The way that brands present themselves to consumers has changed a lot in the past several years. Because legacy brands have had a hard time adapting to what consumers want now, a void in the market is being filled by a number of new, young brands. Some of those brands have raised meaningful amounts of capital and if they are not successful, they wind down and close once their capital runs out. But many new brands are succeeding and surprisingly, their success often comes with few financial resources. I talk to those young brands often and find that they continue to adapt to how the world is evolving.
Many of those new brands are in product classes where overall sales are declining. There were fewer handbags, less apparel fashion and jewelry products sold in 2017 than in 2016 and 2018 is likely to be more of the same. In spite of the overall trend, many young, new brands are growing and it’s fascinating to listen to those CEOs talk about their businesses. None of them are in their freshman year anymore — they have all moved out of the startup phase, they are executing on their plans and building. How they think about their business now is different from when they started.
Recently I spoke with the companies below. Here’s who they are and what I heard:
Snowe – They concentrate on home goods (bedding, bath, tabletop) in categories they call Eat, Drink, Sleep, Bathe and Clean. Their focus is on high-quality products used every day. They were previously profiled (by the very smart Vivienne Decker) in this article.
Dagne Dover – Creates handbags that make it easy for a woman to be organized. Their products have pockets and compartments to make everything accessible and they come in colors and materials that are fun and fashionable. Previously profiled in this Forbes.com article.
Food 52 – Combines kitchen products sales with media by providing recipes and articles and creating events.
Brilliant Earth – Sells conflict-free, responsibly-sourced and ethically-produced jewelry through their own stores and electronically. Provides a personalized, premium shopping experience. Previously profiled on Forbes.com in this interesting take by Nikki Baird.
La Ligne (picture of their sweater at the top of this article) – Molly Howard, CEO of La Ligne describes the business as, “a womenswear line focused around one iconic graphic: the stripe. La Ligne intends to become synonymous with the stripe, and the graphic is incorporated into every garment the company produces.” This company has endless competition in a category of product that’s declining. It should be a terrible business and yet La Ligne is thriving and growing.
Good Man Brand – A menswear brand that “stands for comfort,” according to cofounder and President Scott Bonomo. You can find them in all Nordstrom stores. They make sportswear, footwear and tailored clothing (suits and sportcoats).
How They Describe Themselves
Most of these companies will tell you that they are “digitally native.” When that term was first created, it meant, among other things, that they sell their products online only. No more. Although the companies still think of themselves as digitally native, the meaning of the term has changed. Until recently, they’d have called themselves omnichannel but now that term has gone out of vogue. A more relevant description would be “Omnipresent” ─ products always available in stores and online at any hour of the day and in as many places as possible.
The way they wholesale their products is different now too. Dagne Dover, for example, has wholesale accounts but the wholesale customers are not who you’d expect from a company in the handbag and backpack business. You can find their products at Equinox, Bandier, Nordstrom, Revolve, Canyon Ranch and Stitch Fix. Except for Nordstrom, it’s about the least traditional list of wholesale customers you’ll see. It’s so interesting that Dagne Dover doesn’t feel compelled to sell its products at more traditional retailers like department stores.
Department stores know they can’t let these young, new brands elude them. “Department stores and other multibrand retailers are seeking out smaller consumer brands to differentiate their product lines and appeal to changing consumers”, said Zia Daniell Wigder, Chief Global Content Officer at Shoptalk, a retail conference starting this Sunday where many young, new brands will be presenting. Wigder says, “Retailers like Nordstrom and Walmart are well known for embracing this trend, but others like Target, Ulta Beauty and more are also working with young, fast-growing brands to provide new products and experiences to shoppers.”
Howard of La Ligne talks about selling products in ways that serve consumers’ timetables. She says, “customers are changing the way they shop, preferring to receive goods as soon as they see them. La Ligne has been at the forefront of this new attitude by delivering new product on a weekly basis, as opposed to seasonal, while adjusting the offering based on feedback from the most important group: our customers. Growing transparency in the industry has educated the consumer.” They are using their small scale to be flexible and change production timetables to suit consumers’ needs and the desire to have everything instantaneously.
Jill Manoff, Editor-in-Chief at Glossy Media, said, “Big boxes and long-term leases are exceptions.” That’s a completely different way of looking at selling in stores. The way these companies think, they don’t define themselves by their sales channels at all, it’s much more about how they think about their relationship with their customer. Melissa Mash, Founder and CEO of Dagne Dover says, “everyone else is born on earth trying to get to Mars. A digitally-native brand is born on Mars.”
