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250 Brands to Watch | Seattle Interactive 2019

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250 Brands to Watch | Seattle Interactive 2019

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Patrick Dolan (Speaker) President & COO, IAB

In February the IAB released its second annual “IAB 250 Direct Brands to Watch” report identifying the top direct-to-consumer brands that are disrupting their industries and driving positive change in the U.S. consumer economy. This session will provide a deep dive into the report’s findings including emerging trends in marketing, advertising and data usage as well as ways traditional brands can leverage new techniques to drive growth.

Patrick Dolan (Speaker) President & COO, IAB

In February the IAB released its second annual “IAB 250 Direct Brands to Watch” report identifying the top direct-to-consumer brands that are disrupting their industries and driving positive change in the U.S. consumer economy. This session will provide a deep dive into the report’s findings including emerging trends in marketing, advertising and data usage as well as ways traditional brands can leverage new techniques to drive growth.


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250 Brands to Watch | Seattle Interactive 2019

  1. 1. 250 Brands To Watch Seattle Interactive Conference October 18, 2019 Direct Brand Initiative Strategic Partners
  2. 2. Hello My Name is: Patrick Dolan President & Chief Operating Officer, IAB Emmy Award Winning Extra Say hi on Twitter - @patrickdolan @iab
  3. 3. 00. What is the Direct Brand Economy? The IAB direct brands report
  4. 4. The Direct Brand Revolution
  5. 5. Direct Brand Economy, 2010 - Direct Brands create value through low-barrier, capital- flexible, leased or rented supply chains, with value extraction accomplished primarily through the direct relationships between the company and its end consumers. Indirect Brand Economy, 1879 - 2010 “Indirect Brands” are characterized by value-creation based on dominating O&O, high-barrier, capital-intensive supply chains with value extraction accomplished through a series of third-party handoffs (brand to publisher to retailer). 5
  6. 6. Indirect brand economy, 1879 - 2010 retailer publisher advertising agency brand consumer finance sourcing manufacturing logistics distribution integration 6
  7. 7. Direct brand economy, 2010 + product services Identity community data analytics programmatic storytelling retailing measurement consumer brand fulfillment stack data stack attention stack production stack 7
  8. 8. Seven primary characteristics of direct brands 1. Direct brands are centered around individual consumer relationships and the data they provide 2. Direct brands are web-native 3. Direct brands are socially closer to the consumer 4. They are “maniacally focused” on consumer experience 5. Direct brands use content as a differentiator 6. They define content more broadly than incumbent brands and partners 7. Their mission is central to their story 8
  9. 9. direct brands are nipping at the big brands’ heels...
  10. 10. innovation-led growth is shifting to smaller DTC & boutique brands http://www.foxbusiness.com/markets/2017/04/04/gillette-bleeding-market-share-cuts-prices-razors.html Gillette’s share of the U.S. men's-razors business fell to 54% in 2016, from 70% in 2010. Both Dollar Shave Club and Harry’s combined U.S. share rose to 12.2%, from 7.2% in 2015. 20 biggest CPG brands reported flat sales while smaller brands grew 2.4 percent.1 Razors
  11. 11. The IAB direct brands report 01.The Disrupted Consumer Economy, 2018-2019
  12. 12. Generational consumer behavior change disrupts commerce
  13. 13. 2018 was peak retail apocalypse • More than 12,000 stores were projected to close in 2018 — up from roughly 9,000 in 2017, and the largest number of closures in U.S. history, according to Cushman & Wakefield • 2017 retail closures were ~4x 2016 closures • By 2022, analysts estimate that 1 out of every 4 malls in the U.S. could be out of business Source: Cushman & Wakefield Research and Moody’s Analytics https://sourcingjournal.com/topics/business-news/retail-apocalypse-2018-cushman-wakefield-prediction-76866/ https://money.cnn.com/2017/12/26/news/companies/retail-toughest-year-store-closings/index.html http://time.com/4865957/death-and-life-shopping-mall/ 13
  14. 14. As trends suggest e-commerce continues to grow, consistently and steadily, projected to be 14.3% of all US retail sales or 513.61B in 2018, up 14.2% from 2017. Source: Internet Retailer, U.S. Commerce Dept. https://www.digitalcommerce360.com/article/e-commerce-sales-retail-sales-ten-year-review/14 eCommerce as a Percent of Total Retail Sales 2007: 5.1% 2012: 7.9% 2018: 14.3% 5% 9… 2007$136B $2,535B 2007 14.3% 2018 14.3% 8… 2007 2018 $513.6B
  15. 15. Across categories, digital retail $ growth vastly exceeds brick-and-mortar… Source: Nielsen, 2017. https://www.nielsen.com/us/en/insights/reports/2017/total-consumer-report.html15 Absolute Dollar Growth Fast-moving consumer goods (FMCG) categories are seizing outsized growth from e-commerce
