6 October 2020
6 min read
As we’ve already explored, consumers are more diverse, empowered, and expressive than ever before. These changes amongst Future Consumers have put mass brands -- companies largely built on the back of a general mass market -- at risk. As the mass market has eroded to make way for many niche markets, today’s consumers are finding themselves better served by emerging brands that were built specifically for them.
The new center of the universe
A mass market could once be effectively dominated through investment in a business model driven by the mass production, mass distribution, and mass marketing of a product. For decades throughout the last century, a few large brands remained dominant thanks to a mass model that put the product first.
However, evolving consumer trends have resulted in a rejection of the mass model. Consumers today are less interested in products that were not truly made for them. Rather, they have come to expect business models that cater to their personal needs and interests.
Consumer demand eventually found supply, and emerging brands have risen to the occasion by delivering experiences oriented around a consumer-centric model. This model ensures that the consumer is considered when a product is developed, when services are provided, and in the establishment of brand values.
Since the dot-com era, incumbent mass brands are no longer competing amongst themselves but also against many small brands that have emerged to meet the new needs and expectations of consumers. These emerging brands typically concentrate on a specific use-case or subcategory within a broader category, and fixate obsessively on the consumer experience.
Bigger (budget) isn’t always better
Mass brands had previously built empires by making huge investments to win and maintain dominance over broad categories of consumer products. These budgets would go into maintenance as the mass model machine kept getting larger and larger over time.
Today these brands continue to spend billions upon billions in R&D, capital expenditure, and sales and marketing, yet they are losing market share to smaller, more nimble competitors. This trend stretches across multiple categories and has only been heightened by the COVID-19 pandemic halting the economy and altering consumer behavior. This has resulted in everything from lower profits and subscribers to divestitures and bankruptcies.
Out with the old, in with the new
Meanwhile many emerging brands have become household names in their own right. They have done so not only by developing great products and services, but by redefining categories and transcending the typical user experience. Thus, emerging brands are setting the bar even higher for what Future Consumers can expect.
This is evident across many categories important to consumers: whether they are managing their finances, playing a children’s game, working out or choosing a grooming product. Mass brands that previously would have been top of mind have been slowly losing share to emerging brands.
The rise of emerging brands is leading to changes in Future Consumers who now want to:
- Manage their money in Robinhood, rather than at a large bank such as Wells Fargo.
- Guide children to immerse themselves within Roblox, instead of playing with toys.
- Exercise on a Peloton bike in their living room, instead of going to the gym.
- Shave with a lower-cost Dollar Shave club razor, instead of choosing Gillette.
Snapshot on these emerging brands
Robinhood is a financial services company that offers a mobile app and website giving users the ability to directly invest in stocks, ETFs, options, and cryptocurrencies with no trading fees.
- Valuation: Announced a new round of funding at an $11.2 billion valuation
- Revenue: Estimated to have ~$1 billion in revenue, primarily through order flow (i.e. data on trades that are placed), as well as a subscription service called Robinhood Gold.
- Average user profile: 30 years old and 50 percent of users had never invested before with smaller account size ($1,000-5,000) compared to average of $100,000+ at Fidelity and Schwab
- Engagement: 4.3 million transactions a day, more than any other broker
Growth: More new users joined in 1Q20 (3 million new accounts) than top 3 competitors combined (1.5 million for Schwab, TD Ameritrade, and E-Trade)
Roblox is a global platform where millions of people gather together every day to imagine, create, and share experiences with each other in immersive, user-generated 3D worlds. Earlier this year, Roblox raised $150 million in new venture capital funding led at a $4 billion valuation
- Creator community: 4 million creators on track to get paid $250 million this year
- Content selection: Total of more than 40 million games within the Roblox platform, about 30 times the total number of mobile games offered on iOS and Android combined
- Users: 155 million monthly users (80 percent of which are users under age 17)
- Engagement: 1.5 billion hours of engagement monthly & 40 percent increase in usage post-COVID
Peloton is an exercise equipment and media company founded in 2012 and launched with the help of a Kickstarter funding campaign in 2013. Its main products include a stationary bicycle and treadmill allowing users to remotely participate in classes that are streamed from the company's fitness studio and paid for through a monthly subscription service.
Dollar Shave Club delivers razors and other personal grooming products to customers by mail. It offers a monthly subscription service that delivers razor blades and additional grooming products to consumer homes. In 2016, Dollar Shave Club sold to Unilever in an all-cash sale for $1 billion.
- Subscriptions: Now has 4 million subscribers, but initially launched with a viral video campaign and had 12,000 subscribers sign up in its first two days.
- Digital dominance: Controlled 52 percent share of the online market in 2015, compared with Gillette’s 21.2 percent
- Beating Competition: Gillette lost volumes initially and then had to slash razor prices by up to 20 percent to encourage customers to not abandon the brand.
While financial services, gaming, fitness, and personal care are great examples of categories where emerging brands have rapidly gained share from established incumbents, these are not isolated industries. As Future Consumers become more diverse, empowered and expressive, we imagine a world where they migrate away from mass brands, in favor of those that are consumer-centric and serve them in personalized and authentic ways. These new players are likely to be emerging brands that will be built from the ground up to meet increasingly niche needs and to serve as avenues for self-expression. Said another way, we are only seeing the beginning of the rise of emerging brands.