An example of what she means is that Dagne Dover’s entire company works like a customer service department. Everyone in the company is responsible for following the brand’s social media accounts and responding to customer comments. Responsiveness to customers isn’t anyone’s job, it’s everyone’s job. Deepa Gandhi, cofounder and COO of Dagne Dover, says, “We don’t accept the status quo. We figure issues out one at a time and we don’t pay customers to buy our product.” She means that discounting is not one of their tactics, they are focused on meeting customers’ needs; they know that if they do that, customers will want the product and pay full price for it. Howard of La Ligne has a similar attitude. She says, “La Ligne is focused on constantly adjusting strategies based on feedback from its consumers…from trunk shows to alternative-form popups to unique content to... buzzworthy collaborations.”
Brilliant Earth is also focused on customer service but in yet another way. For them, it’s about having products that don’t just look nice but convey a value system. According to Beth Gerstein, Founder and Co-CEO, Brilliant Earth’s products are focused on social responsibility. “That’s unique in jewelry, we promote transparency…we’re careful about selecting suppliers who track and segregate sources from responsible, environmentally-conscious origins,” she says. In an industry that involves metals, an environmentally messy manufacturing process, Gerstein says, “the metals we offer are from recycled sources that minimize environmental impact.”
The other way Brilliant Earth is focused on customer service is in the incentives they offer to their sales team. Gerstein told me, “We are not high-pressure sales system; we model ourselves after a spa. We provide a stress-free, calm, luxurious place for you to experience the brand and get educated.” Brilliant Earth’s salespeople don’t get a commission. “It’s a team environment; the goal is the best experience for the customer,” she says. Gerstein points out that their salespeople aren’t what you find in other jewelry stores. “We took a different tack, we hire people who don’t have jewelry experience. We hire new college graduates who are more tech-savvy, adept at working across channels with live chat, email and in-person. They are motivated, mission-focused and excited to work for a company they feel proud of.”
Good Man Brand turns the idea of digitally native on its head. They describe themselves as “consumer native,” since they say they are “obsessively focused on delivering what the customer wants and thinking…about what is missing in the market.” Their distribution is the opposite of what digitally native brands have been until now. They are focused on wholesale as a way to build distribution without incurring the cost of online customer acquisition. With this strategy, they are in all major market areas in the US and Canada. Having built that distribution, they are now focusing on expansion direct-to-consumer, online and with their own stores. They define their product differentiation “through the lens of modern comfort,” Scott Bonomo, cofounder and President, told me. They believe “engineered comfort” is the differentiating feature of their brand.
A New Kind Of Founder
It used to be true that when my firm sold a company, we’d find that the history of the companies we’d be selling to be fairly similar. The companies were founded by someone with experience in a sector who decided they wanted to have their own company rather than work for someone else. Now the story founders tell is different. With no experience or knowledge about how a business works, just by being a consumer, they identify a problem they’ve experienced themselves in getting a product or service. The founders create a company to solve the problem. Gerstein of Brilliant Earth talks about hiring people to work at her company who have no experience in the industry. That used to be a weakness but with business models and attitudes changing so dramatically, it’s a strength. The founders we talk to now are almost all outsiders to their industry or business sector. That allows them to avoid conventional processes, approaches and traps. It also allows them to think differently about their products and how to communicate and relate to their customers — a key differentiator. Legacy companies can’t break out of their own histories, it seems to take something new and built-from-scratch to satisfy what consumers want now. Not coincidentally, a great many of these new, outsider founders are women.
These new founders are not looking for insiders to guide them either. When I ask what they look for in new hires, they do not say they are looking for people with experience in the business. Howard of La Ligne says they want employees who “have a voice. We want people with ideas and drive to help build this community of strong women and men and reach a wider audience and stripe the world!” Bonomo of Good Man Brand says they are looking for people who “can deliver differentiated ideas” to their company and can “change and adapt at a rapid pace.”
Building a feeling of community, the idea that if you associate with a brand or company you are part of something that includes like-minded people with similar values, is often a part of the mission. On its website, La Ligne has a series of photographic portraits of women that provide an educational, entertainment and aspirational aspect to the company. Howard of La Ligne says, “the experience of La Ligne's three founders has been harnessed to create a wide range of content from editorials to portraiture, allowing consumers to enter the world of La Ligne through its website that serves as a shoppable magazine while also celebrating the aspirational women that are a part of its community… it was essential to build this brand with the community of diverse and strong women who surround and inspire La Ligne at its core… La Ligne also gives back to this community by standing behind female focused charitable organizations and causes such as Time's Up and The Women's March. ” Howard says La Ligne wants their customers to “dream big.”