  16. 16. … e-commerce is driving 82% of total CPG growth… 16 Source: Nielsen Total Consumer Report, June 2018; Nielsen Retail Measurement Services via Nielsen Total Food View, 52 weeks ended May 5, 2018, and Nielsen Total Store Report on e-commerce measurement, 52 weeks ending Mar. 31, 2018 • 30% of Americans buy groceries online, a figure expected to grow to 70% in less than 10 years. • Nearly 1 in 4 Americans (24%) and 40% of millennial consumers shop for consumer goods on their phone. Total FMCG – Share of Growth E-commerce drives 82% of total market growth
  17. 17. Slow adaptation to disruption is taking down incumbents 17
  18. 18. The IAB direct brands report 02. The Direct Brand Playbook, 2019
  19. 19. 19
  20. 20. Play 1: Customer Acquisition Cost (CAC) -to- Life Time Value (LTV) is the new purchase funnel 20 CAC Experiences Speed DataService • Instagram + Facebook • Podcasting • OTT Video • Platforms • Programmatic Display • Content • Mission • Omnichannel Retail • Customer Service • Community • Product-to- Market • Customer Service • Direct Delivery • Discovery • Direct Delivery • Problem- solving • Customization • Product Usage • Pricing Lifetime Value
  21. 21. Play 2: Mobile first… 21
  22. 22. ... and consumers are consuming the world on mobile devices 22 Sources: Nielsen Total Audience Reports Average Time Spent Per Adult 18+ Per Day Exhibit 1 – Based on the Total U.S. Population Daily Time Spent with Live TV decreased by ~14% in 3 years while mobile device time- spent was +133% Mobile: +133% in 3 yearsTV: -14% in 3 yrs
  23. 23. 40% of all e-commerce currently is m-commerce 23 Sources: *eMarketer **Forrester, Mobile Commerce Forecast : Mobile 39.6% Mobile commerce = $208.1B
  24. 24. Play 3: Storytelling gets more acquisitions more cheaply 24 Source: Midroll Overview: To increase new customer acquisition, athletic sock disruptor Bombas advertised on podcasts valued for storytelling They measured campaign performance using vanity URLs which led to a sign-up form to receive an emailed coupon code Results: In a given week, ~50-60% of new customers could be attributed from paid channels… with podcasting ranging from 15% to 40% of that
  25. 25. Play 4: Community turns CAC into LTV Sources: Forbes 11/7/18, IAB The Shift 12/6/18, Yotpo.com https://www.growcode.com/blog/5-moments-shoptalk-2018/ https://techcrunch.com/2017/11/26/predicting-success-in-startup-consumer-brands/?_ga=2.195785836.1191280998.1539121266-1241247821.1536558444 www.iab.com/db/founders-survey 25 • Glossier: 70% of online sales come via peer referrals • Fabletics: Found customers in areas with physical stores spend 2.8x more across all channels than customers in areas without stores. • Matches Fashion: User-generated shoppable content drives 35% of site revenues “We have a 360-degree marketing plan, so we have everything from radio to television now… but the biggest part of our marketing all goes toward our community. It's social media, it's community building, it's information sharing.” — Ido Leffler, Co-Founder, Brandless
  26. 26. “shoppable social” is on path to generate $165 billion in sales by 2021 26 Source: Business Wire; ADI Retail Industry Report, n= 50 billion site visits, 2017 Growth In Share Of Retail Site Visits By marketing channel
  27. 27. Play 5: For disruptors, branding must perform – and vice versa 27 Sources: Businessinsider.com, 11/14/18 Digiday.com, 6/22/18; Digiday.com, 10/31/18. “We don’t think that something like ‘impressions’ means anything. Since these brands are selling direct-to- consumer, we’re able to understand how certain stories work, and how placement and communications work, and then replicate the things that work. I don’t think that transparency has existed in our industry.” –Jesse Derris, founder, Derris “Traditional agency-brand relationships were a function of relationship building and pricing efficiency. That’s still important but for the DTC brands, it’s much more quantifiable. So we need to be prepared to be held accountable for those types of goals. There’s no fancy PowerPoint presentation or New York City dinner that explains away us not driving the business outcome that they want us to.” –Sam Appelbaum, GM, Performance Marketing, Yellowhammer
  28. 28. Play 6: Direct brands are becoming media-promiscuous 28 • ~90% launched with a Facebook-dominant strategy • ~50% of marketing spend still goes to Facebook family • 40%+ have customer acquisition cost management as a top 3 KPI • During the first 6 months of 2017, the average Facebook CPMs >171%, and average CPC >136%. • Respondents are testing ~3 other marketing channels Sources: www.iab.com/db/founders-survey https://www.inc.com/magazine/201805/tom-foster/direct-consumer-brands-middleman-warby-parker.html https://medium.com/@Nicquinn/popping-the-cork-on-2017-top-consumer-startup-trends-945b4ac8c5e4
  29. 29. Disruptor brands are now colonizing main media 29 Source: VAB analysis of Nielsen ad Intel data, calendar year 2015 - 2017. TV spend includes national cable TV, broadcast TV, Spanish language cable TV, Spanish-language broadcast TV, spot TV, syndication TV. Reflects the cume TV spend of the 50 direct brands identified in this report. All 50 companies existed since 2015, except for Hubble, which was founded in 2016. 50 Direct-Disruptor Brands Collectively Spent Over $1.3 Billion on TV in 2017, A 98% Increase YOY “Direct-Disruptor” brands has accelerated spending recently in this very competitive environment, having invested over $MM more in TV of the last year
