BRAND - What is Changing the Brand Game?

No Name Merchandise and a Cohort of Buyers That Aren't Brand Conscious

The First Translucent Soap 1807

He needed a set of impact sockets. Picking up his smartphone he asked 'Google' for the best deal on impact sockets. What happened next amazed him. The first three entries were brands unknown to him but all  sold by Amazon.

Craftsman, a brand he trusted for lifetime warranty was near the bottom of the page. The rabbit hole got deeper as he was transferred from site to site. Eventually he read that Sears had sold Craftsman to Stanley Black and Decker early in 2017. He would need to find a retailer if he wanted to discover the price and acquire a Craftsman set.

Back to Amazon, he was able to order a full set of TekTon impact sockets with carrying case for C$88.00 with free delivery to his rural setting. Sure enough, two days later he picked up an Amazon box at Canada Post Office. The packaging was similar, the price was lower, the sockets worked fine and the convenience was surprising. This is an actual experience of InfoStream staff near Madden, Alberta.

This kind of episode is changing the retail game and moving buyers away from the well known brands and retailers to discover the best price and convenience they can find.

A brand or trademark has been highly valued by those who analyse and invest in businesses. This intangible asset is often recorded as 'goodwill' on the balance sheet. Here are the world's most valuable brands in 2017 as ranked by Forbes.

There are a number of reasons why the value of a brand has historically been very important: Brand reputation supported loyalty; Brand recognition influenced prospective buyers; and, Brand imaging differentiated competitors in a marketplace. However, it seems brand significance has changed for the empowered consumer. They are demonstrating they care more about discoverability, assistance, convenience and price.

Furthermore, name brands have far less influence than YouTube and other social media channels offering authentic story and DIY advice from the users of lesser known products and services. The impact of brand on the price and value complex has also diminished as Dollar Shave Club and Harry's have proven in the past 18 months. Gillette's pricing succumbed to stiff competition from these startups despite the 'recognized' value of the Procter and Gamble brand.

Another large impact is the rising cohort of buyers that do not seem brand conscious. Millennials have a different approach to jobs, education, money and buying. They are more likely to be skeptical of brand promises and more likely to buy without giving brand a second thought.

Just before Christmas, Bloomberg featured an article by Matthew Boyle, entitled 'The Retail Apocalypse Is Fueled by No-Name Clothes'. One of the revelations in the story was how the retailer is developing clothes for Amazon’s surging apparel business. 

Amazon representatives met with fashion designer Jackie Wilson. They wanted her to make a knit top for women that would be sold on Amazon. They wanted the fabric to feel heavy and high-quality just like name-brand attire.

“They are not concerned at all about how many units they sell, and they’re not focused on margins,” says Wilson, whose company in Syracuse, N.Y., makes clothing for Kohl’s, American Eagle Outfitters, and J.C. Penney Co. “They’re concerned about customer satisfaction. They want five-star reviews.”

The Google research we published earlier shows that customer assistance and satisfaction are the primary elements of the new battleground for retailers. Customer satisfaction seems to be the driving force at Amazon. And why not. They have the lead in discoverability, logistics, customer assistance, price and convenience. So why not go for customer satisfaction and have the whole enchilada.

BRAND - Gillette responds to Harry's and Dollar Shave Club

Gillette is rapidly moving to a more cost effective shave

In a "very different approach", Gillette said it will introduce lower-cost razors and beef up its disposable shaver collection.

Gillette will start selling new three-blade and five-blade razors in January that will cost less than $10. It will also start selling disposable razors that will feature the Gillette cooling technology.

This new approach appears to be Gillette's latest response to subscription competitors who have been very disruptive. Until now, Gillette had focused most attention on its expensive Fusion razors, marketing itself as a top-tier brand. That strategy and the rushed to market copycat, Gillette Shave Club, hasn't paid off.

Gillette's pricey razors opened the space for innovation in men's grooming

When Procter and Gamble purchased Gillette for $57 billion in 2005, then the largest acquisition in the company's history, Warren Buffett called it "a dream deal." However, a pack of innovative subscription services including Dollar Shave Club, Harry's and ShaveLogic, have chipped away Gillette's market position. "Gillette was poorly positioned to defend (market) share as consumers shifted to cheaper razors," said Joe Agnese, CFRA Research analyst to CNN.

According to Macquarie Research, Gillette now controls about 56% of the market meaning Gillette's share of the U.S. razor market has dropped 11% in the past two years. Sales at Procter and Gamble's grooming unit, which includes Gillette, slumped 6% in the most recent quarter. Yet Procter and Gamble had not launched a new razor line in 12 years. Their strategy seemed to be upgrading the Fusion series while betting on brand power to lure consumers to its higher-priced blades and slogan 'the best a man can be'.


