Legacy retailers and department stores grew at a time when the landscape was nowhere near as crowded as it is now. It was the norm to go public, and use size and cash flow to open stores, optimize supply chains and become very good at being able to pump out every category under the sun and thousands of SKU’s. Ralph Lauren towels? Sure! A Macy’s on every corner? Bring it!
Gone is that era, replaced by a landscape where we can buy any product from anywhere in the world. Now if you are going to sell something, you must prove why it deserves to exist. The pendulum is swinging away from giant megabrands and back to the time of smaller, artisan shops that provided focused offerings.
How did this happen? How will brands survive? Are the Ralph Lauren towels still available? Read on.
The space is standing room only
Barriers to entry in starting a brand are at an all-time low, but the ability to survive is harder than ever. If you have an Instagram account, you can have a brand. You can make a website for next to nothing and have a myriad of cart applications to choose from at fair rates as the payments space is also more crowded than ever. Maybe each of these little brands have negligible sales on their own, but together they chip away at the market share legacy brands used to enjoy.
Customer reach & acquisition is breaking the bank
Beyond acquiring a small niche of evangelical customers, the cost of new customer acquisition is higher than ever for brands. How can the thousands of little boot strappy brands compete with the likes of Chanel, who spent $1.5 billion on marketing last year?
Online is also no longer a failsafe: Adobe states that retailers increased advertising spend 42 percent in the last two years, but site-driven traffic only increased 11 percent.
Focusing your message and target audience can potentially save money in the AdWords game and avoiding channels that don’t truly serve the brand, but of course the tradeoff is reach. Understanding where you see diminishing returns for acquiring more customers is important, and honesty about the true size of your market is crucial.
You can’t please everyone – well
When I was in college, I found myself at a lunch with other students and the legendary Allen Questrom. I excitedly sat right next to him and when I finally got to ask a question I asked what was the key to success. Mr. Questrom said, “Focus.” No one can do everything well and please everyone.
It’s true. If a brand like Warby Parker, who has expertise in glasses, wants to start selling apparel, it adds layers of complexity and costs. New manufacturers, new supply chain processes, new designers who understand apparel, raw materials etc. With each new category and a finite supply of funding, the quality of every existing product is diluted. They could go after outside funding, but please see the below section.
Outside sources of investment might as well come from the mob
The saturated market has led brands to take outside funding – whether from a venture capitalist or through an IPO – to scale to be able to afford the marketing budget, operations and stores they need to cut through the clutter. However, many established brands have found themselves trapped under too many stores, wholesale accounts, too many categories and way too many SKU’s – the result of being drunk on past success and trying to grow at the rate shareholders or lenders required. They can’t take the hit and risk not making earnings. Now more than ever it is next to impossible for brands to scale at the pace and to the size investors want and not lose themselves in the process, and even more impossible to keep it up. The result is the brands are often abandoned, while the financing community moves on to whatever is the next best thing.
Glossier took in another $52 million this year from notable firms, but can they keep this growth forever? I respect Emily Weiss a great deal (I’m wearing Glossier’s Cloud Paint blush right now in Puff if you’re reading), and my fingers are crossed she took an achievable term sheet. People line up outside Glossier stores now but remember when we also lined up at Juicy Couture? Can Glossier stay true to their mission and grow at the expected rate?
To thine own self be true- or no one will trust you
As brands start to lose focus of their raison d’être, they start to fail. This isn’t new news, but the effects are realized faster than before. After getting past all the hurdles mentioned above and finally getting in front of a shopper, proving to them why your brand is special and staying in their consideration set requires a strong, sincere message.
Going back to Juicy Couture: At first we couldn’t get enough of their velour tracksuits and totally bought into Pam and Gela’s LA lifestyle. Then they were bought by Liz Claiborne and metastasized. But when they started selling Juicy Couture mousepads and Juicy Couture yoga mats and our little sisters were wearing the same outfits we had, we couldn’t take them seriously anymore.
Now Pam and Gela have started their own eponymous brand that is back to their aesthetic and on their terms – albeit with less velour.
So, should I have gone to law school after all?
Maybe, especially if you specialized in bankruptcy. The retail landscape isn’t falling apart, unless you think success means opening a thousand stores and appealing to every wholesaler’s whim. But why is every brand striving to be a unicorn? Last I checked, unicorns are mythical creatures anyway. Maybe having a small, profitable brand that allows founders to create on their terms while listening to their shoppers, not their shareholders, is okay. Maybe you don’t have to try to be the next megabrand, as most people actually don’t want it. I personally have plenty of towels anyway.
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