical stores are feeling the digital crunch, and are having to adjust accordingly. Retail is being forced to welcome the shift to online purchasing … Why? Because no one enjoys navigating through cluttered stores and slow-moving checkout lines. Brandless recognized that customer’s CPG needs weren’t being met. Much like Amazon, Brandless is offering convenience by shipping commodities to your doorstep at a fraction of the cost.
  • Brand Tax CutIf your bottle of shampoo featured a line item for the cost of the advertising that was used to bring it to your attention, would you still be happy paying for it? Brandless refers to this as the “brand tax”. By showing consumers the distributor costs, breakage costs, trade promotion costs and other fees associated with typical retail distribution, they can further promote their own brand story and help the customer without talking about themselves- a master class in making the customer the hero. Without the “brand tax”, Brandless can offer products at least 40% cheaper than comparable products. 
  • Private Label is the New Black – Shoppers are smart… and getting smarter. They know that traditional big brands spend a disproportionate amount of their revenues on building their brands through advertising and trade promotions. Brandless is promoting this idea and locking in on the improvements in shopper perceptions about the quality of private label products. These perceptions are on the rise around the world – especially in North America. As CPG items become more commoditized, this trend will only continue putting Brandless in a position to continue to grow.

  • Right Assortment – Shoppers shouldn’t feel “paralyzed with choice”. Brandless combats this, and differentiates itself from the Amazons of the world, by offering a reduced number of products and an improved customer experience. This requires extensive customer discovery and continued behavior analysis to be certain that they are curating the right assortment of products that shoppers need.  Unlike typical groceries, big-box retailers, and even most online retailers with tens of thousands of SKUs, the Brandless strategy and the supporting systems have made it easier for the shopper to choose.
  • Get Better Stuff and Give Back – Brandless hones in on millennial preference for corporate responsibility by offering a subscription service that gives back. Almost as an antithesis to Amazon Prime, Customers have a chance to “B.More”- giving members a chance to give back by including a donated meal to the nonprofit Feeding America, in addition to the donation that is already made after each Brandless transaction.

By using a strategy that keeps them in touch with their target audience’s needs, Brandless has been able to generate stronger loyalty and buy-in to the brand story. Despite shunning the big brand philosophy of over the top advertising budgets and branding efforts, Brandless has been able to establish a strong brand through a focused strategy and highly aligned systems.

If you’d like to learn more about how you can accelerate the power of your brand story through a focused strategy and aligned systems download our ebook: TRANSFORMATIONAL MARKETING: Moving to the TopRight.

 

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