Microbrands have been steadily rising with the rise of e-commerce. They are essentially direct-to-consumer and digital native brands.
March 24, 2020 shall go down in history as the day the country went into lockdown, changing so much of the world we took for granted, both personally and professionally. Among the many effects of this, is the change in our consumption basket, now stripped down to essentials and likely to stay this way for some time - as per Deloitte’s most recent ‘State of the Consumer’ tracker.
Drilling down this consumption behaviour further, for the more affluent urban consumer, March 2020 may have changed not just what categories we buy but within these categories also what brands we buy. We did a quick survey around the (Google) room and found that almost everyone has adopted 4-5 brands in the last couple of months, ones they’d never tried before. That absolutely sinful (and preservative free) artisanal ice cream brand Cold Love. Mad Mask protective face-masks that were recommended by a friend and launched by a friend of a friend. Cureveda’s immunity building herbal Pureprash. Sacred Salts’ milk protein based skin care range. Milkbasket’s daily grocery deliveries and many, many more.
What’s common across these brands? Each of these were either discovered on social media or recommended by family and friends. Each of them is a direct to consumer brand. They are digitally native and hyper personalized. In short, they are all microbrands.
Microbrands are different from Niche brands. They are essentially direct-to-consumer and digital native brands. Niche brands, by definition, target a well-defined consumer segment, which is typically not the mainstream segment of the market such as Harley-Davidson or Canon.
Microbrands have been steadily rising with the rise of e-commerce. In the US market, Nielsen found the biggest food and beverage companies, accounting for 45 per cent category sales only drove 3 per cent of the total growth in the industry between 2011-2015. The long tail of 20,000 companies of which microbrands form a key share drove 50 per cent of the category growth.
In India, while the share of microbrands has remained low, the current exigency may be accelerating the growth, which in all likelihood, will sustain post the Covid impact period.
A growing tribe of next gen entrepreneurs not guided purely by the profit motive, easier access to funding and the economies of digitally driven sales, distribution and marketing is encouraging new microbrands to launch every day. On the demand side, the 400 million plus Millennial’s and gen Z consumers prefer brands that offer what we like to refer to as the new 3 ‘P’s - 1) Personalized placements 2) Purpose beyond profit 3) Promoted digitally
The success of WOW shampoos is a great example of the power of the microbrand. Launched less than 5 years ago as a digitally first brand, WOW shampoos is today the number #1 selling shampoo on Amazon in India and the US, rising on the back of glowing consumer reviews. The key ingredient of this success story is their commitment to using nature-based products that are free of parabens, sulphates, colour, etc.
The brand capitalized on the growing preference for sustainable, chemical free products at affordable price points. Their process story, following manufacturing practices centered on local sourcing, local manufacturing and a predominantly women work force have further strengthened their brand story.
It took The Dollar Shave Club a little over four years, to achieve annual sales of nearly $200 million and to be acquired by Unilever for $1 billion. The secret sauce? Its innovative direct–to-consumer model, affordable price points and relentless commitment to consumers both in terms of listening to their needs and staying engaged with them.
The recent Covid induced surge in online purchases and the increased reliance on digital and social media for discovering new brands, may be providing the perfect breeding ground for microbrands. Their low inventory and asset light model, makes them nimble at a time when large, established brands are grappling with manufacturing & supply chain disruptions.
While individually, these microbrands may not threaten the old order, but collectively they form a formidable competitor to Incumbents. Leader brands in food, health and beauty categories need to take cognizance of this new breed of brands that think different and do different. They need to accelerate their direct-to-consumer, digitally-first portfolios while keeping a watchful eye on the long tail that may just wag the dog in the future!
(The author is founder and managing partner at BrandStory Consult, a brand strategy and content marketing consultancy.)