Legacy brands are struggling to keep up. They are stumbling, losing share, and competing with more agile, technology-enabled players. Bonobos, Casper, Glossier, Harry’s, Warby Parker—these companies have disrupted sectors previously owned by the deep-pocketed giants.
Evolving Business Models Are Taking Hold
Technology-enabled business models are facilitating new brands, products, and services. Meanwhile, conventional models are falling to the wayside.
Gillette used to own the razor business.
Serta and Sealy once had a firm grip on the mattress sector.
P&G, L’Oreal, and Estee Lauder dominated cosmetics.
Luxottica was untouchable in eyewear.
Instead, companies like Harry’s, Casper, and Glossier are taking advantage of back-end infrastructures that have lowered barriers to entry and democratized tools for business success. They are using viral marketing, deep social media strategy, a creative omnichannel presence, and democratized business processes to thrive in today’s market.
Legacy brands are stumbling as a result. We’re seeing store closures at major retailers like Walmart, Kmart, Sears, Macy’s, JCPenny, and A&F. Previously thriving brands are now facing significant financial challenges (i.e., BCBG, RadioShack, and Payless), while others are grappling with management turnover (i.e., Barneys, Tiffany & Co., Ralph Lauren, Coach, and Givenchy).
This stands in stark contrast to the growth new entrants are experiencing. As the retail apocalypse continues, incumbent brands are floundering. Meanwhile, disruptive entrants are amassing significant customer loyalty with clear advantages.
Deep, Grassroots Consumer Connectivity Is Essential
Two-thirds of consumers—especially millennials and influential HENRYs (high earners, not rich yet)—have come to expect direct brand connectivity. Almost 70% of today’s consumers have used a company’s social media site to engage with the brand, which has been music to the ears of emerging companies. Glossier, for example, had 1.5 million potential users on social media before the launch of its first product.
In turn, Warby Parker had over 60,000 users respond to a single call to action (CTA)—a request for customers to share pictures with their new glasses on social media. This deep, grassroots connectivity has allowed new entrants to fundamentally connect with consumers and solicit major loyalty.
Technology-Enabled Models Emphasize Data
By using technology to engage with customers, disruptive brands can capture unique data points and form powerful insights. Luxury bedding retailer Brooklinen leverages a robust marketing outreach program that targets customers based on where they found the brand, what products they purchased, and other information to achieve engagement rates well above the industry average.
Similarly, cosmetic companies like Ipsy rely on subscription models that provide free samples as marketing in exchange for consumer data and feedback. This is yet another approach that continues to evade legacy brands.
Mobile technologies and an increasing number of touchpoints are emphasizing customer data analytics. The direct and holistic level of connectivity creates full-journey customer data, and brands are now more than ever relying on data volumes to target and monetize their customers.
Democratized Infrastructure Lowers Traditional Barriers to Entry
Support systems like customer service, logistics, and manufacturing—once only accessible to industry giants—are evolving toward flexibility and scalability. Simultaneously, production innovations like distributed and hyperlocal manufacturing, small package shipments, and flexible warehousing are making production much easier for disruptive companies.
The result? These companies can meet customer needs more efficiently than their legacy counterparts.
And this is where social media comes in. Social media has grown central to brand development, and disruptive new companies like Casper and Glossier are partnering with influencers—Kylie Jenner and Karlie Kloss, in these cases—to amplify their message.
In simple terms, digital media has democratized brands’ access to consumers. Consumers’ preferred path is the digital medium, so this is a win-win situation. Interactive marketing is now being used to build brands while capturing critical customer data.
Fulfillment has evolved as well. New brands like Casper, Glossier, and Warby Parker are picking up on the demand-generating power of an omnichannel presence with selective brick-and-mortar stores. Webrooming and BOPUS (Buy Online, Pick Up In-Store) are proliferating, and free/last-mile delivery has become the norm.
In short, sector disruptors are now offering a full array of support services via next-gen outsourced functions, including call center operations and always-on/always-available customer engagement. The result is powerful omnichannel commerce and holistic supply-chains-as-a-service (SCaaS).
Technology Gives New Brands the Tools to Win
There are four main areas where new brands are using technology to set themselves apart and overshadow their legacy incumbent competitors:
Product Design: Brands like Casper, Harry’s, and Allbirds have transformed simplicity into luxury. Selling a single product gives companies the agility to incorporate early adopter feedback and use speed & data as an advantage.
Product Launch: Disruptors are using social media and other viral marketing techniques to quickly gain mass mindshare with audiences. These companies get their names out early so they can quickly build a reputation with early adopters and potential users.
Customer Experience: Companies like Glossier, Casper, and Warby Parker have used technology to build end-to-end brands. The most successful disruptors believe the end-to-end experience of selection, purchasing, and service is equally important to the product itself.
Awareness & Marketing: Brands are incorporating ubiquity and virality into their products. They also have a better grasp of Internet dynamics such as SEO compounding and grassroots social media awareness.
Given the technology-enabled disruptive powers of new entrants, legacy brands are now at their most vulnerable. Disruption will continue as a result of the deep, direct-level connections consumers have come to expect, and due to the lower barriers to entry technology has afforded.
Basically, size no longer matters. This is why Warby Parker has won in eyewear, and Casper has won in mattresses. It is why companies like M.Gemi, Markhor, and Rothy’s will win in footwear, and Brilliant will win in bicycles.