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Brands Born Online, Reshaping the Retail Landscape

Brands Born Online, Reshaping the Retail Landscape

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The world might be a mess, but look on the bright side: Men’s shaving products are much better than they used to be.

Thanks to several online shaving start-ups, razors, creams, gels and other paraphernalia are now cheaper, of higher quality and are more convenient to purchase than ever before. Last week one of the upstarts, Dollar Shave Club, was acquired by the consumer products giant Unilever for $1 billion. For shaving behemoths like Gillette, it is the first skirmish in the coming guerrilla war for men’s faces, not to mention other parts. (Dollar Shave also makes bathroom wipes for men.)

This column usually focuses on the technology industry, an area that sounds far removed from shaving. But the Dollar Shave acquisition signals something bigger than a mere improvement in shaving — it also underscores a consumer products revolution that would not have been possible without technology.

Hilarious online ads passed along social networks allowed Dollar Shave to create instant customer recognition — in other words, a brand — far more quickly, and for far less money, than a shaving company could have managed a decade ago. Online distribution allowed it to get products into consumers’ hands without a costly retail presence. In fact, by cutting out on retail, and shipping products to people’s homes on a subscription basis, the company made buying shaving products more convenient than going to a store.

The same forces that drove Dollar Shave’s rise are altering a wide variety of consumer product categories. Together, they add up to something huge — a new slate of companies that are exploring novel ways of making and marketing some of the most lucrative products we buy today. These firms have become so common that they have acquired a jargony label: thedigitally native vertical brand.

These kinds of online brands aren’t new. Dollar Shave is five years old, andWarby Parker, the online eyewear company, began selling glasses over the web in 2010. But over the last few years there’s been a proliferation of such companies — into underwear, children’s clothing, cosmetics and more — and the Dollar Shave deal suggests their growing importance. These firms could become an emerging problem for consumer products conglomerates like Procter & Gamble, and they might also spell trouble for television, which relies heavily on brand advertising for its revenue.

For you and me, this is a boon. By cutting out the inefficiencies of retail space and the marketing expense of TV, the new companies can offer better products at lower prices. We will get a wider range of products — if companies don’t have to market a single brand to everyone on TV, they can create a variety of items aimed at blocs of consumers who were previously left behind. And because these companies were born online, where reputations live and die on word of mouth, they are likely to offer friendlier, more responsive customer service than their faceless offline counterparts.

 
CreditStuart Goldenberg

“We think it’s a unique moment in history where you can create brands that can be scaled quickly thanks to technology, but you can still maintain a one-to-one connection that delivers an elevated level of customer experience,” said Philip Krim, chief executive of Casper, which sells mattresses online.

Mr. Krim and four friends started Casper two years ago after studying the traditional mattress industry. They discovered it was plagued by inefficiencies and annoying gimmicks. Customers had to trudge to a mattress store and awkwardly prostrate themselves on numerous surfaces before choosing one to use for a decade. There were too many choices and brands, and mattresses were expensive.

With Casper, you simply buy the mattress online and it’s shipped to you in a comically small box (the compressed foam expands into a full-sized mattress, like a magic trick). You have three months to try it out, and if you don’t like it, the company will come pick it up free.

Casper’s business model offers a break from the annoyance of offline mattress shopping. It also works out for the company. Casper advertises on social networks, on Google, podcasts and a variety of other places online; the ads are creative, convincing, targeted and cheap. By selling directly rather than through retail middlemen, the company also creates a connection with customers that allows it to test and develop new products — it now sells sheets and pillows, too.

After two years in business, Casper is on track to book $200 million in sales over the next year, but its success isn’t ensured. Precisely because the internet has lowered barriers to entry, Casper is facing a surge of new mattress start-ups like Helix Sleep, Tuft & Needle and Leesa, among others.

Of course, competition could be great for consumers if it continues pushing down prices for all mattresses, and if these companies invest in better products and customer service. But competition could result in evaporating profits, too. Remarking on the Dollar Shave deal, Ben Thompson, an analyst who writes a tech-business newsletter called Stratechery, predicted widespread “value destruction” across many consumer product categories. He also warned of doom for TV, which “is not only threatened by services like Netflix, but also the disruption of its advertisers,” he wrote.

Value destruction could be on the table. But there’s another view that new online brands could unlock profits through products aimed at people who are not well served by incumbents.

Consider Walker & Company, a start-up founded by Tristan Walker, an African-American entrepreneur who argues that traditional shaving, hair care and cosmetics companies have neglected the potentially multibillion-dollar global market of nonwhite customers. Mr. Walker’s first brand, Bevel, creates men’s shaving products that promise to reduce razor bumps, which disproportionately affect black men. He plans to create several more brands, including products for women.

Unlike Dollar Shave, Mr. Walker does not aim to compete with traditional consumer product companies on price alone. “We want to build a very profitable business,” he said. He will do so, he said, by fostering a deep, lifelong connection with an audience that is getting wealthier and more influential — and whose influence, thanks to social networks, can now be tapped.

“Global culture is led by American culture, which is led by black culture in the U.S. — look at music, dance, et cetera,” he said. “So if we’re catering to an audience that are the most culturally influential demographic group in the world, we can use the internet to promulgate our message across the board, whether it’s Twitter, Facebook, Instagram — and that gives us amazing leverage.”

Walker & Company declined to provide sales numbers; a spokesman said revenue had grown 300 percent over the last year.

I spoke to several other online start-ups that echoed the idea of serving untapped new markets. One was Primary, a year-old clothing company founded by Christina Carbonell and Galyn Bernard, former executives at Amazon. Primary makes so-called essentials for children — logo-free pants, shirts and other clothes that don’t shift according to fashion trends. Basically, it offers a way for parents to find specific clothes they like, then to buy the items in several colors and sizes as their children outgrow them.

“We’re offering a solution to busy parents that’s just not out there in the marketplace,” Ms. Carbonell said. “It’s not about some new style every day, it’s something you can count on.”

It’s striking how few of these online companies could have taken off in the presocial age. At the very least, they would have been sunk by the inability to target ads to the demographics they’re aiming to serve.

“Look at Dollar Shave,” Andrew Bosworth, Facebook’s vice president of ads and business platform, told me. “They were just trying to reach men. If they’d started advertising on TV, they definitely would have wasted half their money.”

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