  30. 30. Streaming consumers are disruptor-brand buyers 30 Source: IAB 2018; Ad Receptivity and the Ad-Supported OTT Video Viewer. Q27b. [Subscription Purchases (Pet food, Contact Lenses, Meal Kits, etc.)] How much would you estimate that your household spends on the following per month? Base: Total n=1223, ASV OTT Viewer n=589, SVOD Viewer n=332, TV Only Viewer n=302 Avg. Spend on Subscription Purchases (e.g., Pet Food, Contact Lenses, Meal Kits, etc.) Total ASV OTT Viewer SVOD Viewer TV Only Viewer
  31. 31. Big media streaming wars will increase reach and spend 31 Source: Videology/Advertiser Perceptions Advanced TV Trends, April 2018; eMarketer, July 2018
  32. 32. Play 7: Omnichannel shopping is the new normal 32 Source: IAB US-China Digital Commerce Study 2016. Base: US online shoppers. BROWSE FIRST IN-STORE BROWSE FIRST ONLINE 1-in-4 Online purchases are made after browsing in store first 1-in-3 In-store purchases are made after browsing online first PURCHASE IN-STORE ONLINE PURCHASES BROWSE PURCHASE 16% 30% 13% Browsing and Buying: In Store vs. Online 42%
  33. 33. Pop-up stores are today’s “advertising creative revolution” 33 Sources: RISNews.com, 11/28/18 and 11/12/18; CNTraveler.com, 7/27/18; Forbes, 7/12/18 , US.FashionNetwork.com, 3/15/18; TeenVogue.com, 3//14/18; BusinessInsider.com, 8/23/18; Brand Sites. 33
  34. 34. Digitally-native brands will open 850 stores in the next 5 years 34 Source: Retaildive.com, 10/10/18 200 next 3 yrs (N.A.) up to 300 in 5 yrs Anticipated Store Openings E-retailers top city pick for first pop- up shop AND permanent locations New York
  35. 35. Play 8: Fast is the new fashion… in every category 35 Source: www.iab.com/db/founders-survey • Average time for direct brands to launch first product was 7 months • Today they can launch a product in 4 months • One-third of founders say their biggest mistake is moving too slowly to iterate the core product or change the portfolio”
  36. 36. Omnichannel buying + delivery drove 3PL CAGRs from -5.4% to +5.8% from 2014-2022 36 Source: Technavio, Global Third-party Logistics Market 2018-2022 Report, May ’18; Hanhaa.com/third-party-logistics, 7/17/18 • IDC Manufacturing Insights predicts by the end of 2020 that 50% of all manufacturing supply chains will have the capability to enable Direct Brand consumption shipments and home delivery. • The Global 3PL Market is expected to grow at a CAGR of 5.8% between 2018-2022.
  37. 37. Play 9: 2-day delivery is a cost-of-entry standard for brands 37 Source: Monarch website, Monarch newsroom article on ToyHouse LLC and DIFF; LogisticsBrief.com, 11/19/18; MMH.com, 9/4/18; DCVelocity.com, 6/28/18. Key benefits: • 2-day shipping is available to 92% of the U.S. • No pricing on website; “cost-effective, high service level fulfillment solutions.” • Best-in-class providers in an alliance of design/implementation, fulfillment center, technology, automation, and delivery companies. • Business model based on those of “the best e-commerce and O2O businesses,” including distributed logistics, automated, multi-client, flexible, scalable, and focusing on inventory flow not storage. • Compelling value proposition including no upfront capital, low operating costs, increased revenue due to faster delivery, affordable same-day, next-day, and two-day delivery, streamlined return processing. • Industries served include new forays into toys, healthcare, and food/beverage.
  38. 38. Amazon is pressing toward a 2-hour delivery standard Source:CBI, 3/28/1838
  39. 39. Play 10: Delivery is discovery 71 Sources: ProfiteroResearch White Paper; TechCruch.com, 3/20/18; CBI, Brand Sites. Monthly selection of the best beauty, grooming, a lifestyle product samples on the market from well-known and emerging brands A curated tasting pack of new and exciting craft and premium spirits. Offers subscriptions for vinyl and coffee pairings, and for music and meal pairings where consumers can “discover rising artists, enjoy an original menu, get to know unique ingredients and wow your friends with a playlist of the best new music each month.”
  40. 40. Play 11: Agile supply chains enable mission-based marketing 40 Movebutter  Online-only specialty grocer that promises low prices, a curated selection of staple products and direct-to- consumer sourcing.  Does not charge delivery. The cost is built into its business model, which leverages low overhead and a miniscule marketing budget in addition to its direct sourcing chain.  Total Disclosed Funding: $120K  Select Investors: FundersClub, Y Combinator. Source: GroceryDive.com, 6/13/17; CBI
  41. 41. 41 And the mission is the message… or else
  42. 42. Play to win… 42 Play 7: Omnichannel shopping is the new normal Play 8: Be ready to react fast Play 9: 2-day delivery Play 10: Delivery is discovery Play 11: Support a mission Play 1: C.A.C. is king Play 2: Mobile first… Play 3: Tell your story Play 4: Build community Play 5: Branding must perform Play 6: Be media-promiscuous
  43. 43. 43 Follow @iab on Twitter and don’t miss any updates from IAB’s Direct Brand Initiative
  44. 44. Thank You 44 Patrick Dolan patrick@iab.com @patrickdolan

