In case you haven’t noticed, there is a whole lot of bifurcation going on. And in many markets, the middle is all but collapsing.
At one end are the Walmart’s, the Home Depot’s, the Amazon’s–the low price, vast assortment guys. Their pitch is easy to understand. We have just about everything you could possibly want, virtually anytime you want it, at the low, low price. Operationally this is incredibly difficult to scale. But from the customer’s perspective, it couldn’t be more simple to grasp. Dominance and value (defined by price) creates meaning.
At the other end of the spectrum are the brands built around market niches, product differentiation and the somewhat intangible “brand personality.” What defines meaningfulness here is built on deep customer insight, emotional connection and, more and more, the ability to treat different customers differently.
Historically, luxury brands thrived by merchandising exclusive products in spectacular settings delivered face-to-face by well-trained sales associates. To the extent companies could replicate this model as they added stores, they could continue to create meaning and deliver it at scale. Yet, as all things digital become increasingly important, the notion of what constitutes a meaningful one-to-one “luxury” relationship is being challenged.
The best specialty stores have succeeded by curating merchandise for a particular “lifestyle” and presenting it in a distinctive environment that reinforced a unique brand image. These companies created a business model that was simple to replicate and led to the ubiquity of many of these brands in affluent malls and upscale shopping areas of most major cities. Now, with product choice and availability exploding and new micro-niche brands emerging online, the concept of “specialty” is being redefined.
The hyper-growth, venture-backed “pure-play” brands that have launched over the past few years–think Gilt, Bonobos, Warby Parker–found it comparatively easy to scale at first. They exploited many of the advantages of a direct-to-consumer model and employed low-cost acquisition techniques to build an initial base of customers–what I like to call the obsessive core.
But it turns out that creating meaning at the scale that will lead to profitability isn’t so easy (or economically viable). Too many newer customers of these high-flying brands have started to equate meaning with discounts. Others, it turns out rather predictably, need the meaning that comes from a physical presence to derive theirs. Many see this hybrid-model as an exciting new area of growth. Others see it as clear evidence that most e-commerce only brands are finding it very difficult to deliver meaning at scale.
In an anything, anytime, anywhere, anyway world, it’s getting harder and harder to break through the clutter, to win the battle for share of attention, to create the all essential meaning that matters for customers.
If you seem to be stuck in a sea of sameness, selling average products to average people, relentlessly promoting just to stay even, it’s time to get off the bridge. The collapse is near.
If your customer is choosing you mostly on price, you had better be the low-cost provider. Otherwise you will lose the inevitable race to the bottom.
If you believe you have the ability to be meaningful to a well-defined set of customers who choose you over the competition for specific, sustainable reasons, good on you.
Just remember, as Bernadette reminds us, it’s not so easy to create meaning at scale, particularly if you need that scale to stay in business.