Bonomo of Good Man Brand says they give 3% of their total sales to the Why Not You Foundation. That may not sound like a lot but if a typical company makes 10% of revenue as profit, so they’re giving away about one-third of a typical company’s profit margin to charity. They are making their values clear and wearers of their product have the opportunity to identify with those values by buying.
How Companies Have Adapted
One of the attributes that consumers want now is to buy from a local company or to buy locally-sourced production. That makes it challenging to build a company to a large scale. One of the ways that these companies are addressing that desire is by using the virtue of community as a surrogate for being a local company. Being local and having a community are both trying to accomplish one goal: a sense of belonging. Using community as a way to create that sense allows a company to scale without having to have local production in too many places. It works because consumer attitudes now about distance are different given the way we communicate so easily and cheaply across distances. Consumers can feel that sense of belonging without being geographically proximate and that is so different than in the past.
When I asked Amanda Hesser, cofounder and CEO of Food52, what differentiates them, she kept using the word “trust.” She said, “We build a strong, genuine relationship with our audience so they trust everything we do. They trust our recipes. They trust the products we sell. And they trust the advice they get from other cooks and readers.” One of the most interesting things she also mentioned was risk. For the last 20 years, I’ve been hearing retailers talk about how they are reducing the risk in their business to avoid erratic swings in earnings. Hesser said that she and her cofounder, “spend our time… push[ing] our team to continue creating and taking risks,” exactly the opposite of what retailers have been saying for decades. When you put it together, trust and risk, you get a combination that is different from what retailers usually offer. She sums it up by saying that Food52 delivers, “…inspiring content, an enthusiastic community…[consumers] can learn from, a shop of smartly curated kitchen and home goods and a place that encourages them to eat thoughtfully and live joyfully.” They don’t want to sell all things to all people, they want to have an opportunity to make money when there is a chance to bring pleasure to the everyday world of cooking and eating.
Increasing Risk
Risk is a subject that doesn’t get talked about enough at retail. To build a brand today, you have to be willing to take more risk than ever. You have to do all the things that a brand had to do in the past: designing, sourcing and selling products. But you also have to be a retailer. Historically, that was a different business entirely. And you also have to do your own direct-to-consumer promotion on social media, historically also a separate business. It used to be true that shying away from risk was a strategy for success, now it’s a recipe for failure. Like it or not, retailing and brand-building has more risk than it used to. Having a strategy to reduce the risks in the business won’t work anymore.
Andres Modak of Snowe told me “we…consider ourselves digitally native…[but we always] knew physical manifestations of our brand would be critical from the get-go. When we launched Snowe, we created a ‘Snowe’ in a loft space [where] we held events and trunk shows.” Modak says that let their customers experience the products “physically just as much as digitally.” Creating the “Snowe Home” also let the company take advantage of the trend towards combining shopping in stores and online. If you look at where consumers of a brand are located, you find concentrations around their stores, even for brands that are primarily online. That says that stores and online work together to reinforce each other and it implies that opening stores to stimulate both online and offline sales is a big opportunity for these young brands and that’s what Snowe understood. With retail real estate so often going begging right now, there are great deals to be made for digitally-native brands to expand into retail store spaces if they have the capital to outfit the spaces and can afford to commit to leases. Many of these young brands will undoubtedly expand into the physical world.
Unprompted, Modak of Snowe also talked about truth as a strength of the brand. Unlike traditional advertising that shows only perfect-looking people in their perfect-looking home, Modak says Snowe’s content shows a lifestyle that illustrates “the beautiful imperfections found in every day life,” just as much as they show customers’ idealized looks. This is a different way to think about advertising than the way it’s been done traditionally.
What All This Means
These companies, and so many others like them who are new and young, have a much different attitude about the most fundamental aspects of their business than anything before them. It’s not just the technological changes of our era that allows them to be the way they are. They are tapping into changes in attitudes among consumers and what consumers want now from the companies they buy from. Time will tell whether these new way of selling products will endure. In all my years as a banker I haven’t seen anything as fascinating as the way in which these young entrepreneurs are tossing over established ideas and meeting with success. This is an incredible time to be in a consumer business.