Hinweis der Redaktion

  • The Direct Brand revolution has not gone unnoticed by the giant incumbents.

    This illustration by the consulting firm CB Insights brilliantly captures the Direct Brand assault on incumbents. It shows how 42 upstart Direct Brands have targeted Procter & Gamble across all its categories.
  • Number 1: Physical retail shopping is declining as a share of total shopping, as digital shopping grows.
    Number 2: The giant consumer brands of the 20th century maintained their supremacy by dominating scarce physical shelf space. As brick-and-mortar shopping declines, the primary source of incumbent-brand dominance also decays.
    Number 3: Digital media consumption and digital brand consumption are correlative: The more time a consumer spends in digital media environments, the greater that consumer’s propensity to purchase challenger brands.
    Number 4: With mobile media consumption overtaking linear television consumption, the 70-year-old television-to-store marketing playbook is being replaced by a new standard: mobile-to-etail.
    Number 5: Because disruptors know their consumers individually at scale and are not subject to intermediation by third-party stores, they are able to customize communications, products, and services to their audiences more effectively and efficiently than legacy competitors.
  • One of the biggest trends in retail lately has been the decline of the brick and morder store
  • Nielsen: Our population is growing at the slowest rate since the Great Depression.
    For many categories across FMCG, we’re actually in a deflationary environment.
    And for many consumers, they’re spending their dollars elsewhere.