WHY THIS IS IMPORTANT:
Unilever's purchase of Dollar Shave Club for a billion dollars and Target's partnership with Harry's is easier to understand in the light of the Gillette experience. It now seems evident that brand power is expensive and may not be successful for maintaining brand position in the face of innovation. Clearly there is a paradigm shift occurring that doesn't favour legacy brands of the large and powerful consumer directed organizations and retailers.

ACQUIRE - Unilever Negotiating Acquisition of The Honest Company

Unilever’s proposed purchase of Jessica Alba’s The Honest Company for $1 billion is its second recent move to acquire young start-ups with direct-to-consumer subscription models.

The Dollar Shave Club was purchased by Unilever earlier this year, allowing the much larger company to tap into the market share that Dollar Shave Club had opened up.

The model of cheap, subscription-based service eliminates a lot of expensive elements involved in brick-and-mortar operations.

These types of purchases offer benefits for the start-up in terms of an influx of cash to push them into the black.

For the larger company, such as Unilever with these purchases, or Walmart purchasing Jet.com, the benefits are less tangible but no less real.

Acquiring start-ups that are finding footholds with consumers who now demand much more flexibility and responsiveness from their providers allows large companies to remain relevant in a changing capitalist climate.

The convenience and price point are probably also a factor in The Honest Company’s success, with their bundle services and subscriptions designed to fit specific lifestyles.

The Honest Company also offers the promise of eco-friendly and baby-safe products (though there has been controversy over whether they keep that promise).

This second purchase by Unilever indicates a similar focus on accessing the subscription bases of successful start-ups in order to diversify their customer base and remain agile in a new market environment.

In 2014, 80% of The Honest Company’s sales were via a monthly subscription service. Although their products are now available in Costco, Whole Foods, and Target, their subscription services are still a significant part of their marketing.

And, even if some of their subscribers are inactive, those inactive subscribers are still a valuable commodity for Unilever.

Research has shown that even inactive subscribers purchase more, and more frequently, than non-subscribers. This means that Unilever gains benefits from The Honest Company’s subscription-model start despite the company’s move into department stores.

And the subscription model offers valuable information and direct access to customers, which provides value beyond the standard sales figures.

With venture capitalists being much choosier about where their money goes, these sorts of alliances between agile young start-ups and established larger companies will become more and more important.

By Tiffany Sostar

Tiffany is a writer, editor, academic, and animal lover who came late to her appreciation of pets. At 18, a rescue pup named Tasha saved her from a depression and she hasn't looked back. She has worked as the canine behaviour program coordinator for the Calgary Humane Society, and was a dog trainer specializing in working with fearful and reactive dogs for many years. She doesn't have any pets right now, but makes up for it by giving her petsitting clients (and any dogs she comes across on her frequent coffee shop adventures) extra snuggles.

ACQUIRE - Unilever Buys ECommerce Startup Dollar Shave Club

Dollar Shave Club's 3.2 million members generate US$1 Billion Cash (US$312/Member)

According to a twitter report by Forbes reporter Ryan Mac, Unilever, the $130 billion dollar multinational consumer goods company, is paying $1 billion cash, for the startup Dollar Shave Club. While the details are still emerging, this transaction is likely to be the third largest ever in e-commerce. The other higher dollar transactions are zulily and Wayfair.


Venture capital providers Venrock, along with other other well known investors Andreessen Horowitz, Battery Ventures, and KPCB, have provided the capital for Dollar Shave Club’s growth. However, Battery Ventures and KPCB won’t benefit from the sale to Unilever since they exited earlier. The others are likely to see a true venture return of up to 10X investment.

Dollar Shave Club (DSC) has grown to become a dominant player in the male grooming business since its founding in 2012. Although best known for a shaving service, DSC also markets wash, skincare and styling products to its male club members. The company's revenue was $153 million in 2015 and there is an expectation it will top $200 million during this fiscal period. Other published information suggests this transaction will represent the largest multiple for a e-commerce startup in history.

DSC's 3.2 million members should be a valuable addition to Unilever, increasing the company’s exposure to a growing demographic as well as adding valuable client data. Unilever offers Dollar Shave Club the ability to plug into existing international marking and distribution channels.

Apparently, Unilever does not have plans to make any executive changes meaning DSC’s CEO, Michael Dubin will continue into the future.