    So, it’s no surprise that the total FMCG and retail pie doesn’t appear to be growing at all. But we’re not facing a slowdown.

    “What we’re being forced to grapple with is a systemic change to where, how and why consumers are shopping.”

    For edible categories, more than half of all growth is coming from e-commerce.

    And etailing’s share of the pie will only continue to grow, as it sucks up all the growth – every last dollar of growth – in the consumer economy. You think that’s hyperbole? Well, let’s look at the dollars, then.
    While physical stores will still comprise the greatest share of “brand fulfillment,” their singular power over consumer choice and brand strength is eroding. No longer will consumers be forced to choose only from among the handful of brands that can buy their way onto scarce physical retail shelves.
    Which means the goal of marketing and advertising – which was always, entirely to get people to show up in a physical store to select from the products on those wooden, metal, or melamine shelves – itself must change.

  • Last July, Dan Loeb, the founder of the hedge fund Third Point, amped up his attack on Nestle S.A., the world’s largest FMCG company, attacking its “muddled strategic approach” and calling the group ‘insular, complacent and bureaucratic.”

    Among Loeb’s biggest complaints: “New brands took share, while Nestle has fallen behind.”
  • First, I would ask you to reflect:
    What if the number of stores became infinite? What if shelf space was endless?
    What if production capacity was limitless?
    What if all goods and services were like milkshakes in Manhattan, available for home delivery, 24 hours a day, 7 days a week?
    This is what’s happening today to brands, marketing, advertising, and media.

    Warby Parker in eyewear, Glossier in cosmetics, Casper in mattresses, Away Travel in luggage – these are not interesting curiosities. These are not the second coming of direct response advertising. These companies actually represent an enduring shift in the way the consumer
  • First, Direct Brands have replaced the purchase funnel of old with a new purchase funnel. Instead of a long-term process that brings consumers from brand awareness to preference to intent to purchase, the Direct Brand Playbook begins with cost-per acquisition, and ends with lifetime customer value.
    This CAC-to-LTV chain is the essence of the direct brand lifecycle. It also characterizes their primary difference from incumbent brands.
  • And that CAC strategy must be mobile first.
    Consumer time spent on mobile devices has grown 133% during the past three years, while time spent on television devices has declined 14%.
  • Already, nearly 40% of e-commerce is mobile commerce.
    The lesson here is that other media matter – but mobile matters first.
  • Mobile is only a medium, of course. It turns out the message is equally important. Hence the third lesson we’ve learned from Direct Brands this year: Storytelling lowers acquisition costs.
    There’s a lot of nuance here. All the Direct Brands we have studied tell us, virtually without exception, that customers acquired through storytelling channels have higher lifetime values. It’s intuitive that better stories create better and longer consumer engagement. But we also have observed a front-end, shorter-term benefit, the relationship between the story and CAC.
    For example, the Direct Brand sock company, Bombas, says that in any given week, between 15-40% of their paid acquisitions come from podcast advertising. Why? Bombas CMO Kate Huyett says that’s because “there’s a little more air space to talk about how the company started.”
  • But how does low CAC turn into high LTV? One word: community.
    “community” is not a soft “nice-to-have.” To the contrary, community has become an essential part of the branding playbook because it ties directly to acquisitions, sales, and repeat purchases.
    The cosmetics disruptor Glossier, for example, says that 70% of its online sales come via peer referrals. Matches Fashion gets 35% of its revenues from user-generated content that is shoppable.
  • The role of community in revenue growth is the reason “shoppable social” marketing is expanding nearly 150% per year, and is on a path to reach $165 billion in sales by 2021.
  • Disruptor brands call the CAC-to-LTV bridge “performance branding.” In their playbook, Brand advertising must perform – and selling activities must contribute to enhanced brand perceptions, sufficient to maintain the community and foster repeat purchases.
    As disruptor agency founder Jesse Derris says, “We don’t think that something like ‘impressions’ means anything. Since these brands are selling direct-to-consumer, we’re able to understand how certain stories work

    Derris is among a burgeoning set of new agencies that are overturning the holding company model that took hold in the 1980s. In that model, media planning and buying was separated from creative strategy and execution. Other specialist agencies were launched or acquired by the holding companies to concentrate on particular functions, including PR, trade promotions, analytics, relationship marketing, and production. The holdings operated on an eat-what-you-kill basis, with little cross-unit collaboration.
    Five years ago, even three years ago, this was a Facebook story.  
    Disruptor brands appreciated the power of the Facebook pixel to help them build audiences, track conversions, and remarket, and they liked the seamless way advertising creative flowed, particularly in non-anxious environs of Instagram.
    Much has changed in a year. Platforms and publishers like Pinterest, Hulu, Turner, Hearst, Google, and Spotify are actively pursuing and working successfully with disruptor brands. And some brands began to publicly express concern about channel dependency. As Glossier President Henry Davis told Digiday, “If you don’t want to be disintermediated by a retailer, why would you want to be disintermediated by a platform further up the funnel?”
  • Equally notable is how direct brands are now colonizing main media, especially television. The Video Advertising Bureau, working with Nielsen, surveyed 50 disruptor brands and found that these 50 alone spent $1.3 billion on television commercials in 2017, an almost-100% increase in one year!
    IAB 250 research, there are more than 3,000 disruptor brands in the United States. And we know they have been spending more on digital channels than in main media.
  • We believe that much of the new paid media spend will find its way to advanced TV. Consumers of ad-supported streaming video already show a much greater propensity to buy from disruptor brands. IAB research shows they are currently spending more than twice as much as linear TV viewers on disruptor subscription products, for example.

    Lingerie company ThirdLove started investing in TV in 2017 with a budget of $286,000 for the first month. Within 3 months, they had spent $3 million. ThirdLove’s monthly TV budget has more than quadrupled since then. It has aired three separate ad campaigns and spent over $13.2 million on TV in 2018, per Nielsen.

  • But we think it inevitable that, as the world’s largest media companies start coming online with their own streaming services, advanced TV viewership will expand, as well as its targeted advertising opportunities.
  • Already, IAB research shows, 1 in 3 in-store purchases are made after first shopping digitally. 1 in 4 digital purchases are made after shopping in a brick-and-mortar store.
    The days of physical retail hegemony are over. There are multiple, hybrid retail formats that live between pure brick-and-mortar and pure e-commerce. They are complementing and supplanting the dominant formats of the past several decades, such as department stores and big box stores.
  • Glossier
    Launched a pop-up in San Francisco’s Rhea’s Café, which served its signature dishes while also merchandising the space to whimsically show off Glossier products amidst flowers and restaurant props.
    Pop-up in NYC is part of a shoppable loft, event space, and registry designed to inspire home transformations; “hybrid approach” of creating a physical location that can “inspire”—and make people shop.
    “Terminal A” pop-up in SoHo is a chic airport design with a TSA-style checkpoint, luggage scanners, a NYC-themed souvenir area, and the company’s luggage line.
    The “Uniform Shop” area lets customers mix and match luggage color combinations, add limited-edition stickers to their own luggage, or purchase luggage with hand-painted monogramming, pins, and embroidery.

  • Casper will open 200 stores in North America within 3 years, lingerie startup Adore Me for up to 300 in 5 years, and Allbirds for stores in 4 cities in the next year.
    More than half (60%) of the e-retailers studied opened their first pop-ups locations in New York, followed by LA (16.2%) and Toronto (5.4%). More than a third (41.3%) opened their first permanent location in New York, then LA and San Francisco (12% each) and Chicago (5.3%).
    Nearly 62% of permanent stores opened in the same city where an e-commerce venture opened their first pop-up shop.
    Last year the greatest number of permanent stores were opened by formerly online-only retailers, including Everlane, Allbirds, Away and MM.LaFleur. 
  • central to Boohoo's USP is its ability to react quickly to the trends it identifies either through social media, the runways or on a celebrity (though, usually, without directly knocking them off), and to constantly deliver new product. Like ASOS, Boohoo is one of those sites customers will need to check every day if they want to have a somewhat comprehensive sense of what's on it. According to International Director Andrew Thomson, the site published about 4,000 different products in October, averaging 200 per day. The most it published in one day that month was 327.

    Among the top 20% of Fashion Brands Delivering Real Profit over the Last Decade, McKinsey Noted that their Speed and Data Distinguished Them from the other 80%.
    Being on trend no longer guarantees sales and profitability in the fashion sector. In minutes, consumers can spot, own, and share a trend on social media, from any corner of the globe. As a result, hits can sell out rapidly, while misses do not move, even with heavy discounting.
    Fashion has become a winners-take-all business, where size or heritage matters little. Over the past decade, the vast majority of fashion companies have battled to barely break even, while the top 20% have delivered all of the industry’s economic profit. This top 20% are more diversified and can weather category, channel, and consumer changes, and they also operate core functions better than their peers.
    McKinsey / WWD survey found two striking differences between top performers vs. the rest.
    Make speed to market a top priority and get faster and faster. They deliver product to market in less than six to eight weeks. The typical lead time in the industry is more than 40 weeks—far too long to stay ahead of consumers.
    Use data analytics when developing concepts and planning lines—the heart of the creative process. Underperforming companies tap data much later in the process, only after they have developed the product.

    Source: McKinsey, March ’18
  • The speed needs of Direct Brands and incumbents forced to compete with them helped quadruple the revenues of third-party logistics providers in one year, and drove the 3PL industry’s compound annual growth rate from negative 5% to almost 6% positive over the last four years.

    This flexibility begins far back in the supply chain, with supply-chain-as-service providers helping brands connect with small-batch manufacturing partners that can scale later. NYC-based menswear brand Noah, for example, can produce and distribute lines with only 12 or 24 items — for which they use social channels to generate buzz and data.
  • But where consumers see the speed most clearly is in direct delivery to the home – the “2” in D2C.
    Pressured by Amazon, all brands must now offer free, 2-day delivery of their goods to consumers. New logistics solutions, such as the 3PL alliance Monarch FX, are being created to offer omnichannel sellers one-stop shops for meeting the demand for fast delivery of their products, which Monarch says it can offer right now to 92% of the U.S.
  • Not to be outdone, Amazon is investing billions of dollars to optimize for 2-hour delivery. It already has multiple patents for drone-feeding warehouses, fulfillment centers, and maintenance facilities. It was recently granted a patent for an “Aerial Vehicle Delivery Shroud” that cloaks the noise of unmanned delivery drones.
    McKinsey says that autonomous vehicles, including drones, will account for 80% of all delivered items within 10 years.
  • Birchbox
    Discovery commerce platform offering consumers a personalized way to discover, learn about, and shop the best beauty, grooming, and lifestyle products on the market.
    Each month, users are shipped a selection of samples, sourcing samples from both well-known and emerging brands.
    Offers a new way to discover premium spirits for a fraction of the bottle price.
    Sends members a tasting pack of new and exciting flavors.
    Ever-changing collection of craft and premium Spirits expertly curated from over 15K bottles of Whisk(e)y, Bourbon, Gin, Cognac, Rum and other spirits.
    Samples enable try-before-you-buy: taste 1.5oz samples of craft and big brand spirits bundled in themed boxes, such as Star Spangled Bourbon, Flavours of Scotch, Gin O'Clock, and many more.
  • Take a pause on that last word, “sustainability.” Agile supply chains have an additional advantage beyond speed: they create the transparency that increasingly is central to the mission-based marketing strategies that the disruptors have pioneered, but in which incumbents have lagged.
    Activist investor Dan Loeb has premised his attempted takedown of Nestle in part on what he says has been the incumbent’s inability to match disruptors’ cultural appeal to millennials. “Consumers increasingly prefer a variety of new product attributes,” he writes, including “non-GMO, authentic, craft, locally-sourced, and natural.”

    They Sell Goods Straight from the Source and in the Process Remove the Typical Incumbent Consumer Markup Fees.

    The fees added on to incumbent brands at retail include distribution costs, wholesale to retail markups, shelf stocking, breakage fees, in-store marketing costs, etc.